Competitiveness and Investment Promotion in Bulgaria and Romania
After the onset of the 2007 financial crisis, Bulgaria and Romania employed a large set of fiscal and investment incentives in order to attract FDI flows. The chapter provides a comparative analysis of the investment promotion strategies of the two countr
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Introduction Inflows of foreign direct investment (FDI) to Romania and Bulgaria have increased substantially in the run-up to their EU accession in 2007. However, the global financial crisis, which began in 2008, and the subsequent economic downturn led to a rapid and significant contraction in FDI to both countries. This chapter examines the government investment policies adopted by Romania and Bulgaria in order to attract FDI before and after their EU accession and the crisis. Particular emphasis will be given to incentives available to foreign investors and to the activity of the relevant government investment agencies of each state. The effectiveness of investment promotion policies has been assessed using two types of measures: (1) quantitative variables which measure FDI flows and stock and (2) the position of the two states in international rankings of FDI attractiveness.
S.G. Anton (*) Alexandru Ioan Cuza University, Iasi, Romania © The Author(s) 2017 B. Szent-Iványi (ed.), Foreign Direct Investment in Central and Eastern Europe, DOI 10.1007/978-3-319-40496-7_10
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Before EU accession, Bulgaria and Romania attracted FDI flows through the privatisation of state-owned enterprises, financial and fiscal incentives, an improving business and investment environment as a result of better regulatory frameworks, industrial parks, and free trade zones. After EU accession, and in the light of the global financial crisis, investment promotion strategies focused on low personal and corporate income tax rate and on different incentives to attract FDI. The chapter is organised as follows. The following section of the chapter gives a presentation of the evolution of FDI flows to Romania and Bulgaria after the 1990s. This is followed by a brief overview of investment promotion agencies in Bulgaria and Romania. The subsequent section provides an assessment of FDI policies promoted by the two countries. At the end of the chapter, public policy changes are recommended based on the empirical results obtained in the chapter, in order to enhance the international competitiveness of these two countries.
Patterns of FDI Inflows in Romania and Bulgaria after the 1990s After 1990, FDI inflows have had a major contribution to the economic development of the CEE countries. FDI has been a stable source of capital, technology, know-how, innovation, and job creation. Simultaneously, FDI has had positive effects on the level of exports per capita and has increased competition and tax revenue. Kalotay (2010) highlighted that foreign direct investment has had a deep impact on structural change in new EU members. Szent-Iványi and Vigvári (2012) argued that one of the major advantages of foreign direct investments relies on technology (productivity) spillovers to domestic firms, although they were sceptical about the extent of these in the CEE region. On the other hand, Bogumil (2014, 2) found that in the Baltics, Romania, Bulgaria, and Slovenia, the “build-up of sizeable capital inflows into the non-tradable sector fuelled unsustain
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