Academic journal article The European Journal of Comparative Economics

The Role of Italian FDI in Southeast Europe's International Integration. A Focus on Investors from the Marche Region

Academic journal article The European Journal of Comparative Economics

The Role of Italian FDI in Southeast Europe's International Integration. A Focus on Investors from the Marche Region

Article excerpt

Introduction

During the first decade of 2000, Southeast European (SEE) countries experienced significant economic integration into the world economy through international capital flows and especially foreign direct investments (FDI). This area of Europe has become an increasingly popular destination for FDI by EU member countries and overseas multinationals, and is benefiting from the recent worldwide surge in investment flows. During the period 2003-07, the average growth rate of inflows to SEE was 50%, much higher than the rise experienced by the developing (25%) and developed countries (30%). Geographically, two large countries--Croatia and Serbia and Montenegro--account for 77% of world investment in the Western Balkans (3) in the period 2003-07. Their role is comparatively still smaller than the roles of other main Balkan countries--namely Romania and Bulgaria, but since Croatia and Serbia and Montenegro are demonstrating resilience to the global financial crisis, their importance is likely to increase.

Several factors have contributed to recent trends: relatively low labour costs, increased institutional and political stability, and a general expectation that the more advanced countries in the region will join the EU. In fact, even if initially economic integration of the "Old Europe" mainly involved the Central and Eastern European (CEE) countries, it has later broadened including SEE. In this respect, political actions, such as the Adriatic-Ionian Initiative (AII), are promoting greater integration--even at the economic level--between the two areas. The AII involves three EU member countries (Italy, Slovenia and Greece) and five Western Balkans countries in the pre-accession stage (Serbia, Croatia, Montenegro, Bosnia-Herzegovina and Albania) (4). At the inter governmental level, there is a proposal to set up an Adriatic-Ionian Macro Region, with the aim of developing strategic actions, using a cooperative approach, to encourage inclusion of the Balkans in the EU (5). Other initiatives include the Adriatic Euro region and the IPA Adriatic Cross-border Programme (6).

Analysing macro data on FDI, we find out that Italy ranks among the ten major investors in most of the Balkan countries, and in 2007-2009, SEE has become increasingly important as a destination for Italian FDI, in the context of the Balkan area as a whole. Serbia, Croatia and Albania--the main Western Balkans recipient countries - attracted substantial shares of Italian FDI to the area--46%, 28% and 19% respectively during the most recent period (2007-2009).

While the main economic activities involving Italian FDI in the 2000s were privatization-related sectors, in 2007-09, the sector receiving the most Italian FDI was manufacturing. We identify two main patterns of economic integration through FDI: basic integration related to delocalization of labour-intensive tasks (first tier) and more complex integration (second tier). The former type of integration is typical of the economic relationships between Italy and the Western Balkan countries--such as Serbia, Bosnia-Herzegovina, Albania, Macedonia--and involve mostly traditional manufacturing industries such as textiles, clothing, footwear and furniture. Second tier integration pertains predominantly Croatia, Romania and Bulgaria which seem to have embarked on a second level of integration that includes traditional, capital-intensive and high-tech manufacturing industries (see Section 3).

In our analysis, we pay particular attention to the Marche region (central Italy, Adriatic coast) for two main reasons. First, because of its relevance for commercial flows, outward processing flows and manufacturing FDI in the Balkans area. The Marche region has exhibited a recent and increasing propensity to invest in the area, and especially in the Western Balkans. Since 2005, the Marche region FDI in SEE has increased continuously at an average annual growth rate of 46%. …

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