*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"Putting FDI on the G20 Agenda", "International Investment Facilitation: By
Whom and for What?", "Moving the G20's Investment Agenda Forward",
"Emerging Markets and the International Investment Law and Policy Regime",
"Sustainable FDI for Sustainable Development", "Towards an Investment
Facilitation Framework: Why? What? When?", "Beware of FDI Statistics!",
"Towards an Indicative List of FDI Sustainability Characteristics", “The
Importance of Negotiating Good Contracts", "A New Challenge for Emerging
Markets: the Need to Develop an Outward FDI Policy”, "China Moves the G20
toward an International Investment Framework and Investment Facilitation", "The
Next Step in Governance: The Need for Global Micro-regulatory Frameworks",
and "The Evolving International Investment Law and Policy Regime: Ways
Forward" *are* available at and

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> 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看:
> *Columbia FDI Perspectives*
> Perspectives on topical foreign direct investment issues
> No. 236  October 8, 2018
> Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
> Managing Editor: Marion A. Creach ([log in to unmask])
> *To what extent has FDI benefited the transition economies of Central and
> Eastern Europe?*
> <>
> *
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn1>
> by
> Laza Kekic**
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn2>
> The theoretical case for a positive impact of FDI on economic growth seems
> strong, but the empirical evidence has been mixed. Despite the numerous
> alleged benefits of FDI to the host economy, empirical studies have failed
> to establish a significant, unconditional, positive impact of FDI inflows
> on the growth of GDP. Some studies identify a positive impact conditional
> on the existence of a minimum threshold of human capital, or of
> institutional and financial development. At the microeconomic level, the
> evidence on positive spillovers from FDI on domestic companies and
> industries has been sparse.
> The transition economies of Central and Eastern Europe (CEE)[1]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn3>
> may be an exception in terms of FDI having a more unambiguously positive
> impact on growth. FDI has long been seen as a crucial factor in the
> transition to market economies. These economies started out in 1989 far
> away from the international technological frontier. Yet, unlike many
> developing countries, they had a relatively developed industrial structure,
> a highly educated workforce and proximity to rich Western European markets.
> In a model prepared by the author for this *Perspective*, several
> variables explain over 90% of the inter-country variation in GDP in 2017
> relative to output in 1989 for all 28 CEE transition economies.[2]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn4>
> An index of initial conditions at the start of the transition and an
> indicator of whether the country was affected by war in 1989-2017 explain
> some 50% of the variation in transition economies’ growth in 1989-2017.
> Other control variables, all statistically significant, include income per
> head at the start of the transition, natural resource wealth, the ratio of
> external debt to GDP, an index of corruption (a measure of the quality of
> institutions), and an index of progress in economic reform. Debt flows had
> a significant negative impact, in line with the results for emerging
> markets in general. The results for FDI, measured by FDI stocks in 2016 per
> capita, show a positive impact on growth, but were only on the edge of
> statistical significance and not especially strong or robust. The estimated
> impact of FDI was much stronger for the 1989-2008 period alone, suggesting
> that the role of FDI in the post-crisis period after 2008 has been less
> favorable.
> According to UNCTAD data,[3]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn5>
> the inward FDI stock in CEE relative to GDP—a median value of 49% in
> 2016—was higher than the global (42%) and EU (47%) median values. In a
> recent blog, Thomas Piketty talked of the “colonisation” of CEE and called
> these countries “foreign-owned”.[4]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn6>
> For several countries in the region he compared net outflows of profits and
> incomes from property with net transfers received from the EU and found
> that the outflows have been much higher. For example, on average in
> 2010-2016, annual net outflows of profits and incomes from property
> amounted to 4.2% of GDP in Slovakia, 4.7% in Poland, 7.2% in Hungary, and
> 7.6% in the Czech Republic. By comparison, over the same period, the annual
> net transfers from the EU amounted to 2.7% of GDP in Poland, 4% in Hungary,
> 1.9% in the Czech Republic, and 2.2% in Slovakia. It should be noted,
> however, that Piketty’s indicator includes all interest incomes, including
> the interest paid on external debt, and reinvested profits, and thus does
> not necessarily reflect FDI-related “outflows”.
> Progress in convergence with income levels in the developed EU has been
> relatively modest, especially since the 2008 global crisis. The average
> ratio of GDP per head for the 16 CEE countries relative to the developed
> western EU 15 countries rose from 44.1% in 2008 to 48.6% in 2017.
> Importantly, for the population, personal income growth and living
> standards are more crucial than GDP growth.[5]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__edn7>
> The rate of convergence of wages has been slower than the rate of
> convergence of GDP, and growth in consumption has generally lagged behind
> growth in GDP. The rewards from growth have gone disproportionately to the
> owners of capital—in these countries, that tends to mean foreigners.
> Looking forward, the countries in the region will need to develop growth
> strategies that do not depend so overwhelmingly on FDI. Even if FDI is
> important, it is unlikely to lead to sustained convergence with developed
> economies. The priority tasks for policv-makers in the region will be to
> improve access to finance for domestic companies, further deregulation in
> select areas and increasing incentives for domestic innovation, as well as
> to encourage foreign investors to upgrade their operations.
> ------------------------------
> *
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref1> *The
> Columbia FDI Perspectives are a forum for public debate. The views
> expressed by the author(s) do not reflect the opinions of CCSI or Columbia
> University or our partners and supporters. Columbia FDI Perspectives (ISSN
> 2158-3579) is a peer-reviewed series.*
> **
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref2>
> Laza Kekic ([log in to unmask]) is an independent consultant. The author
> is grateful to Alexey Kuznetsov, Elina Pelto and Zbigniew Zimny for their
> helpful peer reviews.
> [1]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref3>
> These 16 countries are the 11 EU members from the region (Bulgaria,
> Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland,
> Romania, Slovakia, Slovenia) and 5 western Balkan countries (Albania,
> Bosnia and Hercegovina, Macedonia, Montenegro, Serbia).
> [2]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref4>
> The model also includes 12 former Soviet Republics.
> [3]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref5>
> UNCTAD, *World Investment Report 2017* (Geneva: UNCTAD, 2017),
> Annex table 07. FDI inward stock as a percentage of gross domestic
> product, 1990-2016
> <>
> .
> [4]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref6> Thomas
> Piketty, “2018, the year of Europe,” *Le Monde*, January 16, 2018
> <>
> .
> [5]
> <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref7> Simon
> Tilford, “All is not well in the Visegrad economies” *Centre for European
> Reform*, November 29, 2017
> <>
> .
> *The material in this Perspective may be reprinted if accompanied by the
> following acknowledgment: “Laza Kekic, ‘To what extent has FDI benefited
> the transition economies of Central and Eastern Europe?,’ Columbia FDI
> Perspectives, No. 236, October 8, 2018. Reprinted with permission from the
> Columbia Center on Sustainable Investment (**
> <>**).” A copy should kindly be sent to the
> Columbia Center on Sustainable Investment at **[log in to unmask]*
> <[log in to unmask]>*.*
> For further information, including information regarding submission to the
> *Perspectives*, please contact: Columbia Center on Sustainable
> Investment, Marion A. Creach, [log in to unmask]
> *Most recent Columbia FDI Perspectives*
> <>
>    - No. 235, Reji K. Joseph, “Investment facilitation: new dynamism at
>    the WTO on investment,” September 24, 2018
>    - No. 234, Jan Knoerich, “Do developing countries benefit from outward
>    FDI?,” September 10, 2018
>    - No. 233, Meg Kinnear, “Moving with the times: amending the ICSID
>    rules,” August 27, 2018
> *All previous FDI Perspectives are available at **
> <>**. *
> *Other relevant CCSI news and announcements*
>    - *On October 11, 2018*, CCSI will will launch its* Fall 2018
>    International Investment Law and Policy Speaker Series
>    <>*.
>    We’re delighted to announce that this year’s speakers will include Patricio
>    Grane Labat, Philippe Sands, QC, Eugenio Hernández-Bretón, Ko-Yung Tung,
>    Colin Brown, Ana Novik, and Zoe Williams. This fall, the series will be
>    co-sponsored by Arnold & Porter and Baker McKenzie. The series will be
>    moderated by Grant Hanessian, Maria Chedid, and Kabir Duggal. All talks
>    will take place at Columbia Law School. Select presentations will be
>    webcast; please see our website
>    <> for
>    the schedule and more details. No registration is required.
>    - *On* *October 29, 2018*, CCSI and the Columbia Society for
>    International Law (CSIL) will co-host a talk on "The CIT and the General
>    Court of the EU: A Comparison of Powers and Competences," with Judge Jennifer
>    Choe-Groves, United States Court of International Trade, and Judge Savvas
>    Papasavvas, Court of Justice of the European Union. *For more
>    information, please visit our website here
>    <>. *No
>    registration is required.
>    - *On* *October 31, 2018*, CCSI and the Columbia International
>    Arbitration Association (CIAA) will co-host a talk by Mislav Mataija
>    on "Three Strikes and You’re Out? Investment Treaties in the EU Legal
>    Order." *For more information, please visit our website here
>    <>. *No
>    registration is required.
> Karl P. Sauvant, Ph.D.
> Resident Senior Fellow
> Columbia Center on Sustainable Investment
> Columbia Law School - Earth Institute
> Ph: (212) 854-0689
> Fax: (212) 854-7946
> *Copyright © 2018 Columbia Center on Sustainable Investment (CCSI), All
> rights reserved.*
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