Investment Matters: The Role and Patterns of Investment in Southeast Europe (World Bank Working Papers)

The purpose of this book is to provide policy insights to decision-makers, academics and researchers on investment flows and patterns in Southeast Europe. The report explores some of the determinants of private investment, such as: the financing sources for investment, the contribution of FDI and the role of public investment. It finds that investment rates in Southeast Europe are substantially lower than among the EU-8 and the fast growing East Asian economies, which could explain partly the slower economic growth in Southeast Europe. Contents......Page 4 Acknowledgments......Page 6 Acronyms and Abbreviations......Page 8 1. Introduction......Page 10 The Contribution of Investment and Productivity Improvements to Output Growth......Page 12 Investment as Driver of Productivity......Page 14 Private Capital Formation in SEE......Page 16 Figure 5. GFCF in Machinery and Equipment in Some of the EU-10......Page 19 Table 3. Difference Between the Share of Investment and Share of Value-Added for NACE Sectors......Page 21 The Link Between Savings and Investment......Page 26 The Role of the Financial Sector......Page 27 Remittances as a Source of Investment......Page 30 5. The Role of Foreign Investment for Domestic Capital Formation......Page 32 Figure 10. FDI by Sector in the EU......Page 34 6. Public Investment Can Fuel Private Investment......Page 38 Public Infrastructure in SEE......Page 39 Figure 13. Impact of Infrastructure Improvements on Productivity Growth......Page 41 Box 3. PPPs in the Case of Croatia......Page 42 7. Conclusions......Page 44 References......Page 46 Table 2. GDP Structure (NACE) of the SEE Economies......Page 20 Table 4. Increase in Sector Labor Productivity Compared to the Average, and Sector Investment Per Employee Compared to the Average......Page 23 Table 5. Sources of Financing of Investment......Page 28 Figure 11. Greenfield FDI in Selected Transition Economies......Page 35 Table 7. FDI Stock in SEE by Country as Percent of Total Stock......Page 36 Figure 12. Government Capital Expenditure in the EU-10......Page 40 Box 1. Macroeconomic Framework......Page 13 Figure 3. Private GFCF in SEE......Page 17 Figure 4. Private GFCF, including Change in Inventory......Page 18 Figure 6. Investment and Output Growth in SEE by Sector......Page 22 Box 2. Investing in High Technology and R&D......Page 24 Figure 8. Private Investment and Credit and Annual Changes in Investment and Credit in SEE (2002–06)......Page 29 Figure 9. FDI in SEE......Page 33 The Purpose Of This Note Is To Provide Policy Insights To Decision Makers, Academics, And Researchers On The Trends In Investment In Southeast Europe (see). A Comprehensive Assessment Of What Determines Investment Is Essential To Identify, To The Extent Needed, Policy Actions That Stimulate It. The Report Looks More In-depth Into Private Investment Trends In See, And Explores Some Determinants Of Private Investment, Such As: The Financing Sources For Investment, The Contribution Of Foreign Direct Investment (fdi), And The Role Of Public Investment. The Selection Has Been Made Based On The Relative Importance And Data Availability For The See Economies. Some Key Determinants Of Investment Such As Political Stability And Business Environment Have Not Been Included Because These Are Already Well Covered In The Existing Literature. Overall, The Report Aims To Assess Not Only The Quantity But Also The Quality Of Investment. It Should Be Noted That While (investment In) Human Capital Is Equally, If Not More, Important For Economic Growth, Its Role And Patterns In See Are Beyond The Scope Of This Report. Investment, Productivity, And Economic Growth In See -- Private Investment Is Critical For Sustained Rapid Growth -- Financing Investment -- The Role Of Foreign Investment For Domestic Capital Formation -- Public Investment Can Fuel Private Investment. Borko Handjiski. Includes Bibliographical References (p. 37-38). Presents policy insights to decision-makers, academics and researchers on investment flows and patterns in Southeast Europe. This book explores some of the determinants of private investment, such as: the financing sources for investment, the contribution of FDI and the role of public investment.