engleski

Investment Effects of Regional Trade Agreements in Southeastern Europe

The paper identifies the potential impact of PTAs between SEECs on the FDI inflows in the region. It is expected that PTAs would encourage vertical FDI. We have analysed FDI inflows in SEECs before the establishment of RTA, regarding their performance and determinants. We assume that PTAs in SEE would reduce transaction costs and risk for the foreign investors and therefore could have an important positive impact for the region as a whole, but there may be winners and losers due to the redistributive effect within the region. Taxes will start to play an important role, especially corporate income tax’ . Its tax rate, is of the crucial importance and will play major role in attracting investment. Accelerated depreciation and tax credits (allowances) for investment are even more cost efficient and could be seen as a good supplement of the former major factor. Tax holidays should be avoided. Countries should also consider lengthening loss carry forward and withholding taxes on direct dividends.

FDI, RTAs, Southeast Europe, FDI determinants, tax incentives

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