Studies in Economic Transition

Transcription

1 Studies in Economic Transition Series Editors Jens Hölscher The Business School Bournemouth University Bournemouth, United Kingdom Horst Tomann Department of Economic Policy and Economic History Freie Universitaet (FU) Berlin Berlin, Germany

2 This series brings together theoretical and empirical studies on the transformation of economic systems and their economic development. The transition from planned to market economies is one of the main areas of applied theory because in this field the most dramatic examples of change and economic dynamics can be found. It is aimed to contribute to the understanding of specific major economic changes as well as to advance the theory of economic development. The implications of economic policy will be a major point of focus. More information about this series at

3 Balázs Szent-Iványi Editor Foreign Direct Investment in Central and Eastern Europe Post-crisis Perspectives

4 Editor Balázs Szent-Iványi Aston Centre for Europe Aston University Birmingham, UK Institute of World Economy Corvinus University Budapest Budapest, Hungary Studies in Economic Transition ISBN ISBN (ebook) DOI / Library of Congress Control Number: The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

5 To Benedek, Aron, and Gyöngyi

6 Contents 1 Introduction: The Changing Patterns of FDI 1 Balázs Szent-Iványi 2 Post-crisis Crossroads for FDI in CEE 23 Kálmán Kalotay 3 Czech FDI Performance: Between Global Value Chains and Domestic Reforms 51 Tereza De Castro and Pavel Hnát 4 Foreign Direct Investment in Slovakia: The Tatra Tiger Gone Tame? 77 Martin Grančay and N ora Grančay 5 Latecomers May Be Admitted: Foreign Direct Investment Between the CEE Countries 99 Magdolna Sass vii

7 viii Contents 6 Upgrading and Value Capture in Global Value Chains in Hungary: More Complex than What the Smile Curve Suggests 127 Andrea Szalavetz 7 Inequalities of Accumulation: The Case of Central and Eastern Europe 151 Annamaria Artner 8 Multinational Banks: Protective Factors of Financial Stability in Central and Eastern Europe? 171 Gábor Kutasi 9 Investment Promotion in the Visegrad Countries: A Comparative Analysis 193 Agnes Tőrös, Adám Mészáros, and Akos Dani 10 Competitiveness and Investment Promotion in Bulgaria and Romania 219 Sorin Gabriel Anton 11 Conclusions: Prospects for FDI-Led Development in a Post-crisis World 241 Balázs Szent-Iványi Index 259

8 Notes on Contributors Sorin Gabriel Anton is Associate Professor of Finance at Alexandru Ioan Cuza University of Iasi, Romania. His research interests are in the fields of international finance, financial risk management, and corporate finance. Annamária Artner is a senior research fellow at the Institute of World Economics, Centre for Economic and Regional Studies of the Hungarian Academy of Sciences, Budapest, Hungary. Her main research interests are labour markets, crises, and the global accumulation of capital. Tereza De Castro is Lecturer in Global Economy and Development Economics at the Faculty of International Relations, University of Economics, Prague, Czech Republic. She specializes in trade and investment relations between Europe and the BRICS countries. Ákos Dani is a PhD candidate at Corvinus University Budapest, Hungary. His main research area is the international monetary system. Martin Grančay is the Director of the Project Center at the Faculty of Chemical and Food Technology at the Slovak University of Technology in Bratislava, Slovakia, and an independent researcher. His work focuses primarily on gravity models of trade and the economics of international civil aviation. Nóra Grančay is an independent researcher. She holds a PhD degree from the University of Economics in Bratislava, Slovakia. ix

9 x Notes on Contributors Pavel Hnát is Associate Professor of World Economy and European Integration at the Faculty of International Relations, University of Economics, Prague, Czech Republic. His latest monograph examines the Political Economy of Global Imbalances. Kálmán Kalotay is an Economic Affairs Officer at the United Nations Conference on Trade and Development (UNCTAD) in Geneva, Switzerland, and Honorary Professor of Corvinus University Budapest, Hungary. Gábor Kutasi is an associate professor at the Institute of World Economy, Corvinus University Budapest, Hungary. Ádám Mészáros is an assistant professor at the International Business Research Centre, Corvinus University Budapest, Hungary. His main research interests are foreign direct investment and research, development, and innovation policy. Magdolna Sass is a senior research fellow at the Centre for Economic and Regional Studies of the Hungarian Academy of Sciences, Budapest, Hungary. Her main research areas are international trade, foreign direct investments, and related policies, with special attention to the East Central European region. Andrea Szalavetz is a senior research fellow at the Centre for Economic and Regional Studies of the Hungarian Academy of Sciences, MTA MRTK, Budapest, Hungary. Her research areas are global value chains and international business. Balázs Szent-Iványi is Lecturer in Politics and International Relations at the Aston Centre for Europe, Aston University, Birmingham, UK. He also holds an associate professor position at the Institute of World Economy, Corvinus University Budapest, Hungary. His work focuses on international development politics and the relations between multinational corporations and the state. Ágnes Tőrös is an economic analyst, who received her PhD degree from Corvinus University Budapest. She gathered professional experience in governmental institutions and spent several years in positions dedicated to investment promotion.

10 List of Abbreviations ARIS Romanian Agency for Foreign Investment BAC Business Advisory Councils BPO Business process outsourcing BRIC Brazil, Russia, India, China BRICS Brazil, Russia, India, China, South Africa CDS Credit default swaps CEE Central and Eastern Europe CNB Czech National Bank CoE Compensation of employees CUSUM Cumulative sum sequential analysis DBR World Bank Doing Business Report DIAE Division on Investment and Enterprise (of UNCTAD) ERT European Round Table of Industrialists ESI Export similarity index ESPRIT European Strategic Program on Research in Information Technology ETA Equity to total assets EU European Union EU-15 The 15 member states of the European Union prior to the 2004 enlargement EU-11 The 11 Central and Eastern European member states of the European Union xi

11 xii List of Abbreviations EXPY FDI FX GDP GIPB GNI GOSMI GVC HIPA HITA ICT IDP IFDI IPA ITD LIBOR LLRGL M&A MNC NACE NAFTA NBS NOIP NPL OECD OFDI OLI OLS PAIiIZ PIIGS PPI R&D SARIO SEZ SME Measure of the productivity level associated with a country s export basket Foreign direct investment Foreign exchange Gross domestic product Global Investment Promotion Benchmarking Gross national income Gross operating surplus/mixed income Global value chain Hungarian Investment Promotion Agency Hungarian Investment and Trade Agency Information and communication technologies Investment development path Inward foreign direct investment Investment promotion agency Hungarian Investment and Trade Development Agency London Interbank Offered Rate Loan Loss Reserves/Gross Loan Mergers and acquisitions Multinational corporation Statistical Classification of Economic Activities in the European Community North American Free Trade Area National Bank of Slovakia Net outward investment position Non-performing loans Organisation for Economic Co-operation and Development Outward foreign direct investment Ownership, location, internalisation Ordinary least squares Polish Information and Foreign Investment Agency Portugal, Italy, Ireland, Greece, Spain Producer price index Research and development Slovak Investment and Trade Development Agency Special economic zones Small and medium enterprise

12 List of Abbreviations xiii SSC TBTF TCR TNC ULC UN UNCTAD VAT V4 WEF WIIW Shared service centre Too-big-to-fail Total capital ratio Transnational corporation Unit labour cost United Nations United Nations Conference on Trade and Development Value added tax The Visegrad Four (Czech Republic, Hungary, Poland and Slovakia) World Economic Forum The Vienna Institute for International Economic Studies

13 List of Figures Fig. 2.1 FDI inflows and inward FDI stock of the 11 CEE states, (in billion dollars) 25 Fig. 2.2 Share of the 11 CEE countries in world GDP, exports and FDI inflows and inward stock, (in percentages) 26 Fig. 2.3 FDI inward stocks of the 11 CEE countries and the top three hosts, 1993, 2003 and 2013 (in billion dollars and share of total) 35 Fig. 2.4 GDP per capita of selected CEE countries as a percentage of German GDP per capita, 2000, 2007 and Fig. 3.1 Inward and outward FDI flows in the Czech Republic, (US dollars at current prices and current exchange rates, in millions) 55 Fig. 3.2 Inward and outward FDI stock of the Czech Republic, (US dollars at current prices and current exchange rates in millions) 56 Fig. 3.3 The Czech Republic s current account balance, (in percentage of GDP) 58 Fig. 4.1 Per capita FDI flows in Slovakia and the Visegrad 4, (in US dollars) 83 xv

14 xvi List of Figures Fig. 4.2 Per capita FDI stock in Slovakia and the Visegrad 4, (in US dollars) 85 Fig. 4.3 Weighted gross-value-added-to-output ratios for FDI flows and stock Fig. 4.4 Weighted gross-value-added-to-output ratios for FDI flows and stock in manufacturing, Fig. 4.5 Hypothetical weighted capital intensity of FDI flows and stock, Fig. 4.6 Unit price indices of Slovakia s major export commodities, Fig. 5.1 NOIP and GNI per capita of CEE countries, Fig. 5.2 NOIP and GNI per capita of CEE countries, Fig. 6.1 Smile curve economics 129 Fig. 6.2 Functional upgrading modifies the position and the shape of the smile curve 139 Fig. 7.1 Characteristics of FDI income in CEE, (per cent) 161 Fig. 7.2 Real unit labour cost, (percentage change) 163 Fig. 7.3 Share of the compensation of employees within gross national income (per cent) 164 Fig. 7.4 Gross operating surplus and mixed income per compensation of employees (rate of exploitation), (per cent) 165 Fig. 8.1 Relationship between capital adequacy ratios and the LLRGL 184 Fig. 9.1 Framework for evaluating V4 IPAs 208 Fig Fig Fig Flows of foreign direct investment to Romania and Bulgaria, compared with selected countries from Central and Eastern Europe, (million dollars) 221 Activities carried out by InvestBulgaria Agency and the Romanian Department for Foreign Investments and Public-Private Partnerships 228 The relationship between FDI performance and openness in selected EU members,

15 List of Tables Table 2.1 FDI Contribution Index versus Inward FDI stock, 2009 and Table 3.1 Czech inward FDI flows by home country, (in percentage) 54 Table 3.2 Czech inward foreign direct investment stock by sector, (in percentage) 57 Table 3.3 Inward FDI flows to the Czech Republic flows from the BRIC countries, (in thousand USD) 64 Table 3.4 Investment incentives granted to foreign companies, by country of origin (up to March 2015) 65 Table 3.5 Czech investment incentives granted to Chinese and Indian companies (up to March 2015) 66 Table 3.6 Selected investors from the BRICs in the Czech Republic 67 Table 4.1 Structure of FDI flows to Slovakia (in percentage of total FDI) 86 Table 4.2 Reinvested earnings in services, Table 4.3 FDI flows to Slovakia selected manufacturing industries (in percentage of total) 89 Table 5.1 Various indicators of IFDI originating from other CEE countries (2005 and 2012) 109 xvii

16 xviii List of Tables Table 5.2 Various indicators of OFDI realised in other CEE countries (2005 and 2012) 111 Table 5.3 Hirschman-Herfindahl indices of CEE IFDI and OFDI stock (percentage) 114 Table 5.4 Fixed effects estimation of the IDP model for CEE countries. Dependent variable: NOIP 120 Table 8.1 Overview of regression results 186 Table 8.2 Collinearity indicators 186 Table 8.3 OLS regression results on the determinants of capital adequacy ratios in CEE banks 187 Table 9.1 Summary of the most important eligibility criteria for selected forms of state aid in the V4 countries (2014) 204 Table 9.2 Checklist for nation branding promotional videos 210 Table 10.1 Inward FDI in Romania and Bulgaria, Table 10.2 Examples of investors in Bulgaria, Table 10.3 Examples of investors in Romania, Table 10.4 Incentives for foreign direct investments available in Romania and Bulgaria after Table 10.5 OECD FDI Regulatory Restrictiveness Index for selected CEE countries ( ) 233 Table 10.6 Ease of Doing Business rankings for Romania and Bulgaria,