Download Economie Mediterranee

International Workshop
“Bridging the gap: the role of trade and FDI in the
Mediterranean”
Napoli, Castel dell’Ovo
8-9 Giugno, 2006
FDI Potential and Shortfalls in
South Mediterranean Countries: Determinants and
Diversion Effects
A. Ferragina ([email protected])
F. Pastore ([email protected])
Outline
• FDI in the MED-10 vis-a-vis Central and Eastern
•
•
•
Europe: overview of performance and potential.
Determinants of FDI with the help of the gravity
model: the role of institutional and policy
variables.
Simulation analysis of the magnitude of “normal”
value of FDI expected on the basis of the
explanatory variables.
Diversion of FDI from MED to CEECs?
2
Introduction
• A worrying stylised fact: Southern Mediterranean
countries (MED so far) receive little FDI from most
other regions in the world.
• FDI flows into some of them have tended to grow
slowly over the 90s and to decline after 2000,
while they have been booming in Central and
Eastern Europe (CEECs).
3
World FDI outflows to CEEC10 and
MED10
• Actual dollar values of FDI outflows from 1994 to 2004
from the World to CEEC10 and MED10 million USD and
as percentage of total FDI outflows (Unctad, 2005).
World FDI outflows to CEEC10 and MED10
30000
5
4,5
4
3,5
20000
3
15000
2,5
%
Millions USD
25000
2
10000
1,5
1
5000
0,5
0
0
1994
Med10
1995
1996
1997
1998
CEEC10 (% of world)
1999
2000
2001
Med10 (% of world)
2002
2003
2004
CEEC10 (% of world)
4
EU investment are crucial
• EU is the main provider of FDI to the South
•
•
•
Mediterranean.
In 2004 the EU provided on average more than 70% of
the FDI to MED10.
The European presence is not equally distributed in all
the MED but for some countries it is really striking:
Turkey received more than 75% , Morocco 73% (more
than 95% in 2001), Tunisia 65%.
According to the MIPO database from ANIMA, 59% of
the investment projects are coming from European
investors, essentially France, Spain, the United Kingdom,
and Germany.
5
Things are not going well
• EU FDI: a slow trend of growth up to 1997
• an upsurge between 1997 and 1999 and a good
•
performance up to 2002: overall from 5 to 15
billions $ and from less than 1% to almost 14%
of total EU FDI.
However, from 2002 to 2004 a strong decline
has eroded previous results: a fall from almost
14 to 4 per cent, corresponding to a decrease of
more than 10 billions USD (from 15 to 5 billions
$).
6
EU FDI outflows to CEECs and
MED10
actual dollar values of EU FDI outflows to CEEC10 and MED10 from 1994
to 2004 as percentage of total EU FDI outflows (Eurostat, Economics
and Finance Statistics) : this cursory evidence might suggest
investment diversion from MED to CEECs
EU15 FDI outflows in Meds10 and CEECs
25
% on total
20
15
10
5
0
1994
1995
1996
1997
1998
1999
Med10
2000
CEEC
2001
2002
2003
2004
7
EU15 FDI outflows to MED10 (% on total EU15 FDI)
18
16
14
12
10
%
MED10
8
6
4
2
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
Algeria
Tunisia
Morocco
Jordan
Lebanon
Egypt
Israel
Palestina
Turkey
Med10
2003
2004
Syria
8
Source: Eurostat, Economics and Finance Statistics.
Perfomance and Potential Index
• two indicators for ranking countries with respect to FDI
(UNCTAD, 2004):
• 1) a “performance index” which relates the share of the
FDI flows to a country to its share in the world GDP. An
index above (below) one indicates that the couuntry
attract more (less) FDI as a percentage of its economic
dimension
• 2) a “potential index”, which is calculated as simple
average of 12 structural variables which corresponds to
the main FDI determinants identified by theoretical and
empirical models (market size, degree of openness,
infrastructures, technologies, qualified labour force at
low cost, natural resources endowment, regulatory
framework, busineess climate and country risk which
influence the degree of confidence of investors).
9
Performance of MED in 2004:
ranking over 140 countries
(Unctad, 2005)
• UNCTAD ranking of countries according to the
•
inward FDI performance index: MED lag behind
at the international level: Lybia is at the bottom
of the list (116), followed by Turkey (111), Egypt
(108), Algeria (95), Lebanon (90), Israel (83).
Better Tunisia (67), Morocco (65), Jordan (48)
and Syria (39).
CEECs position is far better for most countries:
Bulgaria 12, Estonia 16, Slovak R. 25, Czech R.
28, Croatia 33, Romania 35, Poland and Albania
42, Hungary 46, Latvia 47, Lithuania 59,
Slovenia 60, Macedonia 72.
10
Potential of MED in 2003:
ranking over 140 countries
(Unctad, 2005)
• UNCTAD ranking of countries according to the
•
inward FDI potential index in 2003: USA (1),
China (12), Slovenia (28), while Egypt 75
Morocco 87, Syria 95!
The MED (excluding Israel) all from 60
downward.
11
Evolution of Performance
• Only in few MED changes occurred over the last
•
•
•
decade through economic reforms and the
adoption of more friendly policy towards
investors have translated into significant
improvement.
This is suggested by the evolution of the
performance index over the period 1993-95 and
2000-2002.
Jordan, Algeria and Lebanon have realised an
important increase in the index of development
of FDI.
But Tunisia, Egypt, Morocco, Syria, Turkey show
a negative evolution.
12
Evolution of Performance
4,00
3,50
performance index 2000-2002
3,00
Cyprus
2,50
Macedonia
Croazia
2,00
1,50
Spain
Slovenia
Bosnia
Portugal
France
Israel
1,00
Jordan
0,50
Algeria
Lebanon
0,50
Malta
Turkey
Italy
0,00
0,00
Albania
Tunisia
Morocco
Greece
1,00
Egypt
Syria
1,50
2,00
2,50
3,00
3,50
4,00
performance index 1993-95
France
Albania
Slovenia
Lybia
Cyprus
Italy
Bosnia
Algeria
Jordan
Greece
Malta
Croazia
Morocco
Israel
Turkey
Portugal
Macedonia
Tunisia
Lebanon
Jordan
Spain
Serbia-Montenegro
Egypt
Syria
13
Evolution of Potential
• Most of the countries with upsetting FDI
performance (Turkey, Tunisia, Morocco,
Egypt, Syria) have had a negative or static
dynamic also as far as the potential index
is concerned
• Only Israel shows a big increase in
potential from 0,20 to almost 0,40
14
Evolution of Potential
0,50
0,45
Potential index 2000-2002
0,40
France
Israel
0,35
Spain
Slovenia
Greece
0,30
Jordan
Malta
Portugal
Cyprus
Lybia
0,25
Italy
Croazia
Lebanon
Egypt
Turkey
Albania Algeria
Tunisia
Morocco
0,20
0,15
Macedonia
Syria
0,10
0,05
0,00
0,00
0,05
0,10
0,15
0,20
0,25
0,30
0,35
0,40
0,45
0,50
Potential index 1993-95
France
Italy
Malta
Portugal
Spain
Albania
Bosnia
Croazia
Macedonia
Serbia-Montenegro
Slovenia
Algeria
Morocco
Tunisia
Egypt
Lybia
Jordan
Israel
Lebanon
Palestina
Syria
Cyprus
Greece
Turkey
15
Perfomance and Potential
• Comparing the Potential Index value with the
•
•
•
•
•
Performance Index value gives an indication of
how each country performs against its potential.
Countries in the world can be divided into the
following four categories:
front-runners (countries with high FDI potential
and performance);
above potential (countries with low FDI potential
but strong FDI performance);
below potential (countries with high FDI
potential but low FDI performance);
under-performers (countries with both low FDI
potential and performance
16
Perfomance and Potential
• In the figure below, it is shown the position of
•
•
•
the 10 Mediterranean partners with respect to
both these two indicators in the period 20002002.
On the horizontal axis, it is portrayed the
Performance index and on the vertical axis the
Potential index.
For comparison, to measure the distance of
Mediterranean economies from international
partners, there are also countries with high and
average potentials, such as USA, China, Poland,
Venezuela.
Striking the potential value of China and Poland,
quite close competitors for MED.
17
Perfomance and Potential Index
• Four partitions of the figure:
• MED with high (low) performance those
which on the horizontal axis intercept value of
the inward FDI performance index above
(below) one
• countries with high (low) potential those with
a potential index above (below) the average for
the Mediterranean area (South and North) as a
whole
18
Perfomance and Potential Index
• 1) MED with high performance combined with
high potential (frontrunners): only Israel, close to
Spain, France, Slovenia, Portugal and Cyprus.
• 2) MED with high performance but low potential
(countries “above their potential”): Morocco,
Tunisia, close to Albania, Croazia, Macedonia.
• 3) MED with worrying position both as
performance
and
as
potential
(“underperformers”), above all Egypt, Turkey,
Syria, but also Jordan, Algeria, Lebanon.
19
FDI index 2000-2002
1,40
China
1,20
Poland
1,00
Potential index
Venezuela
0,80
0,60
United States
0,40
0,20
France
Italy
Malta
Greece
Lebanon
Jordan
Egypt
Algeria
Syria
0,00
0,00
Israel
Spain
Slovenia
Portugal
Albania
Tunisia
Morocco
Macedonia
Turkey
0,50
1,00
1,50
Cyprus
Croazia
2,00
Performance index
2,50
3,00
3,50
20
FDI index1988-1990
1,40
1,20
Venezuela
United States
Potential index
1,00
China
0,80
0,60
France
0,40
Italy
Spain
Israel
0,20
0,00
0,00
Algeria Lybia
Turkey
Tunisia
LebanonJordan
Morocco Syria
Poland
0,50
1,00
Greece
Cyprus
Malta
Portugal
Egypt
1,50
2,00
Performance index
2,50
3,00
3,50
21
Why so little FDI?
• Does the current situation with both low
performance and low potential and with
some countries even showing performance
“above their potential” suggests that MED
have reached an equilibrium although of
low level?
• What role is played by distortions of an
institutional and policy type that economic
agents are submitted to in MED?
22
Determinants of FDI
• pick up the determinants of FDI flows to a
large sample of host economies:
– a gravity model is estimated to this purpose with
panel data techniques based on aggregate countrylevel data on bilateral FDI flows of fourteen
European countries and two non EU countries
(USA and Japan) into a large sample of developed
and developing partners (84), using among the
relevant explanatory variables also institutional
and policy factors for the years 1994-2004
23
Simulation analysis
• Use these estimates to perform forecasts for FDI flows to both
the single CEECs and Southern Mediterranean countries,
subsequently comparing these estimated flows to actual flows
• For CEECs, the stock adjustment might have already taken place.
Hence, actual and expected flows should not be strongly
misaligned.
• On the contrary, we would expect that actual capital flows to MED
are much below the expected flows because the stock adjustment
process still has to take place.
• However, the current situation although not corresponding to an
optimum allocation of resources, might also correspond to an
equilibrium taking into account the distortions of various types that
economic agents are submitted to in MED (actual flows not below
expected).
24
Diversion of FDI from MED to
CEECs?
• Here we use the gravity model to assess
•
•
whether changes in FDI flows to CEECs which
are economically integrating appear to be
associated with negative changes in FDI flows
to MED.
Our methodological approach is based upon
that of Sapir (1997) who sought to identify
whether a “domino effect” had characterised
the impact of European integration upon
bilateral trade flows.
We experiment by including interaction of
regional dummies with dummy variables for
particular sub-periods: 1994-1998 (transition
period), 1998-2004 (pre-accession period) and
25
for years, checking how regional dummies
Choice of the model:
underlying theoretical reasons
• Why firms produce abroad and face additional costs instead of
•
•
•
simply servicing the markets via exports?
Dunning (1977, 1981), the “OLI framework”, considers FDI
as determined by Ownership, Location and Internalisation
advantages which the MNC holds over the foreign producer.
The so-called “New Theory of FDI” takes inspiration from the
OLI approach and refers mainly to the Ownership and
Location advantage to introduce MNCs in general equilibrium
models, where they arise endogenously.
The early literature (Helpman 1984, Helpman and Krugman
1985) was mainly able to explain ‘vertical FDI’, i.e.
investment that takes place in order to take advantage of
differences in relative factor endowments (hence in factor
prices) across countries.
26
Other theoretical explanations
• There are also ‘horizontal’ FDI: similar types of production activities,
owned by MNCs, taking place in different countries. This
phenomenon is better clarified if multinational activity is not driven
by factor endowments differences, but rather by the trade-off
between proximity and concentration (Brainard 1993; Markusen and
Venables , 1995).
• The proximity advantage stems from ‘firm-level’ economies of scale,
whereby R&D activity (or any other type of ‘knowledge capital’) is
transferable to affiliates and allows MNCs to be closer to the foreign
market.
• The concentration advantage derives from traditional ‘plant-level’
economies of scale, which make it more profitable to concentrate
production in one location and then export.
• Whenever the former outweigh the latter, foreign investment will
take place, and this will be more likely the higher are intangible
assets relative to fixed costs of opening up an affiliate and the
higher are transport costs, which are assumed to be positive and an
increasing function of geographical distance in this model.
27
Gravity model
• When we get to the empirical analysis, to compare ‘attractiveness’
•
•
•
•
•
across countries and explain the geographic distribution of FDI we
need a model that can pick up all these common determinants.
To synthesise the two approaches discussed above, i.e. Helpman
and Krugman’s treatment of vertical FDI and Brainard’s of horizontal
one, we will include in the model the following main variables:
a measure of the ‘economic space’ between the two countries, given
by the sum of the two GDPs and by the two country’s populations to
catch the ‘market-seeking’ aspect of FDI
the relative factor endowments, an index of countries’ similarity in
size measured by their relative GDP.
additional variables, such as distance, a common language, a
common border, or preferential trade agreements, that may reduce
the costs (transaction and transportation costs) of locating abroad
and which can be introduced via dummy variables.
This type of gravity model approach has been already applied to
studies of FDI as a means of picking up the common determinants
of FDI flows across countries (Eaton and Tamura, 1996; Brenton
and Di Mauro, 1999).
28
Enlarged gravity model
• We apply this type of model but we propose a “broad”
version:
– factors traditionally considered in gravity models such
as proximity and market size should make countries
attractive locations for FDI and should play a decisive
role, but …
– moving from the consideration that the success of FDI
attractiveness of CEECs was mainly due to the
prospects of EU membership and to the fact that most
CEECs have succeeded in attaining both institutional
and political stability
– ….we attempt to explain FDI shortfalls of MED with a
gravity model enlarged to include policy and
institutional factors
29
Specification
ln (Bilat FDIijt) =
traditional gravity: β0 + β1 ln SUMGDPijt + β2 ln POPit + β3 ln POPjt
+β4 lnDiffGDPPCijt +β5 ln Distij + β6ln Areasij + β7 LLij+ β8
Borderij + β9 Langij + β10 Colonialij +
policy and instit.: + β11 Regionalijt + β12 ln (IMP/GDP)jt + β 13 ln
(M2/GDP)jt + β 14 ERVijt + β 15 CUijt + β16 Govijt + β17 FTAijt
+β18 Humcapjt +β19 Current + β20 Capital +
regional and time dummies: + β21 EUij + β22 MED+ β23 CEECs +
β24 YEARDummies
• where: i and j denotes donor and host country respectively, t denotes
time
• FDIij is the value of the FDI flow from country i (home country) to
country j (host country)
• and the variables are defined as follows:
30
Traditional gravity variables
• SUMGDPijt is the sum of nominal value of the gross
•
•
•
•
•
•
•
•
domestic product in i and j
POPi and POPj, is the population of i and j
DiffGDPPCijt is the absolute difference in per capita income
between i and j (a proxy for relative factor endowment)
Distij is the Great Circle Distance between i and j in miles
Areas is the sum of the areas of i and j in square kilometres
(hence a proxy for distance within the country to the border),
LLij is a dummy variable, which is 0 if no countries are
landlocked, 1 if one partner is landlocked
Borderij is a binary variable, which is 1 if i and j share a
border and 0 otherwise
Langij is a binary variable, which is 1 if i and j share an
official language and 0 otherwise
Colonialij is a binary variable, which is 1 if i colonized j
31
Further variables
• Regionalijt is a binary variable, which is 1 if i and j belong
•
•
•
•
•
•
•
to a Regional Trading Agreement in year t
IMP/GDPj a proxy for the openness of a country to foreign
trade
ERVijt is the volatility of the bilateral nominal exchange
rate between i and j in period t
CUijt is a binary variable, which is 1 if i and j use the same
currency at time t
Govjt is the sum of six governance indices of j at t
FTA is a dummy variable defined as 1 if only one of the
countries is in a regional trading agreement (and 0
otherwise) proxi measure of trade diversion
Current and Capital are variables coded 1 if host country
has current and capital account restrictions respectively
MED is a dummy variable which is 1 when host countries
are MED10 countries, CEEC is a dummy variable for
belonging to CEEC10, EU is a dummy variable for EU
32
membership of i.
Instability of FDI over time
• Data on FDI flows at which we are looking here
•
•
•
may be considerably biased upward or
downward in a particular year
For instance, a large merger and acquisition deal
has taken place or a substantial portion of the
domestic corporate sector has been privatized.
Great instability in the coefficients over time.
Year dummies are introduced to solve this
problem.
33
Empirical results
• Here we present the results of the regression analysis of
•
•
•
•
•
bilateral FDI flows by major investing countries over
1994-2004.
The gravity model introduced is used to define a "normal
pattern" of bilateral FDI flows.
Dummy variables are included for three groups of
countries EU, CEECs, MED10 to get a very preliminary
test for a possible divergence from this pattern.
If the corresponding coefficients are significant and
negative, we interpret this as evidence that the group has
received less FDI than other countries after controlling for
all the other factors.
Therefore, the group concerned can expect to benefit
from further large FDI inflows as foreign investors adjust
their stocks to the new opportunities created by economic
transformation.
If the dummies are not significant, the future growth of
the FDI flows can be expected to be in line with changes
34
in the determinants of FDI.
Determinants I
• First focus on few variables at the core of gravity
•
•
•
•
models: sum of GDP (a measure of mass), Population,
Distance (measure of transport and transaction costs).
The “gravity variables” have all the expected sign:
Increased ‘economic space’ (SUMGDP and Population)
have a noticeable impact on FDI. Elasticity of bilateral
FDI with respect to population larger than 1.
Distance appears to harm FDI something which is more
intuitive in the case of exports. However, non linear
relationship: squared distance positive. Also theory
suggests that firms will tend to prefer FDI to exports as
trade costs, as proxied by distance, rise. More distant
markets will tend to be served by overseas affiliates
rather than by exporting.
Differences in relative factor endowments have a
negative impact on FDI; from the theoretical discussion
above one can infer that, on average, EU investors are in
general more prone to horizontal than to vertical FDI. 35
Regional Dummies:
• MED negative and significant at 10%
• CEECs positive but not significant
• EU positive and significant at 1% .
36
Determinants I
-----------------------------------------------------------------------------Log FDI
| Coef.
Std. Err.
z
P>|z|
----------------------------------------------------------------------------Log sum gdp | .1151378 .0075292 -15.29 0.000
Log population host | .8594187 .0551189 15.59 0.000
Log population donor | 1.304252 .0645561 20.20 0.000
Difference of GDP p.c. | -.9031703 .048244 -18.72 0.000
Distance | -3.99e-07 6.29e-08 -6.35
0.000
Distance2 | 2.32e-14 4.06e-15
5.72
0.000
EU | .648041 .1534813
4.22
0.000
MED10 | -.5623256 .314175 -1.79
0.073
CEEC10 | .0778871 .2526697
0.31 0.758
_cons | -27.60273 1.496819 -18.44 0.000
-----------------------------------------------------------------------37
Determinants II: “enlarged gravity”
• As expected Border, Language, Regional agreement all
•
•
•
•
•
•
•
have positive and significant effects on FDI levels.
CU is significant and positive.
FTA not significant effect, indicating that for the full
sample there has been no discernible trade diversion
effect of FTAs.
Colonial links not significant too.
The import on GDP coefficient is also not significant.
Volatility of exchange rate is positive and significant: FDI
more stable and less risky than portfolio and trade
activities?
Governance is highly significant with positive sign (very
robust variable).
Current and capital account restrictions are both
negative and highly significant.
38
Regional Dummies:
• MED no more significant : all the negative
•
•
difference with respect to other countries seems
to be explained by the institutional and policy
variables
CEECs after introducing the institutional
variables becomes negative and significant: the
group has received less FDI than other countries
after controlling for all other factors.
EU not significant: the future growth of the FDI
flows can be expected to be in line with changes
in the determinants of FDI.
39
Log FDI
Coef.
Std. Err.
z
P>z
Log sum GDP
.1102201
.0410843
2.68
0.007
Log population host
1.068.686
.0581647
18.37
0.000
Log population donor
1.181.239
.0662389
17.83
0.000
Difference in GDP pc
-.3142086
.0527492
-5.96
0.000
Distance
-3.24e-07
5.78e-08
-5.60
0.000
Distance squared
1.76e-14
3.69e-15
4.78
0.000
Log area
-.2154785
.0396847
-5.43
0.000
Common border
.8735025
.3147306
2.78
0.006
Common language
.9506041
.3273679
2.90
0.004
Regional integration
.293194
.0712112
4.12
0.000
Colonial links
.6739344
.4622208
1.46
0.145
Import/GDP
.002354
.0017827
1.32
0.187
Exchange rate volatility
.223984
.0212081
10.56
0.000
Governance
.0687912
.0037609
18.29
0.000
Current account restrictions
-.1866332
.0440186
-4.24
0.000
Capital account restrictions
-.0811416
.0455017
-1.78
0.075
Currency union
.4337308
.0593678
7.31
0.000
FTA
.053803
.0513012
1.05
0.294
EU
-.1302178
.1475229
-0.88
0.377
MED10
-.306008
.2716849
-1.13
0.260
CEEC10
-.4018635
.218197
-1.84
0.066
-3.325
1.462.512
-22.74
0.000
_cons
40
Simulation Analysis: Actual
vs. Expected FDI
• The simulation concerns the expected or “normal” FDI
•
•
flows to each single MED and CEECs (that would be
expected based on the empirical benchmark model
described above) compared with actual FDI flows.
Our expectation would be that, if the adjustment process
was quite fast (slow) FDI flows are above (below) the
average level of flows expected to countries with
comparable attributes.
For MED we would expect not to observe a strong
catching-up effect in the past years in spite of the fact
that these economies are underdeveloped as compared
to average industrialised countries and in need to adjust
and to catch up too.
41
Germany FDI flows to MED: simulated in %
of actual
250
200
150
100
50
0
1994
1995
1996
1997
Morocco
1998
Egypt
1999
Israel
2000
2001
2002
2003
Turkey
42
Italy FDI flows to MED: simulated in % of
actual
160
140
120
100
80
60
40
20
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
43
Simulation results by country
• The calculations for these four MED indicate
that most of them attracted almost 100% of
the total expected FDI inflows.
• A downward shift in inflows for Israel with
slight increases for Egypt and Morocco.
44
Diversion of FDI from MED to
CEECs?
• Here we use the gravity model to assess
•
•
whether changes in FDI flows to CEECs appear
to be associated with changes in FDI flows to
MED.
In particular, we check whether increasing CEEC
integration over the 1990s, culminating into the
accession for most of them, had any noticeable
negative impact upon FDI flows from EU
countries going to the MED10.
We experiment by including the interaction of
regional dummies with time dummies for
particular sub-periods: 1994-1998 (transition
period), 1998-2004 (pre-accession period) and
for years.
45
Results by years:
• Interaction of regional dummies with time
dummies: how they have been changing
over two periods (1994-1998, 19992004)? and year by year?
• Negative and significant dummy for CEECs
both in 1994-1998 and in 1999-2004
(most years show a negative and
significant dummy).
• For MED negative and significant for the
first period but not significant and positive
in the second period (in each year from
46
1999 to 2003).
coefficient of MED and CEEC dummy interaction with time
0,60
0,40
0,20
0,00
-0,20
-0,40
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
MED
CEEC
-0,60
-0,80
-1,00
-1,20
47
Diversion of FDI from MED to
CEECs?
• We find that MED countries in the 1994-1998
•
•
were receiving substantially less FDI than could
be expected on the basis of their incomes and
proximity to the EU and to other variables.
However, the magnitude of this ‘underpotential’
weakened in the late 1990s and in the first half
of the 2000s which may suggest that the
enlargement process did not adversely affected
the magnitude of inward FDI from EU countries.
Hence, our, albeit limited, analysis finds no
evidence to suggest that the intensification of
FDI in CEECs, following integration with the EU,
has had a discernible dampening effect on FDI
flows going to MED.
48
Conclusions
 The current situation of FDI in MED although does not correspond
•
•
•
•
•
•
to an optimum allocation of resources corresponds to an equilibrium
taking into account the distortions that economic agents are
submitted to.
Rejection of the hypothesis of FDI diversion away from the MED.
FDI in these countries have come down but institutional and policy
variables the main reason.
It is from the issue of the FDIs that one can best perceive the
necessity to modify the business environment and the behaviour of
the enterprises but also the role of anchorage which EU can play.
During the same period, Eastern Europe offered promising long
term perspectives on this ground enhanced by the perspective of
adhesion which also offered investors a guarantee of regulatory and
institutional reforms
Industries that faced difficulties (most of the time public ones), have
been privatised and restructured under the impulse and with the
help of Europe, a process that did not take place at a sufficient scale
in the MED
As a result CEECs moved towards a deeper integration not limited to
a few tariff evolutions and are progressively adapting their legal
49
framework and their practices to international standards