REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART V:
INTRODUCTION
In the conditions of the current economic and financial crisis that is becoming stronger with
time and gradually enters our region, perhaps from one point of view, it might be ungrateful
to speak about investing the foreign capital due to the existence of great instabilities and
risks. However, on the other hand, the inflow of the fresh capital is always welcomed, since
it brings about numerous benefits for the domestic economy and boosts the growth and
development of one transitional country. If there are conditions for foreign direct investment
inflow in one country they would enable the rapid recovery of the country’s economy, easier
overcoming of the forthcoming potential crisis and the successive and steady development
which would in turn result in the continuous constant growth with time. Foreign capital
undoubtedly gives considerable benefits to the developing countries because it influences
the establishing of political and economic stability, strengthens both legal and institutional
framework, introduces new technological knowledge and achievements, exerts a positive
effect on business environment and improves managerial and organizational skills of
the employees. The role of the foreign private capital in transitional countries increases
proportionally with the speed with which they achieve the transformation and the reform
that lead them towards the market economy. Thus, they reach certain degree of economic
stabilization and economic growth. (Vidas-Bubanja, 2008) The positive aspect of the
foreign direct investments is the subject of numerous scientific researches, and the authors
of the expert literature frequently exploit this topic. Moreover, it was proved in numerous
real life situations. When we discuss the inflow of the foreign capital into a transitional
country, we cannot overlook numerous negative elements particularly in terms of the host
country’s point of view. The growth of competition, collapse of domestic entrepreneurs,
illegal privatizations, union strikes, accumulation of huge profits from the irregular dealings
and the crime growth are only some of the numerous negative effects that accompany the
aforementioned process. Unfortunately, we are witnessing these negative happenings in the
West Balkan Countries. However, these circumstances are convenient for the investments
and entrance of the large transnational companies which might be said to have somehow
irresponsibly and naively approached the realization of the aforementioned processes.
Transition has started some time ago and some of its effects can already be seen, but
numerous changes will be introduced in the forthcoming period and it is difficult to forecast
their influence on the national economies. We can only hope that the governments of the
countries in question will make more concrete steps towards solving the current problems,
support the inflow of the foreign capital and enable regular and unrestrained realization of
investment projects. Of course, we must not ignore the fact that the transitional process is
always more or less painful and it always leaves behind certain consequences.
In terms of the current situation in Serbia and other West Balkan countries, as well as the
need of these countries for the fresh capital, this paper will emphasize the key features,
positive and negative sides of foreign direct investments and the most common motives of
the foreign investors. The special care will be given to the analysis of the incoming flows of
foreign direct investments and their significance for the mentioned countries. By applying
specific comparative analysis of the basic pillars of competition and the analysis of the
global competitiveness index and subindex, we would point to the current circumstances
and possibilities for future improvements in West Balkan countries that are constantly
striving towards achieving some level of the status that the developed countries have.
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