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Attracting Investment to South East Europe 46177 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Copyright © 2007 The World Bank Group 1818 H Street, NW Washington, DC 20433 All rights reserved November 2007 Available online at www.fias.net The findings, interpretations, and conclusions expressed here are those of the authors and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank Group does not make any representations or warranties regarding the completeness or accuracy of the information included this report, or the results which would be achieved by following its recommendations. Rights and permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint, please send a request with complete information to: Copyright Clearance Center, Inc. 222 Rosewood Drive Danvers, MA 01923, USA t. 978-750-8400; f. 978-750-4470 www.copyright.com All queries on rights and licenses, including subsidiary rights, should be addressed to: The Office of the Publisher The World Bank 1818 H Street NW Washington, DC 20433, USA f. 202-522-2422 E-mail: [email protected] About FIAS FIAS, the multi-donor investment climate advisory service managed by the International Finance Corporation (IFC) and supported by the Multilateral Investment Guarantee Agency (MIGA) and the World Bank, is an integrator of services to improve the business-enabling environment of member countries. In particular, FIAS advises governments of developing and transitional countries on regulatory simplification, investment policy and promotion, and industry-specific investment climate issues. In its 20 years as a donor-funded operation, FIAS has completed more than 760 projects in all regions of the world. For more information, visit www.fias.net. The Invest in the Western Balkans (IIWB) program, based in Vienna, is an independent, pan-regional program administered by FIAS. IIWB’s primary objective is to promote foreign direct investment in the region. More information is available at www.iiwb.org. For more information, contact: FIAS and IFC Advisory Services, Southern Europe Beograd, Serbia t.+ (381) 11 302 3750; f.+ (381) 11 302 3740; E-mail: [email protected] Invest in the Western Balkans, FIAS Vienna, Austria t.+ (43) 1 5355 382 2115; f.+ (43) 1 5355 382 5115; E-mail: [email protected] FIAS Headquarters Washington, D.C., USA t.+ (202) 473-7517; f.+ (202) 473 1000; E-mail: [email protected] Attracting Investment to South East Europe Survey of FDI Trends and Investor Perceptions November 2007 FIAS The Multi-Donor Investment Climate Advisory Service The World Bank Group Acknowledgements This report was undertaken by FIAS, the investment climate advisory service of the World Bank Group. The project team was led by Margo Thomas, FIAS Regional Program Coordinator and IFC Advisory Services Business Enabling Environment Manager, and Dermot Coffey, Manager of the Invest in the Western Balkans program. The report benefited from the contributions of several team members: Peter Kusek authored most of the report and also served as overall project coordinator; Wim Douw, Madalina Papahagi, Patricia Steele and Christine Bowers also made substantial contributions to the content and/or the process to transform the research findings into a publication. David Brown of McInvest Economic Development advised the team on the report’s recommendations. Several peer reviewers offered thoughtful and greatly appreciated feedback on the draft report, including Gjergj Konda, John Varney and Mathew Verghis. Zai Fanai and Madan Gera assisted with finalizing the report. The team was especially grateful for the collaboration and expertise of Marc Lhermitte, Paul Catsiapis, Fabrice Reynaud and Vincent Raufast of Ernst & Young. Table of Contents Executive Summary................................................................................................... 1 Methodology ........................................................................................................... 1 Findings ................................................................................................................. 1 Conclusions ............................................................................................................ 3 Moving Forward....................................................................................................... 4 Introduction .............................................................................................................. 6 Regional Overview ................................................................................................... 6 Report Approach...................................................................................................... 7 Report Structure...................................................................................................... 7 Audience ................................................................................................................ 8 Further Resources.................................................................................................... 8 Survey Methodology and Sources.............................................................................. 9 I. World Bank Group/Ernst & Young: Investor Perception Survey of the South East European Region ................................ 9 II. Multilateral Investment Guarantee Agency/Oxford Intelligence: FDI Trends Analysis of South East Europe............................................................ 12 FDI Trends Analysis Findings ...................................................................................13 Summary Findings ................................................................................................. 13 Investor Survey Findings..........................................................................................17 Investor Optimism about Reforms and Performance, Past and Future ............................ 17 Level of Awareness and Knowledge about Business Conditions ..................................... 24 Comparative Advantages and Disadvantages ............................................................. 28 Priorities for Increasing Attractiveness ...................................................................... 31 Regional Competitiveness for Company Units and Production Functions ......................... 38 Future Investment Prospects ................................................................................... 42 Country Profiles........................................................................................................45 Albania ................................................................................................................ 46 Bosnia and Herzegovina.......................................................................................... 50 Bulgaria ............................................................................................................... 54 Croatia................................................................................................................. 58 Macedonia, FYR ..................................................................................................... 62 Moldova ............................................................................................................... 67 Montenegro .......................................................................................................... 72 Romania............................................................................................................... 76 Serbia.................................................................................................................. 81 Appendices...............................................................................................................85 Appendix 1: Acronyms and Glossary of Terms........................................................... 86 Appendix 2: Regional Classification of Countries ........................................................ 87 Attracting Investment to South East Europe iii Figures and Tables FIGURES Figure 1: Sectors of surveyed companies ..................................................................... 10 Figure 2: Origin of surveyed investors ......................................................................... 11 Figure 3: Investors’ perceptions of market conditions .................................................... 17 Figure 4: FDI inflows to South East European countries.................................................. 18 Figure 5: FDI inflows to regions in Europe .................................................................... 19 Figure 6: Doing Business in South East Europe ............................................................. 20 Figure 7: Global competitiveness of South East Europe’s economies................................. 21 Figure 8: Expectation of future attractiveness............................................................... 22 Figure 9: Future attractiveness of South East Europe vs. Western Europe ......................... 23 Figure 10: Investors’ awareness of business conditions .................................................. 24 Figure 11: Companies’
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