ABSTRACT

This chapter investigates the Foreign direct investment (FDI) inflows to the Central and Eastern Europe (CEE) region during 1990 - 2000. It describes the typical determinants of FDI, with an emphasis on CEE-specific issues. An unexpected devaluation or depreciation in the currency of the FDI recipient country can render an impressive local currency profit virtually worthless in the source-country currency that matters to the investor. The chapter summarizes the specific FDI needs of the CEE region, distinguishing between the needs at the beginning of the period and those that remain today. It provides an empirical overview of the FDI pattern for the region and explains why most FDI went to Poland, the Czech Republic, and Hungary while other CEE nations received virtually none. The geographic predecessors of the Czech Republic had played an integral role in Western Europe for centuries, for example. The chapter concludes with a look into the future of the FDI in CEE.