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*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 | p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | w: www.ccsi.columbia.edu | t: @CCSI_Columbia <https://twitter.com/CCSI_Columbia> "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 https://ssrn.com/author=2461782 and http://www.works.bepress.com/karl_sauvant/. > View this email in your browser > <https://mailchi.mp/law/perspective-236?e=d77d3e2158> > > 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： > http://ccsi.columbia.edu/publications/columbia-fdi-perspectives. > *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?* > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=2cbf7cc840&e=d77d3e2158> > * > <#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 > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=ac500638b5&e=d77d3e2158> > . > [4] > <#m_-4175451768798169542_m_3862976724613552842_m_6591331123203214814_m_7478100643405337212__ednref6> Thomas > Piketty, “2018, the year of Europe,” *Le Monde*, January 16, 2018 > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=af9ece58bb&e=d77d3e2158> > . > [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 > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=f75b9b027b&e=d77d3e2158> > . > *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 (**www.ccsi.columbia.edu > <http://www.ccsi.columbia.edu>**).” 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* > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=b490a377cc&e=d77d3e2158> > > > - 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 **http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/ > <http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/>**. * > > *Other relevant CCSI news and announcements* > > - *On October 11, 2018*, CCSI will will launch its* Fall 2018 > International Investment Law and Policy Speaker Series > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=4014f568eb&e=d77d3e2158>*. > 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 > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=97e0d1d556&e=d77d3e2158> 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 > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=ec78a23cea&e=d77d3e2158>. *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 > <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=6182c8843f&e=d77d3e2158>. *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.* > [log in to unmask] > > *Our mailing address is:* > Columbia Center on Sustainable Investment (CCSI) > Columbia Law School - Earth Institute, Columbia University > 435 West 116th Street > New York, NY 10027 > > Add us to your address book > <//columbia.us6.list-manage.com/vcard?u=ab15cc1d53&id=a61bf1d34a> > > > unsubscribe from this list > <https://columbia.us6.list-manage.com/unsubscribe?u=ab15cc1d53&id=a61bf1d34a&e=d77d3e2158&c=6320db15ca> > update subscription preferences > <https://columbia.us6.list-manage.com/profile?u=ab15cc1d53&id=a61bf1d34a&e=d77d3e2158> > > > [image: Email Marketing Powered by Mailchimp] > <http://www.mailchimp.com/monkey-rewards/?utm_source=freemium_newsletter&utm_medium=email&utm_campaign=monkey_rewards&aid=ab15cc1d53&afl=1> > ------------------------------ Spam <https://antispam.law.columbia.edu/canit/b.php?c=s&i=01WJ50nsJ&m=c8dd846259ad&t=20181008> Not spam <https://antispam.law.columbia.edu/canit/b.php?c=n&i=01WJ50nsJ&m=c8dd846259ad&t=20181008> Forget previous vote <https://antispam.law.columbia.edu/canit/b.php?c=f&i=01WJ50nsJ&m=c8dd846259ad&t=20181008> ____ AIB-L is brought to you by the Academy of International Business. 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