ABSTRACT
It is widely acknowledged that the neglect of the service sector in transition economies in the past generated poor conditions for the supply of services and negatively affected also the capacity of the service sector to compete internationally. The introduction of market-oriented reforms in the 1990s brought about restructuring of the service sector, gradual deregulation and liberalization. Service firms in transition economies were increasingly faced with local and foreign competition. The latter came not only through diminished barriers for imports of services but even more so through FDI and establishment of foreign affiliates in service activities. From the beginning of the 1990s onwards, transition economies have attracted quite a substantial amount of FDI in both manufacturing and in services.
