International Programs

This paper aims to give a general analysis of Foreign Direct Investment in the CIS and CEE. Firstly, I define FDI and explain the basic patterns associated with it. There is a very unequal regional FDI distribution, with the majority flowing to transition economies of CEE. Also, FDI is more prevalent in countries advanced in transition. In order to investigate, I use multivariable regression analysis to determine that several factors positively influence FDI inflows in Transition Economies: progress in transition, GDP growth and membership in CEE. The first part of section 2 explains how the Multinational Corporation generates benefits in a host nation through the provision technology transfer and demonstration of more advanced business practices. This knowledge is essential for addressing the central theme of section two, which is how FDI can alter the welfare of the host. For Transition Economies, FDI is argued to be exceptionally beneficial, mainly because of the "Shumpeterian" relationship between regional education levels, transfer of technology and economic growth. Having established FDI as imperative to transition, section 3 explains several barriers to investment: the tax system, the legal system and financial institutions. Attached to the paper is an Annex section. The annex analyses the writings and economic philosophy of Russia's president, Vladimir Putin. The goal of this paper is to give the reader a complete understanding of: 1) Why FDI is important, 2) What problems need to be solved before FDI can impart maximum benefits to the citizens of CEE and the CIS.