Foreign Direct Investment and Transition [antikvár]

Foreword Creating a single market in Europe which includes not just the present European Union but the Central European countries as well poses many economic prob- lems. One of the key issues is how to balance the need to make special allowance for the difficulties that the Central European countries have in tackling their transformation against the wish to avoid distorting the structure of European production by offering excessively large incentives for activity to locate in Central Europe. In 1992, as part of a large programme of research into the evolution of the Single European Market, financed by the Economic and Social Research Council in the UK, developed a research proposal entitled Competition Policy and Cohe- sion in the Single European Market, involving some 50 research institutions covering most European countries from Portugal to Russia. Its theme was the in- vestigation of the hypothesis that opening up the entire market to the full rigour of EU competition policy from the outset might conflict with the aim of 'cohesion'. Cohesion is an extremely ill-defined although well understood term in the Euro- pean context; its primary concern is that the consequences of integration should be perceived by the participants as being adequately socially and economically fair. Unfortunately, only one part of that proposal secured funding, and that was an investigation of three issues relating directly to the role of Poland, the Czech Republic, Slovakia and Hungary. These issues are being investigated in a series of workshops. The first was held in Prague in 1995, the second in Budapest in March, 1996 and the last is to take place in Freiberg in July 1996. This book is a product of the second of these workshops, organised by the Institute for World Economics of the Hungarian Academy of Sciences. The topic was the role of foreign direct investment in ac- celerating the transition and creating that single market. Several lines of argu- ment are followed in the book but the key issue for me is that there has to be a clear competitive advantage if firms are to choose to locate economic activity in Central Europe at present. This implies that rates of return have to be above aver- age. Achieving those rates of returns implies some imperfections in the market. In part those may stem from being able to obtain a dominant position in the local market. If the inward investment leads to large scale production, technology transfer and increases in employment, there must be a clear incentive to the Central European countries to offer transitional inducements. Given that inward investment in Central Europe since 1989 has in most years been lower than that in New Zealand, a country with a twentieth of the population, such inducements might seem to pose only a limited prospect of distortion.