REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART V:
from government regarding all spheres of economic life of one country were such that the
private ownership and free economic flows were impossible to achieve. As the contrast
to the mentioned system, the market economy, which implies absolute freedom of the
movemrnt of capital, emerges. Market economy also implies privatization of state owned
companies, fair competition and formation of market prices only based on freely established
relation between the demand and supply. West Balkan countries are making exceptional
efforts in order to transform their economic systems and improve their competitive position
primarily by establishing liberal laws on foreign direct investments, reducing the corporate
profit tax as well as the removing of trading barriers and investment prohibitions.
Depending on the current economic situation present in some country, as well as its
competitive position, the foreign investor will apply the most adequate form of capital
investment. It is important to stress that the West Balkan countries have moderate capital
accumulation. These countries were recently faced with wars and devastation and are
constantly faced with political feuds and instability, as well as the high inflation rate,
exceptionally slow economic growth and development, etc. If we consider the overall
situation, it is quite clear why these countries are at the lower level of economic development
compared to their neighbors and why they need larger inflow of the foreign capital. The
inflow of foreign direct investments in the region of Central and Eastern Europe has been
insignificant up to 1990. The value of the overall inflow was approximately $500 million
that was mostly invested in Hungary.( Claessens S., Oks D., Polastri R., 1998, str. 7). More
intense investments in West Balkan countries started from 2000, thus the inflow of foreign
direct investments in recent years shows the constant growth, which is unfortunately slowed
down because of the world economic crisis.
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Table 1: FDI inflows by West Balkan countries, 2005-2007 (millons of dollars)
Country
FDI inflows (millions of dollars)
2005. 2006. 2007.
Albania 262 325 656
Bosnia and Herzegovina 595 708 2022
Croatia 1788 3423 4925
Macedonia 97 424 320
Montenegro 478 618 876
Serbia 1609 4499 3110
Source: World Investment Report 2008.
In the aforementioned period, Croatia achieved constant and increasing inflows of the foreign
direct investments, while other countries showed various oscillations. The presented data
show that Macedonia had the smallest inflow in 2005 only $ 97 million while the leading
position was again held by Croatia which had $1788 million. However, Serbia had slightly
smaller inflow of $ 1609 million FDI. Other countries- Albania, Bosnia and Herzegovina
and Montenegro had more modest but steady inflow of the foreign capital. In 2006, Albania
attracted the smallest number of investors and achieved very low inflow of only $ 325
million FDI, while Serbia achieved the record inflow of $ 4499 million. Also in 2006,
thanks to the selling of the following companies: Mobtel, Hemofarm, Vojođanska banka
and Panonska banka, as well as selling the license to the third mobile telephone operator, the
record inflow of foreign direct investments of almost $ 4.3 billion was achieved. Although