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Paper Abstract: Historical background & current geopolitical & economic situation. Direct investment (FDI) in particular Balkan nations. Need for internal restructuring. Paper Introduction: EUROPEAN FOREIGN DIRECT INVESTMENT IN THE BALKANS This research paper discusses the historical background and contemporary geopolitical and economic perspectives of foreign, primarily European, direct investment (FDI) in the Balkans and in particular Balkan nations. The national economies which make up the Balkan Peninsula have not shared appreciably in the tremendous global expansion of FDI which has occurred in the last quarter of the 20th century. The ending of the Cold War and the apparent dampening down of the wars of the 1990s which accompanied the disintegration of the former Yugoslav Federation have ushered into power throughout most of the region governments which are receptive to FDI. FDI and other forms of European foreign capital played a Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. . The United Energy Information Service said "Romaniahas the potential to become an important economic power in the Balkans,with its large domestic market, a well-trained and low-wage workforce, anadvanced petrochemical industry, rich agricultural lands, diverse energysources, tourism opportunities," and its key location as a transportationartery (IUSIE Romania 2). . GDP declinedby an average annual rate of 3.5 percent 199 -1996,, increased 2.9 percentin 1996, declined 1 .1 percent in 1996 and fell 6.9 percent in 1997(Bulgaria 75 ). London: Europa Publications, 1999. By the 192 s its capital,Zagreb, became the leading financial center of the Balkans. According to Tanner, the 1991-1992 war with Serbia and later fightingin Bosnia between Bosnian Muslims and Bosnian Croats and a repeat of thewar with Serbia in 1995 in Krajina "ruined the economy of what had oncebeen the richest of Yugoslavia's six republics" (ix). The central Balkans region (Serbia, theinternational protectorate over Kosovo since 1999, Bosnia, Albania andMacedonia) has been and is likely to remain for the indefinite future aninhospitable area for European FDI due to the adverse effects of theYugoslav wars, the nature of the regime of Slobodan Milosevic, and ethno-religious tensions among Serbs, Croats, Montenegrins, Bosnian, Albanian,Kosovar and Macedonian Muslims and Christians, as well as the lack ofeconomic viability of most of the states in the area. Its trade has since largely been reoriented toward Germany,Austria and the rest of Western Europe. The principal sources of world FDI recently have been Western Europe(in 1992 $544 billion), the United States ($48 billion) and Japan $24 billion (OECD Foreign Direct Investment 114). Bival and Gligorov said "there have been no significant foreigninvestments thus far," about $5 , through the end of 1995 (134). One third of allforeign joint ventures established in Yugoslavia by 1985 were in Slovenia(Rojec 137). Bulgaria A Country Study. London: Europa Publications, 1999. However, it is difficult to see it as a candidate forFDI until the Milosevic regime is replaced, and the country's economy isrebuilt. Many economic as well aspolitical disagreements marred Serbo-Croatian relations under Tito and hissuccessors. 54-55.Steil, Benn, and Susan Woodward. In ancienttimes, its barbaric tribes set outer limits to the expansion of Greekcivilization and the Roman and Byzantine Empires. Curtissaid by the 198 s Yugoslavia had achieved a "significant expansion in therange and depth of Yugoslav industrial output" and from 195 to 1978 arelatively high rate of economic growth, 6.8 percent (Curtis Yugoslavia133; and OECD Foreign Investment in Yugoslavia 9). Inflation has been reduced from 237 percent in1992 to one percent in 1999 (Helmenstein 452; and Fresh Start 5 ). Washington, DC: GPO, 1992.Curtis, Glenn E. . II. a. Its per capita income of $9,84 in 1997 is the highest in Eastern Europe. The Federal Republic of Yugoslavia consists of Serbia and itsremaining provinces of Montenegro and Vozvodina (FRY). Its trade benefitted from the endingof the Greek embargo in 1995, but suffered from loss of the Yugoslavmarket. Albania with a GDP percapita of $75 is the poorest nation in Europe (Albania 362). It joined theEuropean Free Trade Association in 1995 and entered into an Agreement ofAssociation with the EU in 1996, making it together with Croatia the mostlikely Balkan nations to be invited to join the EU in the future. With the passing fromthe scene of strongman Franjo Tudjman, Croatia's political leadership hastaken more moderate positions toward detente with the Bosnian Muslims andthe return of Serbian refugees. 677-695."Bulgaria." Europa World Year Book 1999 Vol. Rojec said Slovenia'shigh labor costs are compensated by its higher labor productivity andeffective entrepreneurial and managerial ability (144). Real GDP growth has been sluggish: +7.1 percent in 1995,-6.6 percent in 1996, -7.3 percent in 1997 and -2 percent in 1998 (USEIRomania 1-2). 43.Estrin, Saul, Kirsty Hughes, and Sarah Todd (eds.). Inflation is stillhigh, 41.5 percent in 1998, down from 255 percent in 1993 (USIE Romania 1;and Sanborn 1 9). 1997, p. 11 1-1119."Croatia Struggle to Attract Needed Foreign Investment Capital." Internet: http://www.linder.com/berserk/ croatia_726.html 25 July 1999): 1-2.Curtis, Glen E. New York: St. Inter-regional trade was crippled by the rise ofeconomic nationalism, exemplified by the 1925 Rumanian law which barredforeigners from owning more than 4 percent of mining companies, and hightariffs, and was ruined by the effects of the Depression on commodityexport prices. . "A European 'New Deal' for the Balkans." Foreign Affairs 78 (Nov./Dec. Successive waves of peoples from Central Asia and fromnorthern Europe settled in the Balkans, and eventually produced independentmedieval kingdoms in areas such as Serbia and Croatia. London: Europa Publications, 1999. Romania attracted only $6 million in FDI by 1993, $15 million ofwhich was accounted for by one investment by Coca Cola (Sanborn 111).Substantial increases in FDI have occurred since 1993 from American, SouthKorean and European sources. Foreign Direct Investment And Economic Development Lessons from Six Emerging Economies. . London: Royal Institute of International Affairs, 1997.Franck, Robert. Its economy has been largely privatized and FDI iswelcome. EUROPEAN FOREIGN DIRECT INVESTMENT IN THE BALKANS This research paper discusses the historical background andcontemporary geopolitical and economic perspectives of foreign, primarilyEuropean, direct investment (FDI) in the Balkans and in particular Balkannations. New York: Columbia UP, 1974.Bival, Gordana, and Vlado Dimovski. It started slowly on its privatization of state ownedenterprises, but by 1997 had sold nearly half of them (Ramet 113). Kosovo has little in the way of resources, other than someminerals, that anyone would wish to go to war over or to invest in. Its GNP per capita declined byan annual average of 8.5 percent 199 -1996, but it increased by about 1.5percent in 1997 (Macedonia 2266). Macedonia has suffered from a massive influx of refugeesand other adverse effects of the Kosovo war. 214-238.Bival, Gordana, and Vladimir Gligorov. Its foreign debt and publicdeficits are still very high, but have been reduced substantially by salesof state enterprises. It has arelatively homogenous population (87 percent Slovene, most of whom areCatholics). London: Europa Publications, 1999. world FDI has grown more rapidly than world exports, and salesof foreign affiliates exceed world exports in value," $34 billion in 1996(6 and 14). New York: Random House, 1998."Hungary." Europa World Year Book 1999 Vol. As a result of therise of commercial and later industrial capitalism in Northwest Europe andthe related scientific revolution, a great disparity in living standards,income per capita, developed between Western Europe and Eastern and CentralEurope, which Landes estimated was only 15 percent in 175 , 64 percent by185 and by 19 almost 8 percent (194). Romania which possessed crude oil needed by Germany soon followed.Yugoslavia was crushed by the Wehrmacht in 1941. Dictator Nicolae Ceascescu (r. Hundreds of thousands ofSerbs were butchered by the puppet Ustashe-led Croatian state set up by theNazis and Italian Fascists during World War II. Economic stagnation was worstin the central and southern Balkans which remained under Ottoman controlwhere new ideas and new methods of production were discouraged. Economic reforms began in 1991 but "widespreadanarchy, an almost complete production shutdown, a paucity of capital, anda lack of managers trained to deal with the vagaries of a market economyslowed the reform process" (Zickel and Iwaskiw 118). 357-374.Artisien, Patricia, Martija Rojec, and Marja Svetlick. It includes equityinvestments as well as non-equity arrangements that give rise to thecontrol of assets used in the control of assets used in production ofassets abroad" (UNCTAD 7). Albania. Slovenia declared its independence in June 1991. Romania, Bulgaria, Albania and Yugoslavia (until 1965) relied oncentrally planned economies which emphasized heavy industry to thedetriment of agriculture and consumer goods and completely excluded foreigncapital. Successful FDI is a dynamic force for economic growth. Romania. . Romania hopes to be the site of a pipelinecarrying oil and gas from Caspian Sea fields. Nevertheless, FDI has continued to increase, especiallyin tourist facilities. Serbia is well-endowed with minerals,is partially industrialized and has a skilled and well-educated workforce.Since 199 , its economy has declined precipitously due to high defenseexpenditures, United Nations economic sanctions imposed since 1992, theloss of its two richest provinces, Slovenia and Croatia, the destructionwreaked upon its infrastructure and industry by NATO's air campaign and theMafiazation of Serbian commerce, what the Economist described as "closeties among political and criminal elites" (Rebuilding 49). . (ed.). Landes commented: "these . FDI was excluded from the Balkans, except in Yugoslaviaduring the latter phase of Josef Tito's rule, in the communist centrallyplanned economies of the years 1945-199 , which generally unbalanced andretarded Balkan economic development and made Balkan re-entry into theworld economy a very painful process. According to Shaw andShaw, the European powers under the Treaty of Berlin of 1878, "ended theOttoman Empire as a significant European power and created the morass ofpetty Balkan states whose rivalries created a tinderbox, drawing the greatpowers into the confrontations that culminated in World War I" (195). Croatia, which until recently has had a large (12-14percent) Serb minority, had for many decades a rocky relationship with thecentral government in Belgrade. History of the Ottoman Empire and Modern Turkey. a Turkish bank has takenover one of the state-controlled banks . It generateshigher incomes, employment and technological skill levels in the hostcountry, reduces imports and foreign debt payments, and "direct investmentby MNES has the potential rapidly to restructure industries at a regionalor global level and to transform host economies into prodigious exportersof manufactured goods or services to the world market" (OECD Foreign DirectInvestment 8). "Slovenia." Foreign Direct Investment in Central and Eastern Europe, eds. As of the end of 1994, themain sources of FDI for the Balkans between 1989 and 1994 were the nationsof Western Europe: Germany $4.9 billion, Austria $2.9 billion, Italy $1.2billion and the Netherlands $1.1 billion; and the United States $4.3billion (Meyer 35). Growth resumed inthe 192 s, but for the interwar period as a whole was only 1 to 2 percent(Berend and Raki 284). html (Sept. Slovenia benefited from its longassociation with the German-speaking states to its north. "The Slovenian Success Story." Current History 97 (March 1995): 113-118."Rebuilding the Balkans-Theory And Practice." Economist, 19 Feb. Until the Bosnians, Serbs, and Croats decide to stopkilling each other, there is nothing the outside can do about it(Holbrooke 23). 49-5 .Robinson, Anthony. Cheltenham: Edward Elgar, 1999. Decades of Crisis Central And Eastern Europe Before World War II. New York: Norton, 1998."Macedonia." The Europa World Year Book 1999 Vol. Berendsand Raki said "export of capital to the Balkans began relatively late,during the 189 s, becoming a more certain flow after the turn of thecentury" (1 5). According toUNCTAD, in the 198 s and 199 s "FDI . Patrick Artisien, Martija Rojec, and Marjan Svetlick. Despite allits problems, Albania's GDP increased by an average annual rate of 2.2percent 199 -1996, and jumped in 1999 to an amazing 8.6 percent (Albania362; and Fresh Start 5 ). . Trade and money were forGreeks, Jews, Armenians, and Germans," most or all of whom were eitherdiscriminated against, deported (such as the Germans after 1945) ordestroyed (almost all the Jews 1941-1945) (252). Selective opportunities for FDI exist in the Northern tierand elsewhere but substantial internal restructuring and reconstruction aswell as the end of the Milosevic regime in Serbia must precede any greatnew dawn for FDI in the region. Romania's new government liberalized its foreign investment law in199 and has undertaken a series of reforms to achieve macroeconomicstability and to restructure and privatize its economy. "Croatia." Capital Movements in Central and Eastern Europe, ed. "To Be Or Not To Be Balkan: Romania's Quest For Self- Definition." Daedalus 126 (Summer 1997): 63-67.Helmenstein, Christian (ed.). I. London: Europa Publications, 1999, 2939-2962.Sanborn, Mark. "Macedonia." Foreign Direct Investment in Central and Eastern Europe, eds. They are most attractive in the Northern tier states ofSlovenia and Croatia, but the growth of FDI has remained modest even there,due to principally to economic and social dislocations caused by the warsof Yugoslav secession. Between 199 and 1993, Robinson estimated a total of$12.4 billion in FDI went to the rest of the Balkans (4 ). Serbia. Its government has done a goodjob in reducing inflation from 23 percent in 1991 to 2.6 percent in 1997(Helmenstein 452; and Macedonia 2266). It is endowed with fertile soil ideal for growing grains, richmineral resources, including bauxite which supports its aluminum processingindustry, and is relatively industrialized (37.6 percent of GDP in 1996)(Slovenia 3161). FDI is different from foreign portfolioinvestments, such as non-participating minority equity investments anddebt, long or short-term. S 1-S 25.United Nations Conference on Trade and Development (UNCTAD). 4 -41.Rojec, Martija. I. Secession from Yugoslaviadisrupted Slovenia's trade, about 7 percent of which was with Yugoslavia(Ramet 113). "Foreign Direct Investment in the Newly Independent Republic of Slovenia." Foreign Direct Investment in Central and Eastern Europe, eds. It hasone of the lowest per capita incomes in Europe. According toCurtis, in 19 , Slovenia, as a province of Austria-Hungary, was the "mosteconomically advanced of the South Slavs" (Yugoslavia 82). London: Europa Publications, 1999, 3947-3972.Zickel, Raymond, and Walter R. by the outlawry of theJews, [and] by the curtailment of municipal rights" (8-9). Romania. The Economist said recently: "Albania's new-found if precariousstability has brought back Greek and Italian investors . The Wealth And Poverty of Nations. .societies did not generate enterprise from within. It then pursued the usualStalinist path--central planning, large investments in heavy industry andcollectivization of agriculture. Slovenes consistently criticized the Tito regime and itssuccessors for being forced to support uneconomic policies whichdisproportionately benefited other parts of Yugoslavia. 1965-1989)went on a foreign borrowing binge to finance huge uneconomic projects inirrigation, the Danube-Black Sea canal, steel, aluminum and petrochemicalplants and a public building spree. Foreign Direct Investment in Central and Eastern Europe. The rate of FDI in Romania has increased since1996, reaching a total of $3.4 billion at the end of 1997 (FDI in Romania1). Washington, DC: GPO, 1994.----------------------- 22 However, Yugoslaviaoverborrowed abroad, resulting in a quadrupling of national debt between1975 and 198 , a rise in the rate of inflation from 15 percent in 1975 to7 percent in 1985 and the eventual bailout of Yugoslavia by theInternational Monetary Fund (IMF) (Tanner 2 8). According toBival and Dimovski, the largest sources of FDI in 1995 were Austria ($245million, Germany $181 million and Italy $1 1 million (234). Yugoslavia A Country Study. Despite some reforms, agriculture remainedinadequately mechanized and bound by traditional methods of cultivation.The number of steam ploughs in use in Germany in 19 was 1,696, Hungary159 and Rumania 55 (Berend and Raki 55). London: Royal Institute of International Affairs, 1997. Reforms have included price deregulation, reduction of subsidies tostate enterprises and privatization, banking reform, abolition of importrestrictions, and liberalization of foreign investment laws. . The Ottoman Empireruled over the Balkans for various periods ranging from 173 years in thecase of Croatia (1526-1699) to about 541 years in Macedonia (1371-1912).The slow disintegration of the Ottoman Empire created a power vacuum in theBalkans which led to intense rivalries among the Great Powers, Russia andAustria-Hungary in particular, for predominance. Macedonia has a large external debt ($1.659 at the end of 1996) andessentially survives on international aid. 133-148."Romania." The Europa World Year Book 1999 Vol. Slovenia has made the smoothest transition from its formerassociation with the Yugoslav Federation. Cheltenham: Edward Elgar, 1998.Organisation for Economic Co-operation. Thus far, FDI which totaled $1.4 billion at theend of 1997, "has been concentrated in the cement as in bureaucratic redtape, crime, corruption and lack of sensible planning. Romania. TheEconomist, however, pointed out recently that "Slovenia . London: Royal Institute of International Affairs, 1997, 129-147."Bosnia and Herzegovina." Europa World Year Book 1999 Vol. When Volkswagenreturned after the war to revitalize its abandoned pre-war car factory,Bosnian officials insisted on receiving 51 percent of the ownership whileVolkswagen was expected to pay 1 percent of the startup and retoolingexpenses. 5 -51.Gallagher, Tom. Christian Helmenstein. Slovenia has been politically stable and democratic. Sonje said "generally, foreign participation inCroatian enterprises is unrestricted" and profits and capital may be freelyrepatriated abroad (79). Slovenia 9,84 (Albania, Bosnia, Bulgaria, Croatia, Macedonia, Romania and Yugoslavia 362, 685, 75 , 11 7, 2266, 2944, 3956 and 3156. Over the long run, the Balkan nations areunlikely to become a major magnet for European FDI until they are moreclosely integrated with the economies of the rest of Europe, but progresstoward that goal is likely to be slow and largely dependent on internaldevelopments in the most important lagging economies, especially Serbia andRomania. Slovenia has welcomed new foreigninvestment and has attracted the highest amount per capita of any Balkannation since 199 . . 2 , pp. The result was a substantial reorientation of Yugoslavia'sforeign trade away from the Eastern bloc and more toward Western Europe,and an inflow of FDI which reached $3 billion by 1991 (Meyer 33). Kosovo. . I. The ending of the ColdWar and the apparent dampening down of the wars of the 199 s whichaccompanied the disintegration of the former Yugoslav Federation haveushered into power throughout most of the region governments which arereceptive to FDI. Paris: OECD, 1998.Organisation for Economic Co-operation. Although impressive gains were made in output of capital goods inthe early decades, the overall economic results were disastrous, as morefully described by country below. . had made itdifficult for outsiders to build new factories, and even harder to buy oldones" (The Next S 6). Works Cited"Albania." Europa International Year Book 1999 Vol. Croatia needs a prolonged period of peaceto repair its economy. It stilloccupies a central position along the Danube critical to the restoration ofintra-Balkan trade. Slovenia. According to Berend and Ranki,"the eastern regions of the Continent became an agrarian reserve of theincreasingly industrialized West," a source of food and raw materials andan outlet for Western manufactured goods (3). "For European Reconstruction Bank, 'Wild East' Presents A Challenge." Wall Street Journal, 16 April 1997, p. 1998, pp. London: Europa Publications, 1999. Pond reported a similar percentage increase in Bulgaria in that sameyear (A 21). Paris: OECD, 1982.Pond, Elizabeth. Gallagher estimated the standard of living of theaverage Romanian declined 35 percent between 1989 and 1996 (63). The Balkans remain thepoorest region in Europe as the following GNP per head statistics for 1997indicate: Albania $75 Bosnia 1, 86 Bulgaria 1,14 Croatia 4,61 Macedonia 99 Romania 1,42 Serbia (FRY) 2,54 (1989) (Believed to have substantially declined since 1989). . FormerAmerican Ambassador to Yugoslavia Lawrence Eagleburger, said in referenceto the war in Bosnia in 1992: The tragedy is not something which can be settled from outside . It iseffectively a NATO protectorate, its wartorn economy dependent on Westernaid for survival. When the communist grip loosened in 1989, Curtis said"the manufacturing sector was uncompetitive in world markets, wastechnologically outmoded, and consumed energy and materials at enormouslywasteful rates" (118). II. 1999, p. Internet: http://www.eia.doe.gov/emeu/cabs/romania. UNCTAD said "the flows of FDI have tended toconcentrate in Latin America and East Asia," (11). London: Europa Publications, 1999. I. London: Europa Publications, 1999. the first state assets have been sold . During the first millennium A.D., the Balkans weredivided along North-South and East-West lines between Western and EasternChristendom. Thestructural readjustment program adopted by the Croatian government hasreduced inflation to four percent in 1999, but late that year Steil andWoodward said "Croatia is on the brink of a financial nosedive with twentypercent unemployment" (95). World War II brought greatdevastation and suffering to the region, especially in Yugoslavia whereWorld War II economic losses were equal to 374 percent of 1938 nationalincome (Berend and Ranki 34 ). Serbia and Bulgaria overborrowed, in effect beingunable to meet their foreign obligations by the early 19 s. He then imposed draconian austeritymeasures to reduce the gigantic foreign debts he had incurred, causingwidespread misery. Because it remained loyal to the Ottoman Empire until theearly 19 s, Albania remained economically backward and received little FDIbefore 1945, apart from a few Italian investments in Albanian mines and oilreserves. The emergence of the ethnic Albanian Kosovo LiberationArmy (KLA) as the strongest internal political force bodes ill for thefuture stability of the province and threatens the stability of neighboringMacedonia. At that point, Tito decided to slow down thecollectivization of agriculture, promote economic decentralization throughworkers' 'self-management,' and liberalize Yugoslavia's foreign trade andinvestment laws. Foreign tourism and joint Yugoslav-foreign joint ventureswere promoted. By the late 193 s, Bulgaria had become a economic satellite of NaziGermany. The Balkans: Geopolitical Perspective For many centuries, the geopolitical significance of the Balkanpeninsula has been dictated by its position as a cross-roads betweendifferent empires, migrating peoples, religions and cultures. Croatia is still dependent on IMF loans. Foreign Investment in Yugoslavia. Railroads were builtprimarily for strategic reasons and to take grain and raw materials toports of embarkation. Most FDI was invested in the developed world, 58.2 percent in1997, but, as a percentage of world FDI, the percentage received by thedeveloped world declined about 2 percent between 1983-1988 and 1997 whilethe share of FDI received by less developed nations (including the Balkans)increased from about one fifth (21.5 percent) to nearly two fifths (37.5percent) (11 and 61). 53.Tanner, Marcus. The Europa World Year Book said in 1999 that"Slovenia was perceived as too cautious in opening its markets to foreigninvestment, thus forfeiting the benefits of restructuring and access to newtechnologies that would enhance its competitiveness" (Slovenia 3162).Slovenia has the highest rate of manufacturing productivity in the Balkansand fourth highest in Eastern Europe (The Next S 6). Due to the defeat of Germany and Austria-Hungary and the collapse ofImperial Russia, the fledgling independent nations of the Balkans recededin geopolitical importance during the early interwar period which Berendsaid was characterized by "elimination of the parliamentary system, thetriumph of nationalist authoritarian regimes . Croatia is slightly less industrializedthan Slovenia (29 percent of GDP in 1995) and is significantly dependent onits services industries (6 .5 percent of GDP in 1995), especially tourismon the Dalmatian coast which has partially recovered since 1996. 1995, pp. . Prospects for FDI in the 199 s and Beyond. Cambridge: Cambridge UP, 1977."Slovenia." The Europa World Year Book 1999 Vol. II. The Economist said foreign investors had littleinterest in "Bulgaria's crumbling Soviet-era industrial assets" (Sprucing55). The two leadingrecipients of FDI in 1989-1991 were Romania $1.43 billion and Bulgaria $.45billion, as compared to $13.27 billion, $6.65 billion and $4.96 billionrec6Croatia 74 98 81 349Bulgaria 52 42 55 1 5 9 115Romania 4 77 94 341 419 263 (Meyer 3 ) For the years 1989-1996, FDI inflows were a very low as a percentageof GDP, .4 percent in Bulgaria, .9 percent in Romania and .6 percent inSlovenia. Saul Estrin, Kirsty Huges, and Sarah Todd. Foreign Investment in Central and Eastern Europe. Introduction FDI Defined. GDP declined about 23 percent (1987-1992), but has trended steadily upward since then, by 3.3 percent in 1997and 3.8 percent in 1998 (Slovenia 3161). (ed.). Capital Markets in Central and Eastern Europe. Martin's P, 1993. Berkeley: U of California P, 1998.Berend, Ivan I., and Gyorgy Ranki. Serbo-Croatianrelations worsened in the 193 s after the ultranationalist Ustashe movementassassinated King Alexander of Yugoslavia in 1934. New York: Facts on File, 1996.Shaw, Stanford J., and Ezel Kural Shaw. In general, the economic picture, as of199 , was of economies dominated by inefficient state enterprises whichwere noncompetitive in world markets and technologically outmoded, bloatedbureaucracies, high budgetary deficits and worthless currencies,unproductive collectivized agriculture and consumers with the loweststandard of living by far in Europe. According to Bivaland Dimovski, most FDI has gone into relatively small projects,concentrated in a few industries such as pulp and paper and autos. Geopolitically, what the NATO powers came to realizewas that prolonged instability in the Balkans could destabilize and embroilits neighbors, including Greece and Turkey, and eventually Central Europein a quagmire. Foreign Direct Investment and Development. 1999): 1-1 ."Yugoslavia." The Europa World Year Book 1999 Vol. It went from having an economy on a parwith Portugal and Greece in 1938 to one that was neither energy nor foodself-sufficient in the 198 s. The Dalmatian touristindustry collapsed. a copper-mining concession hasbeen bought by an American group" (Fresh Start 51). tourism is up. Inflation was 1 8.9 percent in 1997 but only 9 percent in1998 (Sprucing 54). 67-88."Sprucing Up Bulgaria." Economist, 17 Oct. I. East and Central Europehave received a growing percentage of the total --from a low of .1 percentin 1983-1988 to 4.6 percent in 1997, but most of that inflow went to threenations, Hungary, Poland and the Czech Republic (61). .. 1997, pp. The nations of theSouthern tier, Bulgaria and Romania, after a slow start, have madeconsiderable progress in privatizing and otherwise restructuring theireconomies after near a half century of communist misrule but remain besetwith serious economic problems. Other industries werefinanced by a combination of foreign loans, equity investments (FDI) andsome domestic capital. . A 21.Ramet, Sabrina P. He said "the end of central planning opened theBulgarian economy to world competition and began a wrenching transition"(164). 1691-1692.Landes, David S. FDI and other forms of European capital dried up in the Balkans dueto the Balkan Wars (1912-1913) and the First World War. As a result, "the plant is a fiasco, producing only 1 cars aday" (Echikson 6). The sheer scale of the atrocities, destruction and massive numbers ofrefugees finally led to more effective NATO military intervention, first inBosnia and then the 1999 air war over Kosovo. Great power conflict in theBalkans is not as severe as during most of the 2 th century, but as thestrain placed on Western-Russian relations by the Kosovo war illustrated,it is still present. . Between 1945 and 199 , all the Balkan nations remained undercommunist control, but Yugoslavia gradually evolved after the mid-196 sinto a mixed economy with some capitalist elements and a shakyaccommodation among ethnic and religious groups which broke down in thelate 198 s and early 199 s resulting in the wars of Yugoslav succession.Both the United States and the rest of Europe were slow to realize thepotentially wider destructive effects of those wars and the accompanyingethnically and religious-inspired atrocities, such as 'ethnic cleansing,'which reached levels which had not been seen in Europe since 194 s. . The national economies which make up the Balkan Peninsula have notshared appreciably in the tremendous global expansion of FDI which hasoccurred in the last quarter of the 2 th century. I. . Unemployment is very high, 4 percent in1999 (Still Nervous 44). No other Eastern European nation suffered more economicallythan Romania from communist rule. Its successful warof independence lasted only a few weeks. 3158-3174.Sonje, Victor. A 14."Fresh Start." Economist, 28 April 2 , pp. Good examples of FDI are foreign branches,subsidiaries or joint ventures in which multinational enterprises (MNEs) ortrans-national corporations own a controlling share or in which they sharecontrol. . To End A War. Martin's P, 1993.Berend, Ivan T. Bulgaria has suffered from many of the same economicproblems as Romania. Sanbornsaid the 199 -1993 period was marked by "stagnant or negative growth,declining income, high inflation, labor unrest, and food shortages" (1 6). Macedonia. . I. FDI per capita in 1996 was also low, except in Slovenia where itwas $9 per capita, as compared with only $9 in Romania and $12 inBulgaria (Helmenstein 46 ). Economic Development in East-Central Europe in the 19th and 2 th Centuries. Foreigninvestments in export markets tend to be more attractive because of thelimited size (2 million population) of the domestic market. II. London: Europa Publications, 1999. They said"the development of capitalist economy was thwarted by the lack of modernproperty law, by feudal laws on opening mines, by aristocraticprerogatives, by medieval rules barring the development of a modern creditsystem, by the obligation of serfs to pay rent . Saul Estrin, Kirsty Hughes, and Sarah Todd. has grown at an unprecedentedrate . For two decades, Yugoslavia pursued communist central planning andeconomic self-sufficiency schemes which by the mid-196 s produced highinflation and unemployment. Future prospects for European FDI in the Balkans vary by region andby country. II. The railroads were owned by local governments, whichguaranteed foreign lenders five percent returns. economic nationalism . Before Milosevicbegan aggressively promoting the cause of Greater Serbia, and clamping downon domestic dissent, FRY had received more FDI and done more trade withEurope than any other Balkan nation. The comparable figures for the Czech Republic are $5,2 and Hungary$4,43 (Czech Republic and Hungary 1165 and 1691). Croatia A Nation Forged In War. The 192 s and 193 s were marked by rising ethnic tensionsbetween majority and minority populations. 199 -1997; however, GDP increased a healthy6.5 percent in 1997 (Croatia 11 7). Conclusion The partial modernization of the Balkans in which FDI played a majorrole was interrupted by the cataclysmic disasters which struck it between1912 and 1989. It, together with Croatia, has a leading earning of hardcurrency through its exports of agricultural and industrial products andtourism. Industrial output fell about 4 percent (Tanner 254).GDP declined 2.8 percent p. Western influence waslargely confined to coastal areas along the Adriatic, to towns adjacent toGreece and in Romania. Iwaskiw (eds.). 1999): 95-1 5."Still Nervous in Macedonia." Economist, 31 July 1999, p. In the first threeyears after the end of the Cold War, foreign investors completely avoidedthe former Yugoslavia. Nevertheless, the influence of Western ideas which took primarily theform of nationalism, and the importation of foreign capital, primarily inthe form of loans rather than FDI (97:3 in Serbia), played a major role inthe initial modernization of the economies of parts of the Balkans. Bulgaria. "Needed: An Army of Investors." Business Week, 3 Nov. Croatia has been relatively stable politically. European capital, from Britain, France, Austria-Hungary,and increasingly Germany after the 188 s, went primarily intoinfrastructure, railroad and communications construction, to capitalizebanks, for raw materials extraction facilities, and also into various foodprocessing and other import substitution industries. Croatia. That modernization was, however,very incomplete and was interrupted by two World Wars, ethnic and religioustensions, political instability, economic nationalism, the Depression andother factors. New York: United Nations, 1999.United States Energy Information Adminstration. The Balkans: Economic Perspectives European FDI Historical Background: (18 -1939). Albania A Country Study. 746-767."Croatia." Europa World Year Book 1999 Vol. "Can Bulgaria Beat the Balkan Curse?" Wall Street Journal, 21 Nov. 1161-1178.Echikson, William. Meyer said that overall "the countries of South-Central Europeshow a very disappointing performance in attracting DFI [FDI]" (39). Growth of FDI and Share Received by Balkan Countries. Cheltenham: Edward Elgar, 1999.Holbrooke, Richard. Like Slovenia, it enjoyed special access toAustrian finance before 1918 and had the first railways in the Balkans inthe 186 s which were financed by Austrian banks. "Economic Rebirth in Eastern Europe." World Press Review, Feb. Direct Investment in Economies in Transition. By 1914, most major industries in the Balkans werecontrolled by foreigners. 2261-2276.Meyer, Klaus. Under the Enver Hoxha communist dictatorship (1945-1985), Albaniafollowed the Stalinist model of development, which in the 198 s producedperennial economic declines. New York: St. FDI and other forms of European foreign capital played a major rolein the initial economic modernization of the major Balkan nations,especially during the half century which preceded the First World War andto a lesser extent during the mid-192 s. Romania was forced to pay the Soviet Unionsubstantial reparations after World War II. extreme xenophobia, territorial revisionism and national conflicts"(396). . The United Nations Conference on Trade and Development(UNCTAD) defined FDI as "investment involving a long-term relationship andreflecting intent and control by a resident entity (the foreign directinvestor or parent enterprise) of one country (foreign affiliate/resident)in a country other than of the foreign direct investor. New Haven: Yale UP, 1997."The Next Revolutions." Economist, 22 Nov. III. Nevertheless,per annum GDP growth was substantial, 3-4 per cent in the region from 19 to 1914 (Berend and Raki 284). Washington, DC: GPO, 199 ."Czech Republic." Europa World Year Book Vol. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.