International Politics Journal Archive

International Politics Vol. 74 No. 1189/2023


Foreign direct investment in European and Eastern European countries in the face of COVID-19 and the Russian-Ukraine War
International Politics, 2023 74(1189):9-34
Abstract ▼
The global shocks of COVID-19 and the Ukraine war on FDI inflows in European countries, particularly Eastern Europe, have been subjects of a serious debate among EU policymakers. This study assesses the level of impact of the two global shocks on FDI in 39 European countries (ECs) and 20 Eastern European countries (EECs) from 2020 Q1 to 2022 Q4. For the comparative analysis, a static panel regression is used. Our findings demonstrate that variations in the levels of stringency measures related to COVID-19 in individual countries are significantly associated with increased FDI inflows. This suggests that investors will increase investment in countries with stricter measures to limit crises. While variations in COVID19 total cases are associated with increased FDI inflows in Europe but with decreased FDI inflows in Eastern Europe, we find that the crisis may have created new opportunities or incentives for foreign investors in Europe compared to Eastern Europe.
Impact of COVID-19 and the Ukrainian War on FDI in a Panel of Eastern European Economies
International Politics, 2023 74(1189):35-58
Abstract ▼
The COVID-19 pandemic, coupled with the Russia-Ukraine war, has had disastrous consequences for the global economy. As a result of the crisis, the normal way of conducting business has changed drastically, and, with the ongoing Russian invasion in Ukraine, many governments and companies have taken immediate investment-related measures. Undoubtedly, the majority of Eastern European countries have been severely hit. It is therefore crucial to find out what impact these challenges have on foreign direct investment in these countries. To do so, the paper employs the panel data technique to estimate the impact of COVID-19 and the Ukrainian war on FDI in Eastern European economies from 1995 to 2022. The regression results show that both the pandemic and the war have discouraged foreign investment in the panel of countries considered in the sample. The results further indicate that per capita growth and trade openness are important determinants of FDI.
Influence and Estimation of Geopolitical Risk on FDI in Eastern European Economies
International Politics, 2023 74(1189):59-80
Abstract ▼
In the current complex international situation, especially under the influence of the Russian-Ukrainian conflict, the inflow of FDI in Eastern European countries is seriously affected by geopolitical risks. However, there is a lack of research on this subject in Eastern Europe. Based on FDI inflow data in Eastern European countries and the political risk ratings of the ICRG from 2009 to 2020, this paper investigates the effect of geopolitical risks on FDI inflow to Eastern Europe using simple linear regression. It has been found that geopolitical risks have a significant negative impact on FDI inflows in Eastern European countries. However, further studies have found that signing RTAs can help alleviate this negative effect; actively carrying out bilateral trade or investment agreements is conducive to the development of FDI in host countries
Foreign Direct Investment Resilience During Times of Crisis: A Comparative Analysis Between Selected Eastern European and African Countries
International Politics, 2023 74(1189):81-107
Abstract ▼
Times of crisis provide the opportunity to question the behaviour of socioeconomic agents and specific phenomena around economic growth’s resilience. Hence, this paper relies on econometrics to analyse the data compiled from secondary sources mainly available within the World Development Indicators to comparatively examine foreign investors’ behavioural shifts in Eastern Europe and Africa during significant crises that the world faced during the last two decades. The aim is to identify, through their impacts, the above behavioural shifts and thereby assist policymakers in advancing policies strengthening and nurturing foreign direct investments’ “FDI” resilience and maintenance during and post-crises. It was uncovered that foreign investors appear to reduce their exposure during crises in Eastern Europe and Africa. The decrease in inflows seems to be higher in Eastern Europe than in Africa. However, the change in net FDI effects on infrastructure, trade openness, and economic growth is more significant in African economies. It is therefore believed that, to nurture FDI resilience or maintenance post-crisis, lawmakers should infer policies supporting the reduction of FDI outflows, the development of infrastructure, the improvement of trade openness, and ultimately advancing a sustainable FDI agenda. Through an empirical analysis of the effects that crisis periods have on FDI in Eastern Europe and Africa, the paper gives suggestions regarding policies that encourage fostering FDI resilience and maintenance in these regions. However, while future research may build on the above, there is a need to particularly investigate how sustainable instruments may support FDI resilience during crises.
Industrial Digital Interdependence and FDI Restrictiveness as Determinants of FDI for Eastern European Economies
International Politics, 2023 74(1189):109-131
Abstract ▼
In the time of industrial supply chain redesign due to COVID-19 and geopolitical risks, Eastern European Economies (EEE) can benefit from their strategic location and interdependent and interconnected manufactured structure to attract foreign direct investment (FDI), particularly in the semiconductor industry. As EEE emerges in the global semiconductor supply chain, they must balance FDI attraction with enhanced national security restrictions. By analysing the patterns of FDI inflows for 20 EEE over 2003– 2022, developing interdependence industrial indices, and assessing FDI restrictiveness, we find that the combination of higher trade interdependence in electronics industries, European integration, and more favourable FDI restrictiveness leads to higher FDI inflows to Eastern European Economies. The findings reveal that a higher level of semiconductor interdependence between Asian countries and EEE will positively correlate with an increase in FDI inflows to EEE. However, it has been verified that there is a weak negative correlation between the FDI in EEE and the OECD FDI restrictiveness index. Conversely, in prospects for strategic investment for the ICT, electric vehicle (EV) battery manufacturing, and automobile sectors in EEE, the concentration of FDI in the Western Balkans and other non-EU candidates may further increase, indicating the need to participate in the common FDI restrictions process to balance interests with core European values. At the same time, there is no evidence of a positive impact of increasing Chinese outbound FDI on FDI in EEE, indicating the Chinese preference for developed EU countries, while Germany serves as the main FDI origin in EEE.
War, sanctions, and foreign direct investment to and from Russia
International Politics, 2023 74(1189):133-153
Abstract ▼
Russia’s full-fledged war on Ukraine, which started in February 2022, added major uncertainties to foreign direct investment (FDI) to and from Russia and affected it negatively in the short, medium, and long run. The degree of the hit would depend on the exact contents of sanctions and countersanctions in constant development. However, the severe consequences of some of them were already visible early on, adding to the financial strain caused by the war. FDI to and from Russia fell drastically in 2022 and, depending on the length and depth of the conflict, would remain sluggish in the subsequent years if no exit strategy is found to stop the conflict and its eventual escalation. This article concludes that the fall in FDI would, in the end, hurt the economic capacities of Russia, already affected by a previous round of sanctions imposed in 2014. If it works, decoupling the Russian economy from FDI partners by applying sanctions would be effective only partially and at a relatively high cost. That, in turn, could thwart the very economic fundamentals of the war effort.

Book review

The Armed Conflict of the Dniester: Three Decades Later
Mitko Arnaudov, Milica Ćurčić
International Politics, 2023 74(1189):155-160