FDI in Central, East and Southeast Europe: Declines due to - - PowerPoint PPT Presentation

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FDI in Central, East and Southeast Europe: Declines due to - - PowerPoint PPT Presentation

Mar 19, 2023 250 likes •412 views

Wiener Institut fr The Vienna Institute for www.wiiw.ac.at Internationale International Economic Wirtschaftsvergleiche Studies wiiw FDI Report 2018 FDI in Central, East and Southeast Europe: Declines due to Disinvestment Gbor Hunya 2

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Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies

www.wiiw.ac.at

Gábor Hunya

FDI in Central, East and Southeast Europe: Declines due to Disinvestment

wiiw FDI Report 2018

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  • FDI inflow in CESEE declined from the 2016 high to the average of 2011-2015
  • Balance of payments statistics, directional principle against revised 2016 data
  • Improved macro-economic environment: Economic growth stabilised or improved in

CESEE and in its main investors

  • Main cause of FDI decline in some EU-CEE: corporate restructuring, disinvestment
  • FDI stock by investing countries: increasing role of the Netherlands, but not as ultimate

investing country

  • FDI stock by activites: manufacturing or finance – export or domestic market
  • rientation?
  • Austria keeps rank 3 as investor in EU-CEE and rank 2 as immediate investor in WB
  • Lower Austrian FDI stocks but higher FDI-related income
  • FDI prospects good in EU-CEE and WB but limited by labour shortage, government

policies and external environment

Main FDI trends in 2017

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FDI inflows in 2017 down by 25% against the peak-year 2016: EU-CEE -20%, Western Balkans +18%, Turkey -20%, CIS-3 and Ukraine -36%, Russia -33%

Declining FDI inflows in CESEE, except in the WB

EU-CEE: European Union - Central and Eastern Europa. CIS-3: Belarus, Kazakhstan, Moldova. Source: wiiw FDI Database. 5000 10000 15000 20000 25000 30000 35000 40000 45000 2013 2014 2015 2016 2017 EU-CEE Western Balkans Turkey CIS-3 + Ukraine Russia

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FDI inflow in CESEE countries in EUR million

Inflow EUR million (left scale): 2015 2016 2017 Inflow as % of GFCF (right scale): 2015 2016 2017 Note: RS: FDI inflow in 2017 is EUR 2544 million. Source: wiiw FDI Database.

10000 20000 30000 40000

2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 TR KZ RU UA

500 1000 1500 2000 2500

2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 AL BA XK MK ME RS BY MD Inflow EUR million:

  • 2000

2000 4000 6000 8000 10000 12000 14000

2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 BG HR CZ EE HU LV LT Pl RO SK SI

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5 Source: wiiw FDI Database

FDI inflow in the Czech Republic, Hungary, Poland and Slovakia by components, EUR mn

Disinvestment reduces FDI inflows – capital restructuring efforts of investors meet economic nationalism

  • 4000
  • 2000

2000 4000 6000 8000 10000 2015 2016 2017

Czech Republic

Loans Reinvestment Equity

  • 4000
  • 3000
  • 2000
  • 1000

1000 2000 3000 4000 5000 6000 7000 2015 2016 2017

Hungary

Loans Reinvestment Equity

  • 4000
  • 2000

2000 4000 6000 8000 10000 12000 14000 16000 2015 2016 2017

Poland

Loans Reinvestment Equity

  • 1500
  • 1000
  • 500

500 1000 1500 2000 2500 2015 2016 2017

Slovakia

Loans Reinvestment Equity

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6 Source: http://www.fdimarkets.com.

Greenfield FDI projects 2013-2017: number of projects, announced capital investment in EUR million and number of jobs to be created

More greenfield projectes but lower capital investment in CESEE

200 400 600 800 1000 1200 1400 1600 50000 100000 150000 200000 250000 300000 350000 2013 2014 2015 2016 2017 Number of projects (right scale) Investment Job creation

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7 EU-CEE: European Union - Central and Eastern Europa. CIS-3: Belarus, Kazakhstan, Moldova. Source: http://www.fdimarkets.com.

Capital investment pledged in greenfield FDI projects 2013-2017 in EUR million

Capital investment in greenfield projects down in Kazakhstan and Turkey, up in Poland, Romania and Russia

5000 10000 15000 20000 25000 30000 35000 40000 2013 2014 2015 2016 2017 EU-CEE Western Balkans Turkey CIS-3 + Ukraine Russia

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Remark: Excluding mining and recycling. Source: http://www.fdimarkets.com.

Share of main activities in the number of greenfield projects, 2017

Differences in specialisation in manufacturing or services

Share of main activities in the capital investments in greenfield projects, in %, 2017

0% 20% 40% 60% 80% 100% BG HR CZ EE HU LV LT PL RO SK SI RS TR RU Financial and other services Electricity Construction Logistics, Distribution & Transportation Sales, Marketing & Support Manufacturing 0% 20% 40% 60% 80% 100% BG HR CZ EE HU LV LT PL RO SK SI RS TR RU

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9 14.8 2.4 6.1 4.3 9.1 15.1 15.6 1.4 6.6 24.7

Inward FDI stock in EU-CEE and Western Balkans by major home countries, in % 2012 2016

Rank 1 for the Netherlands on account of tax optimisation; rank 3 for Austria with about 9.5% of the stocks

Source: wiiw FDI Database.

EU-CEE Western Balkans

9.2 6.3 14.1 9.0 19.4 19.8 8.0 1.2 4.8 8.1 Austria France Germany Luxembourg Netherlands

  • ther EU-15

EU-CEE United States Cyprus+Russia

  • ther countries

11.0 7.0 13.9 7.5 17.8 19.7 8.3 3.2 4.1 7.4 12.2 2.2 4.5 2.5 14.6 16.6 18.0 1.2 11.5 16.9 Austria Germany Greece Netherlands Russia

  • ther EU-15

EU-CEE United States Cyprus+Russia

  • ther countries
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Germany largest ultimate investor, also USA important; NL and AT transit countries; round-tripping capital in CZ and PL

FDI stock by main immediate and ultimate investors, in the Czech Republic, Poland and Hungary, EUR million

5000 10000 15000 20000 25000 30000 35000 NL DE LU FR UK US PL

Poland, 2016

Immediate Ultimate Source: OECD. 5000 10000 15000 20000 25000 30000 35000 NL DE LU AT FR US CZ

Czech Republic, 2016

Immediate Ultimate 5000 10000 15000 20000 25000 30000 35000 NL DE AT CH IL US HU

Hungary, 2015

Immediate Ultimate

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  • Austrian inflows from the world EUR 8.5 billion, outflows to the world EUR 9.7 billion in

2017 following negative flows in in both directions in 2016 (OeNB data):

  • 2016: UniCredit disinvestment in AT; related AT investments in CESEE turned Italian
  • 2017: Lukoil invested EUR 6.2 million in AT, but with the aim to invest abroad
  • 3rd in the EU-CEE, after the Netherlands and Germany (9.2% of the inward stock in 2016)

and 2nd in the Western Balkans (11%), low in the rest (host country data).

  • AT share in the EU-CEE and WB stock declined, but FDI income held up.
  • Austrian direct investors enjoy above-average profitability in the EU-CEE.
  • Share in the Austrian outward stock 25.5%, in global FDI income 33% (OeNB data).
  • FDI income from EU-CEE 1.2% of GDP; net contribution to EU budget 0.8% of GDP –
  • EU payments improve the infrastructure and the business environment in the EU-

CEE and help companies to earn profits on their investments there.

Austrian FDI in CESEE

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  • Economic growth in CESEE somewhat slower than in 2017.
  • Expanding domestic and foreign markets attract investors to EU-CEE and WB.
  • No risk reduction for investors in MD, RU and UA, thus FDI will hardly increase.
  • Sanctions on Russian oligarchs hit hard, triggering declines in relations with the US and
  • Europe. But
  • import substituting investments are vivid and
  • Chinese interest high.
  • The scope for foreign takeovers is limited in the EU-CEE where foreign affiliates produce

40-50% of the business sector GDP,

  • and where government support benefits only export-oriented investments with high-technology

content; the domestic sector is preferred in market-seeking activities

  • Strained labour market situation hinders further FDI projects, unless alternatives are exploited:
  • automation (started but not dominant),
  • moving further to the east (Ukraine not attractive),
  • moving Ukrainian labour to the west (massive),
  • more investment in labour-abundant Western Balkans (expected).

Outlook for 2018

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WIIW FDI REPORT 2018: FDI in Central, East and Southeast Europe: Declines due to Disinvestment 164 pages including 103 Tables and 20 Figures, analysis and

methodological explanations

hardcopy: EUR 70 (PDF: EUR 65) Order via wiiw’s website www.wiiw.ac.at,

per e-mail koehrl@wiiw.ac.at Online access to the wiiw FDI Database via https://data.wiiw.ac.at Annual fee: EUR 160

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Country codes

AL Albania MK Macedonia BA Bosnia and Herzegovina PL Poland BG Bulgaria RO Romania CZ Czech Republic RS Serbia EE Estonia RU Russia HR Croatia SI Slovenia HU Hungary SK Slovakia KZ Kazakhstan TR Turkey LT Lithuania UA Ukraine LV Latvia XK Kosovo ME Montenegro CESEE Central, East and Southeast Europe CIS Commonwealth of Independent States EU-CEE European Union – Central and Eastern Europe WB Western Balkans