Teorijsko-analitički pogled na osnovne determinante angažiranja stranih direktnih investicija u ekonomskom razvoju BiH
Theoretical and analytical view on basic determinants of FDI in economic development of Bosnia and Herzegovina

Summary/Abstract: This paper analyzes the basic determinants of FDI flows from the perspective of recipient countries, by the formation of a theoretical and empirical panel of transition countries and developing countries. The results of the analysis reveal that FDI flows are directed on average towards environments with more stable exchange rates, lower-risk countries, and countries with a higher per capita GDP. However, it would appear that the agglomeration of FDI is a major determinant of its current flows, providing confirmation that the openness of a country and more substantial FDI inflows are a significant explanatory variable of the economic growth of the recipient country. The paper makes a particular study of the links between FDI and economic growth in transition countries, where the presence of negative causal links between FDI and economic growth is confirmed, implying that FDI is a hinddrance to technological convergence with developed economies. This result can be explained to some extent by the model of engagement of FDI. In the period under consideration, acquisitions were the dominant model of entry of foreign capital, with financial inflows from sales mainly directed at consumption and import, and to a much lesser extent to increasing productive resources. However, despite certain adverse effects of the involvement of foreign invesstors in the local economy, associated with a rising trade deficit, tax avoidance, the repatriation of profits and the displacement of local firms, the results of the study eliminate the dilemma concerning the need for FDI inflows into transition economies. As a result, on the basis of experience to date of EEC countries, BiH should devote greater efforts to creating a favourable economic environment to attract greenfield investors, that is the category of non-privattization FDI. The economies of Central and Eastern Europe are BiH’s immediate competitors as regards attracting foreign capital, so that a knowledge and monitoring of their experiences to date in this regard is of major importance for establishing a favourable investment framework in domestic development conditions.

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