Are the FDI policies of the Central European countries efficient?

ISSN： 1465-3958

Source： Post-Communist Economies, Vol.20, Iss.3, 2008-09, pp. : 303-316

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Abstract

This article examines the efficiency of the Central European countries' foreign direct investment policies by evaluating the spillover effects of foreign investment. It is argued that the poor contribution of foreign direct investment to the emergence of competitive indigenous firms is partly due to the adoption by Hungary, the Czech Republic, Poland and Slovakia of a very friendly FDI policy. The argumentation is based on a stylised comparison of the 'Irish Model' and the 'TKC model' (Taiwan, Korea, China) representing two main categories of FDI policies of countries which have built their development on integration in international trade. The comparison of the two families of FDI policies tends to demonstrate that the 'TKC model', built on strong state intervention in the industrial structure and in industrial guidance of FDI, has been more efficient in terms of the creation of competitive indigenous firms than the 'Irish model' which totally bans policies constraining FDI.