THE EFFECTS OF THE ENLARGEMENT OF THE EU:
THE MOBILITY OF FACTORS OF PRODUCTION.
FRIAS, Isidro* IGLESIAS, Ana VAZQUEZ-ROZAS, Emilia Abstract
In the present paper we analyse the role of foreign direct investment in the new acceding economies. The question to be answered is whether the new countries in EU may improve their positions in order to capture FDI flows from their comparative advantages and the southern European countries can worse their positions in the new internal market created in 2004. Besides, we will study if the movements of population between the central European countries and the EU-15 are affected by the last economic changes.
JEL classification: C51, O52
Keywords: Mobility, Production Factors, Europe, EU Enlargement
1. Introduction
The enlargement of the EU will have important consequences over the economic growth of the national states that will join it. It is generally accepted that due to a better accessibility from these new states (with low salaries) to the European core, industrial activities may move towards them. Nonetheless, it is also possible that production may concentrate around the areas closer to the markets, although their costs of production were higher. As these countries joined the EU, they will undergo the removal of borders controls, technical barriers to trade and barriers to the movements of factors of production. Thus, the consequences of being an EU member state can best be approached with the help of trade theories. Traditional theories of international trade, based in unrealistic hypothesis (perfect
* Dr. Isidro Frías Pinedo [email protected], Dr. Ana Iglesias [email protected] and Dr. Emilia Vazquez-Rozas [email protected] are Lecturers of Econometrics at the Faculty of Economics and Business, University of Santiago de Compostela, Spain.
competition, constant return of scale…), can incorporate the mobility of the capital, in which case it is not only important the gap in the price of factors but also the differentials in productivity. New theories of international trade- Krugman (1979), Brander and Krugman (1983) and Helpman and Krugman (1985), consider the possibility of firms operating in an imperfect competition context with increasing returns and differentiated goods. In terms of capital mobility, these theories may explain a reciprocal flow of direct investment among firms located into the more developed markets, to the detriment of firms located into peripheral regions. They also explain that whether the target of the direct investment is to exploit intangible assets, the consequences of European integration over capital flows can be difficult to forecast. Firstly, it can be argued that long run strategies of the firms may change as it is not necessary anymore their presence in every country of the Union. Secondly, location advantages may run in very varied directions. After a general overview of the economic situation of the candidate countries, we will start by studying the foreign direct investment (FDI) by economic sector. In second place, we will monitor the potential and performance FDI indices for acceding countries and for Spain, Portugal and Greece. Finally, we will address summarily the main trends in intra-EU migration movements.
2. The main characteristics of candidate states
The EU has undergone several enlargements since 1957, when the six founder states signed the Rome Treaty. However, this last enlargement has special traits: the high number of candidate states (10), a territorial increase of 23% and a population increment of almost 75 millions people (with a wide range of cultural endowments).
In March 1998, the enlargement process that affects to 13 states began, 10 of these states (Cyprus, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Malta, Poland, Slovak Republic and Slovenia) have already met the Copenhagen criteria and are members of the EU since May 2004. Bulgaria and Romania will wait until 2007, while Turkey is still far from its integration. The adhesion of these ten
countries will considerably increase population (half of which is from Poland), though both, their fertility rate and their expectation of life are under EU standards. However, in spite of the fact that the GDP growth of candidate states was higher since 1996 to the EU average, in 2001 GDP per head was in every single case under the EU mean (23 thousand €), being their average equal to 10,700 €. Comparing the departure situation of the acceding states with that of Spain, Portugal and Greece at the time of their adhesion to the EU, we can observe:
1) their GDP per head was in 2001 higher than that of Spain, Portugal and Greece in 1986. 2) The ratio exports/GDP was more favourable for acceding states. 3) Although the share in the total value added of agriculture in the acceding states was higher than the European average - 4 % in 2001, twice the EU average – it was well below the ratio corresponding to Spain, Portugal and Greece in 1986. 4) Agrarian employment is considerably higher in acceding countries, representing the 13% of total, whereas the employment in services is sensibly lower than that of the EU-15. Acceding states in which agriculture has a bigger share in employment are Poland (19.2%), Lithuania (16.5%) and Latvia(15.1%). In the EU-15, only Greece with a 16% in 2001, reaches this magnitude, though this figure was still higher in 1986 (28.9%). In Hungary and the Slovak Rep. the share of agriculture in employment is similar to that of Spain in the present, only 6%. Cyprus has a lower figure (5%) due to the important role of tourism in the island (71% of total employment in services).
3. Mobility of capital in the EU-25.
Regions within a country are usually more specialized than countries, and also have a stronger mobility of factors of production.
As a result of the unification of the national markets, the geography of production in the EU may go closer to that of a big national economy.
FDI is a way of international loan, by which those countries that have better investments opportunities at the present borrow from those that have capital surplus. For less developed countries, FDI can be an important instrument to fuel their economic growth. In this connection,
we should bear in mind that FDI can, on the one hand, encourage technological development and, on the other, support the accumulation of physical capital1. In the context of the candidate states, which still have a deep technological and development gap with the EU member states, FDI can play an important role in promoting real and technological convergence. Multinational enterprises are the main instrument in order to channel FDI. In this connection, the key issue would be to investigate the main determinants in the localization of multinational enterprises, which are those that explain the direction of trade flows internationally (i.e. factor endowment, transportation costs and barriers to trade). Graph 1 presents FDI flows in manufacturing.2
Graph 1. FDI flows by countries between 1993 and 2002.
Thousands of 2000 US$. (2000 Exchange rates).
0 5000 10000 15000 20000 25000 30000 35000 40000 45000
Latvia Lithuania Estonia Poland Czech Republic Slovakia Hungary Slovenia Malta
Own elaboration from IMF data
1 Borensztein et alter (1998), analysing 69 developing countries, concluded that it can be empirically proved that there is a process of technological transmission associated to FDI in those countries that have reached the threshold needed for technological absorption. They also confirm, although less robustly, a crowding in effect according to which total investment is higher than the corresponding foreign direct investment inflow.
2 In order to asses the effect of FDI over economy, gross capital inflows are usually used. Otherwise, we would be attributing to capital outflows an opposite and symmetrical role over technological development and capital accumulation to the positive effects of capital inflows.
The main receivers of foreign investments have been Poland, the Czech Republic, Hungary and Slovakia. In table 1, we may recognize the openness of the acceding economies to international capital flows between 1993 and 2002. The indicator has been calculated as the ratio of foreign capital flows to total output (and total investment).
Table 1. Percentage of FDI flows over Gross Investment in fixed capital (GIFC) and GDP, and annual FDI per head in 2000(US$)
% on GIFC % on GDP FDI pc Country
A B A B A B
Latvia 21.94 22.44 5.13 5.25 128 131 Lithuania 13.96 18.51 3.60 4.10 89 - Estonia 27.66 22.40 6.06 4.91 233 185 Poland 15.89 15.69 3.41 3.37 109 108 Czech R. 23.19 22.46 6.76 6.54 252 243 Slovakia 16.50 16.50 5.18 5.18 104 104 Hungary 22.48 19.84 4.56 4.04 181 159 Slovenia 8.70 7.80 2.02 1.81 173 155
Malta 26.58 25.22 6.98 6.62 649 621
Acceding countries av. 19.66 17.08 4.86 4.18 213 213 Spain 12.16 -3.45 2.77 -0.79 349 -99 Portugal 11.09 -0.28 2.78 -0.07 268 -6.8
Greece 3.51 1.63 0.74 0.34 70 33
Southern countries
av. 8.92 -0.70 2.10 -0.17 229 -24
Note: A Inflows. B Net inflows Own elaboration, IFM International Financial Statistics. Percentages are annual averages for 1993-2002. FDI pc (per capita) in year 2000 (US$ per inhabitant at exchange rates).
Last years, candidate states received FDI inflows of 213 2000 US$
per head, which is almost the 20% of their gross investment in fixed capital (27% for Estonia and Malta), and around the 5% of their GDP. These figures are higher than those of Spain, Portugal and Greece in the years before their adhesion to the EU: 5% over investment and 1% over GDP. However, FDI inflows in Spain, Portugal and Greece were also higher in the interval between 1993
and 2002, when these ratios were 9% and 2%, respectively. See Table 2. The Czech Republic, which has received 252 2000 US$ per head, and Malta, 650 2000 US$, stand out in the table above. All candidate states, but Latvia and Lithuania, have received higher FDI inflows than Spain, Portugal and Greece between 1980 and 1986.
Portugal and Spain have experience an increase in FDI inflows in last years, though at the moment, FDI outflows are higher than inflows.
Conversely, Greece has received less FDI lastly, though its net FDI inflows are still positive.
Table 2. Percentage of FDI flows over Gross Investment in fixed capital (GIFC) and GDP. Annual FDI per head 2000 US$ (2000
Exchange rates).
1980-1986
GIFC GDP FDI per head
A B A B A B
Spain 5.23 4.39 1.02 0.86 110.8 65.17 Portugal 3.02 2.82 0.7 0.65 61.41 40.10 Greece 6.62 - 1.1 - 119.9 - Average 4.96 3.61 0.94 0.76 - - Own elaboration, IFM International Financial Statistics
Frias and Iglesias(2004) present the FDI stock by origin, distinguishing among the flows coming from the EU-15, the USA and Japan. The 50% of total FDI stock was originated in Germany, the Netherlands and France. Only in Germany was originated the19.2%.
The 14% of FDI comes from the USA, which has invested mainly in Poland and the Baltic States, in which also Sweden, Denmark and Germany had made important investments. Both, Germany and the Netherlands, have addressed their FDI flows towards the Czech Republic, Slovakia and Hungary. The 20% of the Polish FDI inflows were originated in France. Austria, which has made the 8% of total FDI in the candidates states, is the main investor in Slovenia with the 52% of total FDI. It may also be interesting to analyse the FDI broken down by economic activity. The economic sectors of acceding
countries that have received the highest amounts of FDI have been:
Manufacturing activities, Financial intermediation, Trade and Transports and communication. Last years, the FDI stocks in the acceding countries have been increasing in these sectors (graph 2).
Graph 2. Evolution of FDI Stocks in acceding countries by industry. 1996-2001. 2000 US$ per head
Industry
0 200 400 600 800 1000
1996 1997 1998 1999 2000 2001
LATVIA LITHUANIA ESTONIA POLAND CZECH REP SLOVAK REP HUNGARY SLOVENIA
Trade
0 50 100 150 200 250 300 350
1996 1997 1998 1999 2000 2001
LATVIA LITHUANIA ESTONIA POLAND CZECH REP SLOVAK REP HUNGARY SLOVENIA
In the economy as a whole, Lithuania has the highest rate of growth of the FDI stock, Czech Republic and Estonia have also great values of its annual rates of growth (more than 25% between 1997-2001). In the Second sector, the Slovak Republic and Lithuania have reached annual rates of growth about 20% between 1996 and 2000, but the Czech Republic was on the top of the FDI stock per inhabitant in 2000, with more of 800 US$. In this branch of activity, only Slovenia has had negative rates some years. Czech Republic is in the top of FDI stocks in Trade sector, the average rate of increasing of this
Finance
0 100 200 300 400 500 600 700
1996 1997 1998 1999 2000 2001
LATVIA LITHUANIA ESTONIA POLAND CZECH REP SLOVAK REP HUNGARY SLOVENIA Transports and communication
0 100 200 300 400 500 600
1996 1997 1998 1999 2000 2001
LATVIA LITHUANIA ESTONIA POLAND CZECH REP SLOVAK REP HUNGARY SLOVENIA
country is more than 30% between 1997 and 2000 (similar to Poland), and received 300 US$ per inhabitant in the last year, value only reached by Estonia. In Finance, Estonia was in the top (580 US$ per inhabitant) in 2001, but Lithuania had the highest growth rates in these years. Estonia, the Czech Republic and Poland have also had important increments, with annual rates around 30%. Other important sector in many countries is Transports and communication, with great increments in its value of FDI per inhabitant. Investments in this industry have been very important for Estonia, that has an annual rate of increasing of 80%, and the direct investments reached more than 500 US$ per inhabitant in 2001. Table 4 presents the stocks of foreign direct investments in eight acceding countries by sector in 2001.
Table 4. FDI stocks in the acceding countries, by industry, 2001*.
(2000 US$ per inhabitant)
Total Industry Trade Finance Transports and
Communication Others
Latvia 1016 160 228 166 153 308
Lithuania 665 191 151 108 125 90
Estonia 2290 474 302 578 515 422
Poland 1411 543 150 304 142 271
Czech R. 2106 803 317 310 237 440
Slovak R. 691 367 80 83 116 46
Hungary 1188 437 147 135 78 390
Slovenia 1413 574 198 364 22 254
Average 1392 522 175 258 148 290
*Latvia, Estonia and Poland: 2001, other countries: 2000, Cyprus and Malta:
not available. Own elaboration UNCTAD/WIR/2003 and Eurostat.
Estonia and Czech Republic are the countries with higher FDI stocks per inhabitant: more than two thousand US$. Actually, these countries are over the average in all economic sectors. In the Trade sector, we can also point to Latvia and Slovenia. In Manufacturing and Financial sectors, Poland and Slovenia are over the mean value.
Other sectors are important in some countries. The manufacturing
sector has a great importance in the Slovak Republic, represents more than half of the FDI stock in this country. Trans-national companies (TNCs) of motor vehicles are the most important industry in this economy (do not forget that Volkswagen and Skoda have a great weight in the Slovak economy). This sector was also important in other countries, but in Baltic countries where this percentage was lesser. Although Distribution Trade, Finance and Transports and Communication are important in all countries (except Transport in Slovenia), there are other sectors which are specifically outstanding in some countries. Business activities (real estate, rental activities, computer) reaches the 16% in Latvia and Hungary, and it is also important in Slovenia and Estonia. Distribution of electricity, gas and water reaches 9% of FDI stocks in Hungary.
4. Foreign direct investment indices
Two simple ways to benchmark FDI are: to compare the absolute values of inflows in the host economies and to calculate the shares of FDI in national investment. However, these comparisons do not take into account the size of host economy as far as it is a reasonable supposition that the larger economy (measured by GDP) will get the more FDI. It is more interesting to assess how successful an economy is in attracting FDI after taking size into account which can implicitly capture the effect of other factors to which foreign investors are sensitive. Following the World Investment Report 2002 Trans- national Corporations and Export Competitiveness, we have elaborated two indices of foreign investment: the Performance and the Potential index. The FDI Performance Index is the ratio of a country’s share in the FDI flows of the countries considered to its share in the GDP of these same countries. This index will take the relative economic size into account because countries with an index value greater than one attract more FDI than may be expected on the basis of relative GDP. However, it is not possible to capture the host of factors that can affect FDI by this index. That is why we are going to introduce the following index. The FDI Potential Index does not explain flows of FDI in a statistical sense, it tries to take into account
social, political and institutional factors, which could be relevant at the national level to foreign investors from a competitive point of view.
Therefore, this index is built on the basis of these key factors, that are expected to affect FDI, and whose data are available for the analysed country group. The variables which constitute this index are: the rate of growth of GDP, GDP per capita, share of exports in GDP, telephone lines per 1000 inhabitants, commercial energy use per capita (kilotons of oil equivalent), share of R&D expenditures in GDP and student in secondary as a percentage of popula tion aged 25 to 64.
The FDI Potential Index is calculated for 1999-2002 as an un- weighted average of the normalized values of the variables, (see table 5).
Table 5. Components of the FDI Potential Index (average 1999-02)
Gdp growth (av, 99-02)
Gdp per head (av. 99-02)
Exports (av. 99-02)
Nº of telephone lines2001
% Score (0-1)
dollars 2000
Score
(0-1) % Gdp Score (0-1)
per 1000 inhab.
Score (0-1) Czech R. 2.23 0.00 14082 0.50 54.41 0.94 37.76 0.37 Estonia 4.80 0.70 9979 0.17 57.18 1.00 35.41 0.27 Hungary 4.18 0.53 12600 0.38 56.12 0.98 37.52 0.36 Latvia 5.90 1.00 7857 0.00 26.31 0.36 30.70 0.07 Lithuania 3.85 0.44 9029 0.09 35.01 0.54 31.29 0.10 Poland 2.63 0.11 9972 0.17 19.13 0.21 29.51 0.02 Slovakia 2.93 0.19 11977 0.33 57.22 1.00 28.93 0.00 Slovenia 3.95 0.47 17434 0.77 44.32 0.73 40.19 0.47 Malta 2.63 0.11 17772 0.80 57.17 1.00 53.00 1.00 Spain 3.30 0.29 20237 1.00 18.96 0.21 43.36 0.60 Portugal 2.38 0.04 17013 0.74 21.84 0.27 42.49 0.56 Greece 3.90 0.46 16231 0.68 8.83 0.00 52.92 1.00
Commercial energy use (av. 99-01)
R&D expenditure (av.2000-01)
Student in secondary education (av. 2000-02) per head Score
(0-1)
% GN Income
Score (0-1)
% population aged 25 to 64
Score (0-1)
Czech R. 3895 1.00 1.23 0.73 86.73 1.00
Estonia 3377 0.77 0.72 0.25 86.07 0.99
Hungary 2451 0.36 0.88 0.39 70.23 0.75
Latvia 1652 0.00 0.46 0.00 81.60 0.92
Lithuania 2198 0.24 0.65 0.18 84.70 0.97
Poland 2363 0.32 0.65 0.18 80.17 0.90
Slovak R. 3311 0.74 0.65 0.18 84.77 0.97
Slovenia 3312 0.74 1.52 1.00 75.67 0.83
Malta 2002 0.16 - - - -
Spain 3027 0.61 0.95 0.46 39.97 0.30
Portugal 2452 0.36 0.85 0.37 20.03 0.00
Greece 2544 0.40 0.64 0.17 51.83 0.48
Own elaboration from FMI, UNCTAD and Eurostat. Gdp per head at PPPs.
Table 6. Values of FDI Performance Index and Potential Index, and country rankings.
Performance Potential Performance Potential (1999-
2002) Value Rank Score 0-1 Rank
(1999-
2002) Value Rank Score 0-1 Rank Czech R. 1.48 2 0.65 2 Slovak
R. 0.81 6 0.49 7
Estonia 1.22 4 0.59 4 Slovenia 0.29 11 0.72 1
Hungary 0.60 9 0.54 5 Malta 3.16 1 0.61 3
Latvia 0.69 8 0.34 10 Spain 1.29 3 0.50 6
Lithuania 0.57 10 0.37 9 Portugal 1.07 5 0.33 11 Poland 0.74 7 0.27 12 Greece 0.24 12 0.45 8
Own elaboration from FMI, UNCTAD and Eurostat.
Countries with low values of the performance index, which means that the host economy receives less FDI than expected by its size, also vary greatly. Greece is still far from the EU borders and in spite of being members of the EU since 1981, has not improved its investment climate sufficiently to compete effectively for FDI. Others
are small and young countries that after 13 years of independence (Slovenia and Lithuania) have a lack of democratic maturity that inspire distrust to foreign investors. The FDI Potential Index also gives some interesting findings. This index is based largely on structural economic factors and correspond to the levels of economic development. The top 3 countries (apart from Malta) include three economies with higher income among the acceding countries (Slovenia, the Czech Republic and Estonia). The 3 counties at the bottom of the ranking are two countries with economies in transition (Poland and Latvia), as well as a developed country (Portugal).
It is useful to compare the rankings based on the two indices as a rough guide to know whether countries are performing adequately, given their structural indicators. Comparing the two indices we can draw up a four-fold matrix of inward performance and potential indices, as follows: 1)“Front-runners.” Countries with high performance (i.e. above the mid-point of the ranking by performance) and high potential (i.e. above the mid-point of the ranking by the potentiality). 2) “Above-potential.” Countries with high performance (i.e. above the mid-point of the ranking by performance) and low potential (i.e. below the mid-point of the ranking by the potentiality).
3) “Below-potential.” Countries with low performance (i.e. below the mid-point of the ranking by performance) and high potential ( i.e.
above the mid-point of the ranking by the potentiality). 4) “Under- performers.” Countries with low performance (i.e. below the mid- point of the ranking by performance) and low potential ( i.e. below the mid-point of the ranking by the potentiality).
The graph 3 shows the rankings in potential and performance indices as well as a scatter diagram in which we can observe the relationship that exists between both of them. The country rankings for FDI performance yield interesting results. The countries with an index value greater than one, excepting Malta, include two Mediterranean countries (Spain and Portugal) and two eastern economies (the Czech Republic and Estonia).
Graph 3 FDI Indexes.
. 0 . 1 . 2 . 3 . 4 . 5 . 6 . 7 . 8
0 . 0 0 . 4 0 . 8 1 . 2 1 . 6 2 . 0 2 . 4 2 . 8 3 . 2
P e rfo rm a n c e In d e x
Potential Index
M al ta C z e ch R .
S p ain E s to n ia S lo ven i a
P o rt u g al S l o v ak R .
H u n g ary
G re e c e
P o l an d L at v ia
Lith u an ia
Own elaboration from FMI, UNCTAD and Eurostat.
The bottom 3 countries are mainly small countries (Slovenia, Lithuania) and Greece. Countries with Performance Index values greater than one include economies whose FDI performance reflects the strategic position of some enterprises that seek lower costs and market shares in the emergent states economically and geographically better positioned.
FDI Performance Index (1999-2002)
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Greece
Slovenia Lithuania Hungary Latvia Poland Slovak Republic Portugal Estonia Spain Czech Republic Malta
FDI Potential Index (1999-2002)
0.00 0.20 0.40 0.60 0.80
Poland Portugal Latvia Lithuania Greece Slovak Republic
Spain Hungary Estonia Malta Czech Republic
Slovenia
Table 7. Country classification by FDI performance and potential indices (1999-2002).
Countries High Performance Low Performance
High Potential
Front-runners
Czech Republic, Estonia, Malta, Spain
Below potential Hungary, Slovenia
Low Potential
Above potential Slovak Republic, Portugal
Under-performers Latvia, Lithuania, Poland,
Greece Own elaboration from FMI, UNCTAD and Eurostat.
In 1999-2002, there were 4 front-runners, countries that combine strong potential and performance indices. This group includes an industrialized country (Spain), a tourist destination (Malta) and countries which are located next to large developed economies as Estonia (Scandinavian states) and the Czech Republic (Germany and the Netherlands). There were 4 under-performers -Latvia, Lithuania, Poland and Greece- whose economies are not advantaged enough and competitive to capture foreign capitals and are receiving foreign capital according to this. The group of above-potential economies comprise mainly countries without strong structural capabilities that have done well in attracting FDI. Lacking of a strong economical base in the case of the Slovak Republic and in human capital indicators in Portugal. The group of below-potential economies include transition economies that have a weak FDI performance because of political and social factors. Note that Hungary and Slovenia, in spite of not having bad economic indicators, have low FDI inflows and so appear in this category.
5. Trends in the intra-EU migration movements.
Mobility of labour, which has not been too important in last decades among developed countries, is typically stronger within a country that among countries. The incorporation of new states to Europe, will make the movements of their nationals around the EU easier.
However, in spite of the wage differentials, Europeans have shown a
deep attachment to their homelands. Eventually, the regions of the EU will have to compete in order to attract and even maintain the mobile factors and, from this competition it may start an accumulative process of unequal growth.
Tables 8 presents information about the main migration flows directed towards the E.U. and originated in other E.U. countries, des- aggregating those principal inflows coming from Greece, Portugal, Spain and the group of acceding countries. Apart from the former Yugoslavia, which has suffered from a traumatic civil war, only Poland has a significant part of its population living outside its borders in an E.U. state (70% in Germany). Besides, Estonia also has a considerable group of population living in Finland. In relation to Portugal and Greece, it is noticeable that in spite of not being at the moment transferring people towards Europe -which can be observed in OECD Trends in International Migration- have not completed the return of the population migrated in the 1960´s. In 2000, the nationals of these countries living in other EU state represented the 21.5% of the population of EU living in other member state, whereas represented only the 5.5% of the total EU-15 population.
Table 8. Percentage of foreign population in the EU-15 by country of origin (thousands)
Country of origin
Estonia Poland Spain Portugal Greece Former Yugoslavia EU-15 TOTAL
1995 0.0 2.1 2.4 5.2 2.2 15.6 32.2 100
2000 0.1 2.3 1.9 4.6 2.0 13.3 30.5 100
Own elaboration from OECD data
Table 9. Stock of foreign population by country of origin (thousands) Country of origin
Host
country Year
Estonia Poland Spain Portugal Greece Former
YugoslaviaEU--- total---
95 - - - - - 329 94 723
Austria
00 - - - - - 342 105 757
95 - 5.4 51.1 75.4 19.9 8.1 665 1048 Bel-Lux
00 - 6.9 43.4 84 18 9.8 685 1026
95 - 5.3 - - - 28.1 46.5 223
Denmark
00 - 5.5 - - - 35 54.3 259
95 8.4 - - - - 3.3 - 69
Finland
00 10.8 - - - - 2.8 - 91
95 - 47.1 216 650 - 52.5 1312 3597 France
99 - 74.8 161.8 554 - 83.37 1195 3263 95 - 277 132.3 125 359 1299 1812 7174 Germany
00 - 301 129.4 134 365 1036 1870 7297
95 - - - - - - 13 96
Ireland
01 - - - - - - 25.2 151
95 - 22 - - - 56.1 164 991
Italy
00 - 31.4 - - - 40 152 1388
95 - - 16.7 - 5.4 33.5 191 725
Netherland
s 00 - - 17.2 - 5.7 43.48 202 668
95 - - 8.9 - - - 41.4 168
Portugal
00 - - 12.2 - - - 56.8 208
95 - - - 37 - - 236 500
Spain
00 - - - 42 - - 315 896
95 - 16 - - 57.7 256 532
Sweden
00 - 16.7 - - 30.3 243 477
95 - - - 30 - 902 902 1948
UK 01 - - - 58 - 918 918 2587
95 8.4 372 425 917 385 2770 5732 17794 EU 00 10.8 437 364 871 389 2540 5821 19069
Source. Own elaboration from OECD data
6. Main conclusions
These are the main conclusions drawn from the present paper:
- The 50% of total FDI stock addressed towards the acceding countries was originated in Germany, the Netherlands and
France. The main receivers of foreign investments have been Poland, the Czech Republic, Hungary and Slovakia.
- Last years, acceding states received annually FDI inflows of 213 2000 US$ per head, - 20% of GIFC and 5% of GDP- (more than Spain, Portugal and Greece in the years before their adhesion).
- The economic sectors that have received the highest amounts of FDI have been: Manufacturing activities (the most important in all countries), Financial intermediation, Trade and Transports and communication. Estonia and Czech Republic are the countries with higher FDI stocks per inhabitant in overall (more than 2,000 US$ in 2000) and also in every economic sector.
- Countries with Performance Index greater than one -Malta, the Czech Republic, Spain, Estonia , and Portugal- are those whose FDI performance reflects the strategic position of some enterprises that seek lower costs and market shares in the emergent states economically and geographically better positioned. In the FDI Potential Index, which is based largely on structural economic and social factors, the countries better positioned are: Slovenia, the Czech Republic, Malta and Estonia
- Mobility of labour from acceding countries towards the EU- 15 has not been too important in last years.
As a single conclusion it can be stated that the integration process of the acceding counties into the EU will probably reinforce the latter trends in factors movements. On the one hand, capital has mainly moved towards the countries in the vicinity of the EU core and benefited their economic growth exploiting the opportunities of a relatively low-priced and well educated labour force. The Czech Republic and Estonia have specially rented its geographical position and good indicators to be at the top of the ranking in FDI per head.
Nonetheless, the situation was still far from that of industrial dislocation feared in Southern European countries. On the other hand,
labour movements have been of minor magnitude. Just Poland and Estonia have a considerable, although not excessive, stock of population living abroad in bordering countries. Hopefully, in the next future, FDI inflows in acceding countries may be able to contribute to overcome such a big problem as unemployment (15% of unemployment rate in 2002) which in turn may alleviate potential migration tensions.
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