Japan External Trade Organization (JETRO)
(1) Continued Growth in Investment in Central and Eastern Europe
The gap in economic growth between the countries of Central and Eastern Europe and the Commonwealth of Independent States (CIS) is widening. While the economies of Central and Eastern Europe, most noticeably Poland, but also including the Czech Republic, Hungary, Romania and Slovakia, have returned to around the levels they were at in 1989, most of the members of the CIS are, with just a few exceptions, at less than half their 1989 levels.
FDI inflows into Central and Eastern Europe continued to grow thanks to increased investment by U.S. and European firms, which was encouraged by steady economic growth in the U.S. and EU. According to provisional statistics from the Vienna Institute for International Economic Studies (WIIW), the accumulated total of FDI in the eight countries of Central and Eastern Europe at the end of 1997 was US$51.52 billion, 19.8% higher than at the end of 1996, of which 80% was invested in Poland, Hungary and the Czech Republic. While investment in Poland has grown significantly since 1996, investment has failed to rise in both Hungary and the Czech Republic. In the case of Hungary, this has been because the government's privatization program has been almost completed, while investment in the Czech Republic has been hurt by the economic turmoil triggered by the financial crisis there in May 1997. Looking at FDI by sector, investment was active in the automobile and related industries of all three countries. FDI in Hungary largely comprised additional investment in existing operations to produce new kinds of products and investment to supply parts to existing Japanese assemblies, while in the Czech Republic, investment was high in the energy sector.
(2) U.S. and European Firms in Russia Following Developments Closely
Among the CIS countries, FDI in Russia was up 86% to US$3.90 billion in 1997 thanks to moves to stabilize its economy. However, investment dipped in 1998 as the effects of the currency and economic crises in Asia began to be felt and political and economic instability in Russia increased. Despite the deterioration in the economy and investment environment in Russia caused by the financial crisis in August, however, there are few signs of foreign firms pulling out.
With respect to Japanese investment in Central and Eastern Europe, there was a string of entries by Japanese makers of parts and supplies to supply the Japanese firms that entered in force from the latter half of 1996. Investment in Russia in terms of value has followed a consistently downward path over the past few years, but there has been a slight increase over the same period in terms of numbers of investments, and 1998 saw some mergers in manufacturing. Since the Japanese government's adoption of a new policy of diplomacy toward Russia in July 1997, relations between Japan and Russia have rapidly improved. In the economic sphere, several official and unofficial summits have resulted in improvements in the investment environment, such as an agreement to sign an investor protection agreement and moves to establish a Russo-Japanese investment company.
|
Trends in FDI Inflows into
Central and Eastern Europe and Russia
(Unit: US$ million)
|