REGIONAL COOPERATION AND ECONOMIC INTEGRATION

FDI FLOWS IN SOUTH EASTERN EUROPE
stocks per capita held by EU member countries in the above mentioned period was recorded
in Turkey with only EUR 86.73 in 1999 and EUR 683.81 in 2007.
Figure 5: EU FDI outward stocks in the EU - candidate countries per capita
and their annual growth rate, 1999-2007 (in EUR)
4000,00
141.14%
3500,00
3000,00
2500,00
2000,00
142.46%
143.57%
1500,00
1000,00
500,00
0,00
109.29%
129.83%
129.78%
140.58%
121.82%
146.87%
260.48% 109.12%
150.10%
-78.66%
111.60%
140.25%
167.22%
125.59%
123.73%
133.88% 118.04%
250.64%. 138.86% 125.01% -81.64%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Macedonia Croatia Turkey
Source: Eurostat, Statistics in focus 68/2008 and NBRM and author’s own calculations
The increase of EU outward flows to the EU candidate countries in the last five-six years
raises the issue of the sustainability of these inflows and to what extent, they are a result of
the improved macroeconomic conditions, on one hand and the progress that EU candidate
countries achieved in the EU enlargement process, on the other hand.
2. Determinants of foreign direct investments from the EU member states to the EU
candidate countries
A number of economic theories and perspectives have been developed to explain the
determinants of FDI since the late 1950s, when the topic started to receive scholarly attention.
The main FDI theories range from the mainstream economic theories, internalization
models to Dunning’s eclectic paradigm.
With reference to the empirical studies, they have investigated the impact of locationspecific
determinants of FDI on the FDI location decision into and within the United States,
the EU or, more recently, China. Rather less attention has been devoted to the South-Eastern
European countries, with several authors (Lankes, H.P. and Venables, A., 1996 and Meyer,
K.E. 1998) simply reporting aggregate data or using case study and survey methods, and
relatively few econometric studies.(Lansbury et.al., 1996, Holland, D. and Pain, N., 1998,
Resmini, L., 2000, Campos, N. and Y. Kinoshita, 2003, Bevan, A.A. and Estrin S., 2004,
Botric, V. and Skuflic, L., 2005, and Grosse, R. and Trevino, L.J., 2005).
The purpose of this paper is to enrich the econometric research of the FDI determinants
by empirical estimation of the most significant factors that have determined past decisions
of the EU investors and those that will influence their future decisions to invest in the EU
candidate countries.
In order to investigate the determinants of foreign direct investments to EU candidate
countries, we use annual data on EU FDI outward stocks per capita in EU candidate
countries in the period between 1999 and 2007. The selection of variables is based on the
economic literature as well as previous empirical research of the determinants of FDI in
South-eastern European countries. The econometric models will be estimated using the
ordinary least square (OLS) method.
The paper explores the impact of the classical independent variables (market size, labour
costs, quality of labour force, infrastructure and transportation costs), policy variables
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