Investment Incentives in the Central and Eastern European Transition Economies
In: The Journal of World Investment & Tradeand
I. INTRODUCTION In an increasingly globalized world, developing countries try to strengthen their competitiveness by accumulating capital. Anticipating beneficial effects of foreign direct investment (FDI) in economic development, such as increase of capital stock, employment generation, increase in exports and technology transfer, most developing countries provide various financial, fiscal and other incentives to attract FDL1 Although such investment incentives granted by governments may increase the amount of Fm flows into those countries, some such incentives are regulated in the global trading system. Investment incentives directly influencing international trade are regulated by the Agreement on Subsidies and Countervailing Measures
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1 UNCTAD, 1999, pp. 46-50.
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2 For the characteristics of the SCM Agreement in the W're, see Zampetti, 1995. 3 Article 1 of thc Scum Agreement. ; Ibid., Article 2. 5 Objective criteria or conditions, as used in the SCM Agreement, mean criteria or conditions which are neutral, which do not favour certain enterprises over others, and which are economic in nature and horizontal in application, such as numbers of employees or size of enterprise. 6 Scam Agreement, Article 2.1 (b).
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7 Ibid., Article 8.2. 1 Ibid., Article 29.2(a).
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'' Slovenian Trade and Investment Promotion Office, 2000.
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�" UNCTAD. 1998, pp. 275-276.
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� � For further details, see UNCTAD, 1996, pp. 3-7; and Shah, pp. 32-37. 12 Sources of the information on the investment incentives for the Central and Eastern European transition economies covered in the current study are the following: Brock, 1998; Bulgarian Foreign Investment Agency, 2000; Hungarian Investment and Trade Development Agency, 1999, 2000; Latvian Development Agency, 2000; Lithuanian Development Agency, 2000; Meyer and Pind, 1999; OECD. 1996a, 1996b, 1996c, 1996d, 1996e; Polish Agency for Foreign Investment, 2000; Romanian Development Agency, 1999; Russian Investment Promotion Center, 1998; Slovak National Agency for Investment and Development, 1999; Slovenian Trade and Investment Promotion Office, 2000; and WTO 1996, 1998. 13 In Bulgaria, the 1991 Foreign Investment Act, replaced by the 1992 Law on Economic Activity of Foreign Persons and on the Protection of Foreign Investment, is considered to be one of the most liberal for foreign investments in the Central and Eastern European economies. In general, there are neither ceilings nor constraints on the participation of the foreigners' share in the firm, or on the sector of investment. Free repatriation of profit is guaranteed: Koparanova, 1998, pp. 8-11. Bulgaria also provides various fiscal incentives. Despite the FDI regime, friendly to foreign investors, the rare opportunity of financial incentives in Bulgaria appears to be one of the reasons for not-so-satisfactory performance of the Fm inflows.
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11 Illustrative List of Export Subsidies, Annex i(d) of the SCM Agreement. �5 In Poland, the corporate profit tax rate was announced to decrease gradually to 22 percent in 2004: «http://www.paiz.gov.pl/06TAX.htm>, 10 June 2000. 16 For instance, in Lithuania, profit tax rate with respect to companies producing agricultural products is only 10 percent, although the normal profit tax rate is 29 percent: «http://www.lda.lt/invest.law.taxation.html>>, 10 June 2000. » «http://www.itd.hu/aaguide.htm>, 10 June 2000.
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18 In January 2000, a package of investment incentives was passed in Slovenia, accompanied by a pledge to reduce bureaucracy. Capital flow restrictions have largely gone as well, and restrictions on foreign portfolio investment are gradually being phased out: Business Central Europe, «http://www.bcemag.com/y2000/jun00/ cover/0006cover.htm�>, 10 June 2000. This contrasts with the general tendency of the recent gradual reduction of investment incentives in these countries: Business Central Europe, «http://www.bcemag.corn/y2000/rnay00/ survey/0005survey.htm'� May 2000.
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Brock, G.J., 1998: Foreign Direct Investment in Russia's Regions 1993-95: Why so Little and Where has It Gone? Economics of Transition, November.
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Bulgarian Foreign Investment Agency, 2000: «http://www.bfia.org», June.
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Business Central Europe, 1998-2000: «http://www.bcemag.com», May 1998, May and June 2000.
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Hungarian Investment and Trade Development Agency, 1999: Tax Allowances, Support Schemes, Investment Incentives, Grants and Subsidies, April.
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Idem, 2000: «http://www.itd.hu», June.
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Koparanova, Milinka, S., 1998: Overview of Foreign Direct Investment in Bulgaria in the Middle of the 1990s, Eastern European Economics, July-August.
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Latvian Development Agency, 2000: Latvian Trade and Investment Guide, at «http://www.lda.gov.lv», June.
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Lithuanian Development Agency, 2000: «http://www.lda.lt», December.
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Meyer, K.E., and C. Pind, 1999: The Slow Growth of Foreign Direct Investment in the Soviet Union Successor States, Economics of Transition.
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OECD, 1996a: Investment Guide for Bulgaria, OECD, Paris.
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Idem, 1996b: Investment Guide for Latvia, OECD, Paris.
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Idem, 1996c: Investment Guide for Lithuania, OECD, Paris.
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Idem, 1996d: Investment Guide for Russia, OECD, Paris.
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Idem, 1996e: Investment Guide for the Ukraine, OECD, Paris.
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Polish Agency for Foreign Investment, 2000: «http://www.paiz.gov.pl», January.
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Romanian Development Agency, 1999: «http://www.rda.ro», February.
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Russian Investment Promotion Center, 1998: The 1998 Guide to Russia.
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Shah, A., 1996: Fiscal Incentives for Investment and Innovation, The World Bank/Oxford University Press, Oxford.
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Slovak National Agency for Investment and Development, 1999: «http://www.pubnet.sk», March.
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Slovenian Trade and Investment Promotion Office, 2000: «http://www.investslovenia.gov.si». 12 June.
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UNCTAD, 1996: Incentives and Foreign Direct Investment, United Nations, Geneva and New York.
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Idem, 1998: World Investment Report 1998, United Nations, Geneva and New York.
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Idem, 1999: World Investment Report 1999, United Nations, Geneva and New York.
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WTO, 1996: Trade Policy Review: The Czech Republic, WTO, Geneva.
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Idem, 1998: Trade Policy Review: Hungary, WTO, Geneva.
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Zampetti, A.B., 1995: The Uruguay Round Agreement on Subsidies—A Forward Looking Assessment, 29 J.W.T. 6, December.
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Investment Incentives in the Central and Eastern European Transition Economies
In: The Journal of World Investment & Tradeand
I. INTRODUCTION In an increasingly globalized world, developing countries try to strengthen their competitiveness by accumulating capital. Anticipating beneficial effects of foreign direct investment (FDI) in economic development, such as increase of capital stock, employment generation, increase in exports and technology transfer, most developing countries provide various financial, fiscal and other incentives to attract FDL1 Although such investment incentives granted by governments may increase the amount of Fm flows into those countries, some such incentives are regulated in the global trading system. Investment incentives directly influencing international trade are regulated by the Agreement on Subsidies and Countervailing Measures
| All Time | Past Year | Past 30 Days | |
|---|---|---|---|
| Abstract Views | 83 | 49 | 3 |
| Full Text Views | 1 | 0 | 0 |
| PDF Views & Downloads | 3 | 2 | 0 |