Foreign Direct Investments in Reforming CMEA Countries: Facts, Lessons and Perspectives

In recent years, foreign direct investment (FDI) has become the basic avenue of globalization of the international economy. Between 1983 and 1988 FDI worldwide rose by more than 20 percent annually, four times faster than world trade that had been considered for a long time as the basic engine of growth. After two decades of sometimes emotionally loaded discussions and controversial host country policies towards FDI, its contribution to growth, employment, structural change, technological modernization, exports and general economic performance has been widely acknowledged. The overwhelmingly positive attitude of a number of national economies vis-a-vis FDI is a convincing proof of the fundamental changes taking place in the assessment of this vital factor of production. At the same time, the response by FDI to various legal, institutional, economic and political conditions established by potential capital-importing countries is a reliable mirror of how the present and prospective performance of different countries is viewed on the international scale.