Policy Documentation Center

Fatic, Aleksandar

 
 
 
 
FREEDOM AND HETERONOMY: AN ESSAY ON THE 
LIBERAL SOCIETY 
 
Author: Aleksandar Fatic 
 
 
 
 
Publishers: Institute of International Politics and Economics & Centre for 
Security Studies, Belgrade, Serbia 
  
Pages: 235 
  
ISBN: 978-86-7067-112-6 
  
Hardcover, full colour. 
  
Price: EUR 15 + postage. 
 
To order please write to office@cbs-css.org and we will send the book alongside 
with payment information or you can order it on Amazon.com at 
http://www.amazon.com/Freedom-Heteronomy-Essay-Liberal-
Society/dp/8670671123/ref=sr_1_1?ie=UTF8&s=books&qid=1241101171&sr=8-1 
 


Freedom and heteronomy: an essay on the liberal society

Chubrik, Alexander

  
 CASE Network E-briefs 
 8/2009  June 2009 
Global Economic Crisis and Belarus: A Look Back 
By Alexander Chubrik  
At  first  glance,  it  seems  that  Belarus’  recent  economic 
performance  surprised  most  outside  observers.  According  to 
official  statistics,  economic  growth  in  Belarus  between  January 
and June 2009 amounted to a 0.3%  increase year‐on‐year, while 
Russia’s  economy  –  a  major  market  for  Belarusian  industrial 
exports  –  dropped  by  10.1% year‐on‐year.  Comparison  of  the 
country’s previous economic performance illustrates the negative 
impact  of  the  crisis.    A  decrease  of  external  demand  hit 
Belarusian industry and increased external imbalances, while the 
fall of energy prices and deterioration of enterprises deteriorated 
government  revenues.  All  of  these  factors  unveiled  structural 
problems  that  required  appropriate  action.  Instead,  the 
government has chosen to delay “radical” reforms by borrowing 
abroad. 
Loans as a solution 
Belarus was  among  the  first  transition economies  to  ask  for  an 
International Monetary Fund  (IMF) stand‐by  loan – “to  facilitate 
an orderly adjustment  to external  shocks  faced, and  to address 
pressing vulnerabilities”. Recently the IMF approved an additional 
loan  increase  of  $1  billion,  due  to  “a  greater  than  expected 
impact from the global financial crisis on Belarus”. As part of the 
loan agreement  the Fund expects  the Belarusian government  to 
promote  further  liberalization  efforts  which  includes  preparing 
the  economy  for  privatization,  as  well  as  implementing  some 
structural  changes  deemed  “essential  to  improve  prospects  for 
long‐run growth and external stability”. 
Reforms as a remedy 
At the moment, the shape of this “revised” economic program is 
not clear. However, the previous version, approved at the end of 
2008,  included  several  measures  which  can  be  viewed  as 
improving liberalization efforts –  including prices (partial), wages 
(minor), and doing business  (quite progressive, but also partial). 
After  recent discussions with  the  IMF and World Bank  it  seems 
that  Belarusian  authorities  are  ready  to  launch  large  scale 
privatization efforts. Evidently, all of these measures are good for 
growth  in  the medium  to  long‐  term, but  the question  remains 
will they solve the country’s short‐term economic problems? 
Decrease of external demand 
The  rapid  decrease  of  external  demand  in  Belarus  is  a  major 
consequence of the global economic crisis. It has two dimensions: 
1) fall of oil and other commodity prices (which reduced windfall 
profits  of  Belarusian  oil  refineries  and  some  other  “output‐
generating” enterprises) and 2) decline of demand  for  industrial 
goods  (tractors,  trucks,  refrigerators,  etc).  The  first  led  to  a 
decrease  in  the  supply  of  foreign  currency  on  the  domestic 
foreign  exchange market  as well  as  contraction  of  government 
revenues. In 2008, two oil refineries were able to generate about 
10% of general government revenues, however,  in  the  first  four 
months of 2009 consolidated revenues dropped to 47.8% of GDP. 
The decline in industrial demand resulted in increased inventories 
(finished goods in stock). According to official statistics, which are 
hardly  reliable,  4.1%  of  industrial  output  produced  between 
January  and  June  2009  has  been  directed  into  inventories.  In 
some  industries,  like  machine  building,  metal  works  and  light 
industry it exceeded 10%. 
As  a  result,  between  January  and  May  of  2009,  Belarusian 
merchandise  exports  dropped  by  48% year‐on‐year.  This  is 
equally  explained  by  a  decline  in  average  prices  (which  fell  by 
about 30%) and volumes of exports (reduced by 25%). Taking into 
account  the  existing  relationship  between  export  and  import 
volumes  (1%  change  in  exports  leads  to  0.64%  change  in 
imports), the contraction of Belarusian exports should result in a 
growing trade deficit. 
In  the  first  five months  of  2009,  the merchandise  trade  deficit 
amounted  to  $3.2  billion,  or  17.9%  of GDP.  The  first  quarter’s 
current  account  deficit  amounted  to  $1.9  billion.  Seasonally 
adjusted figures would be even higher. Usually,  in the beginning 
of the year Belarus has more balanced external trade. Evidently, 
domestic demand  has not  followed  export  trends  –  in  the  first 
quarter,  it  increased  by  7.3%  year‐on‐year,  mostly  due  to 
investment growth. 
Behavior of domestic demand 
Increased  investment  (by  17.6% year‐on‐year  between  January 
and  June  2009)  may  seem  quite  unusual,  especially  during  a 
major economic crisis. However, a major source of investment in 
Belarus  came  from  a  rise  in  bank  loans.  These  banks  disposed 
government  funds  (as  it  was  in  the  end  of  2008)  and  loans 
obtained  from  the  National  Bank  (NBB).  Between  January  and 
May, NBB’s claims on banks  increased by 115.2%, while reserve 
money for this period shrank by 21.1%. 
Active  refinancing  of  banks  seems  contradictory  to  other 
elements of monetary policy  (increased  interest  rates on NBB’s 
instruments  and  sterilization  of  net  foreign  assets  increase). 
However,  it  can  be  easily  explained  by  the  fact  that  the 
government, in order to get the IMF’s loan, made an obligation to 
run balanced budgets and transfer deposits in commercial banks 
 www.case‐research.eu 
  
The opinions expressed in this publication are solely the author’s; they do not necessarily reflect the views of  
CASE ‐ Center for Social and Economic Research, nor any of its partner organizations in the CASE Network.      CASE E‐Brief Editor: Ewa Błaszczynska 
to  the NBB.  This  reduced  the  government’s  ability  to  stimulate 
the  economy  via  usual  sources  and  “forced”  it  to  increase  the 
money supply through the above mentioned channel. 
In addition, consumption has also increased (by 5.5% year‐on‐year 
in the first quarter). The main reason behind its growth was inertia, 
because  the  government  preferred  to  freeze  incomes  (or,  more 
precisely, to restrict their growth according to the IMF agreement). 
However,  this  freeze  was  not  enough  to  reduce  imports  to  the 
extent necessary to balance external trade. As a result, in the first 
five months the value of imports dropped by 33.3% year‐on‐year. 
Policies that followed: Devaluation and exchange rate band 
Growing  external  imbalances  forced  the  government  to  revise 
exchange rate policy. First, the NBB switched from a US Dollar peg 
to a currency basket  (Euro, US Dollar, and Russian Ruble  in equal 
weights) with a ±5% currency band. Second,  the Belarusian  ruble 
was devalued by 20.45% on January 2, 2009. The devaluation was 
required by the IMF. Despite the measure, this devaluation has not 
been  followed  by  a  restriction  in  domestic  demand,  thus  the 
current  account  deficit  persists.  Additionally,  households 
responded to the ruble’s depreciation with expectations of further 
devaluation,  resulting  in  higher  demand  for  foreign  currency. 
Dollarization of broad money increased from 33% (as of January 1, 
2009)  to  46.3  (as  of  June  1,  2009).  Therefore,  the  value  of  the 
currency  basket  approached  the  upper  bound  of  the  currency 
band, and on June 22, 2009 the NBB announced a widening of the 
exchange  rate band  to ±10%  (which was highly supported by  the 
IMF).  In any case,  the main  reason  for exchange  rate  instability – 
the current account deficit – persists, requiring swift and adequate 
policy action by Belarusian authorities. 
Forecasting the current account deficit 
The  IPM‐CASE  Research  Center  in  Minsk  developed  a 
macroeconometric model, which can be used for macroeconomic 
forecasts.  On  its  basis,  several  scenarios  of  economic 
development  influenced by the global economic crisis have been 
modeled.  According  to  the  scenario  that  assumes  no  further 
devaluation  (and  quite  moderate  recession  in  Russia  and  the 
Eurozone) the current account deficit reaches $6.4 billion in 2009 
and  $8.2  billion  in  2010.  Further  estimates  show  that  under 
current income and monetary policy, even an additional one‐time 
40% devaluation would lead to only a moderate reduction of the 
deficit (from $4.9 billion in 2009 and $5.4 billion in 2010). Hence, 
according to the model, tighter monetary and income policies are 
crucial for external stability. 
Social issues 
Another  important  policy  challenge  facing  Belarus  relates  to  the 
social  consequences of  the  crisis.  Prior  to, Belarus demonstrated 
impressive results in reducing absolute poverty from 46.7% in 1999 
to  6.1%  in  2008.  This  reduction  originated  from  more  equal 
distribution  of  the  fruits  of  economic  growth,  macroeconomic 
stability  and  high  employment.  All  of  these  determinants  have 
faded  out  (economic  growth)  or  are  under  current  threat  (high 
employment). The potential increase of poverty creates challenges 
for social policy, due to a drastic fall of government revenues and 
poor  identification  of  highly  vulnerable  groups,  especially 
unemployed and low‐paid workers. 
The main  “social”  choice  for  the  government  is  between  hidden 
and open unemployment. Hidden unemployment  (current choice) 
allows  postponement  in  reform  of  the  employment  promotion 
system,  but  requires  subsidies  to  loss‐making  enterprises  and 
conservation of inefficient production. Open unemployment allows 
cuts  in  production  costs,  but  requires  social  assistance  reform. 
Efficient  privatization  is  another  possible  solution,  although  it 
would require firing excess labor. It would create new work places 
and generate revenues for social support. 
Concluding remarks 
The  global  economic  crisis  seriously  affected  Belarus,  primarily 
through  declining  demand  for  Belarusian  exports. Unfortunately, 
government reaction has not lead to external adjustment as it has 
tried  to  smooth  the  impact of  the  crisis with external borrowing. 
However, reducing Belarus’ substantial current account deficit can 
only  succeed  through a  combination of  tight monetary and  fiscal 
policies.  If market adaptation mechanisms are  further  restrained, 
devaluation may be inevitable. 
Reacting adequately to the global crisis requires structural reforms, 
as prior domestic demand‐enhancing policies are limited due to the 
drastic  fall  (about 10% of GDP) of general government  revenues. 
Social security reform  is another challenge. Conditional borrowing 
brings some hope for these reforms – but only  if Belarus  is a true 
miracle, where conditionality works perfectly. 
 
 
 
 
Alexander Chubrik is the Vice President of 
CASE‐Belarus and an economist at the 
IPM‐CASE Research Center in Minsk where 
he is the co‐editor of several publications 
including Belarusian Economic Outlook and 
Belarusian Monthly Economic Review.  His 
research interests include economic gro‐
wth, social and economic status of hou‐
seholds, labor markets, macroeconomic 
modeling, applied econometrics and tran‐
sition economic development. He holds an 
honors degree in economic theory from the 
Belarusian State University.  
 
 www.case‐research.eu 
 8/2009  July/2009 


CASE Network E-briefs
No. 08/2009 Global economic crisis and Belarus: a look back

Jonavicius, Laurynas

Why Ukraine and Georgia have not used the opportunities they had?

Kirss, Laura

English

NPLD Local Youth Report: Estonian/Estonia

Kucharczyk, Jacek

The new transatlantic agenda \u2013 a view from Poland

Kudina, Alina

     
       2/2009                                       February 2009   
CASE Network E-briefs
www.case-research.eu
Private capital flows and foreign direct investment (FDI) to developing 
and transition economies has soared throughout most of this decade. 
In 2008 net private sector capital flows reached an estimated $619 
billion (from a record $900 billion in 2007) while FDI accounted for 
an estimated $580 billion. Some of this capital has headed to the 
Commonwealth of Independent States (CIS), a region whose prospects 
have improved considerably since the 1998 Russian financial crisis. 
Although the amount of capital flows into the CIS has been largely 
insignificant prior to and shortly after the crisis, currently their share 
of global private capital flows has averaged a more impressive 13%. 
Attracted by the region’s decade long growth, international investors 
began investing in the CIS to exploit potentially lucrative investment 
opportunities. 
Nevertheless, the economies of the CIS are not immune to external 
shocks or loss of investor confidence. An abrupt withdrawal of 
capital may have severe consequences given the relative small size 
of their economies and low market capitalization. Recent turmoil in 
the financial and credit markets along 
with a general deterioration in the global 
investment climate has created an 
increasingly challenging environment for 
the CIS. Given that the financial sector 
accounts for a greater portion of each 
economy it is crucial that the CIS improve 
its investment climate. Policy-makers in the 
region can assist in attracting additional 
portfolio capital and FDI by supporting 
stronger macroeconomic fundamentals, 
promoting greater integration with regional 
and global trading blocs, and reforming 
domestic financial, regulatory, and political 
institutions. All of these policies can 
significantly improve the CIS’s image as an 
attractive investment destination. 
Portfolio Flows into the CIS
Since their independence from the Soviet Union and subsequent 
integration with the global economy, the economies of the CIS have 
experienced volatile swings in their short-term capital flows. Since 
2005, however, CIS portfolio flows have picked up considerably as a 
result of stronger regional economic growth and financial market 
development.  The amount of capital inflows into the CIS between 
1995 and 2006 totalled $83.2 billion. However, the CIS are still highly 
vulnerable as was demonstrated during the second half of 2008. An 
abrupt withdrawal of capital from the region triggered by the global 
financial crisis has brought severe consequences and exposed many 
investment challenges, especially within its largest markets: Russia, 
Ukraine and Kazakhstan.  Up until recently these countries had 
experienced substantial inflows of equity capital thanks to robust 
activity within the region’s stock markets and IPO (initial public 
offering) deals.  That said, major economic and political challenges 
remain, including initiating additional market liberalization as well 
as strengthening legal and regulatory reforms. Consequently, future 
portfolio flows into the CIS will continue to be volatile and susceptible 
to global financial fluctuations.   
A recent CASE study1 identified key factors that drive portfolio flows 
into the CIS countries. The determinants of portfolio inflows are 
divided into four external categories2 based on the Tobin-Markowitz 
framework: (i) investment return in home country relative to abroad, 
(ii) perceived risk of investments, (iii) degree of co-movement between 
international returns, and (iv) diversification motive.  This set of 
factors enables a comprehensive analysis of the main determinants 
of portfolio flows into the CIS.  However, it was domestic factors that 
helped to determine the size and scope of country portfolio flows 
including restrictions on cross-border capital movements, political 
stability, financial market development, and exchange rate as well as 
financial risk.  
A domestic factor that has heavily influenced capital flows into the 
CIS has been the restriction on cross-border capital movements. The 
ease of liquidating an investment in the local market tends to be very 
important for investors.  In the CIS, controls on capital flows have not 
been lifted and explains the relatively modest volumes of portfolios 
flows coming into the CIS as compared to direct investments.
Another factor that has shaped the pattern of portfolio flows 
into the CIS has been their shaky political environments.  The CIS 
countries have undergone consistently changing political situations 
which have had a detrimental impact on their investment climate. 
Thus, strengthening political stability through institutional reform 
and greater transparency will have a considerable impact on future 
investment flows.   
1 Kudina, A. and Lozovyi, O. (2007), “Determinants of Portfolio Flows into 
CIS Countries”, CASE Network Studies and Analyses, No. 354.
2 Calderon C., Loayza N. and Serven L. (2003), “Do Capital Flows Re-
spond to Risk and Return?” The World Bank, Policy Research Working 
Paper, 3059.
How to improve the investment climate in the CIS?
by Alina Kudina
Figure 1.  Portfolio investment inflows in the CIS countries, million USD
Source: International Financial Statistics
       2/2009                                       February 2009   
www.case-research.eu
Underdeveloped financial markets are another restrictive factor 
affecting portfolio flows into the CIS. In the first years of independence 
the scope of investment opportunities was limited to debt instruments. 
As a result portfolio flows were dominated by government securities. 
Improving the financial market infrastructure to attract private capital 
into the CIS will improve both the quantity and quality of future 
portfolio flows.
Domestic regional events also play a crucial role in determining the 
investment climate in the CIS. For instance, the Russian crisis of 1998 
is believed to have had the largest impact on portfolio flows into the 
CIS. Directly following the Russian default portfolio outflows from the 
CIS amounted to $1.7 billion, $2.7 billion when one includes Russia. 
The CIS’s deep economic, historic, and cultural ties with their former 
benefactor significantly impact their brand image with investors.
There is also a noteworthy link between the growth in portfolio flows 
in Central and Eastern Europe (now EU member states) and enhanced 
capital flows to the CIS. It is likely that some investors expect CIS 
countries to have economic performances similar to those of the new 
EU member states. Hence, investment into the CEE and CIS are deemed 
complementary: the more capital flows into the CEE countries, the 
more likely capital is to flow into the CIS.
Overall, domestic factors such as success of institutional reforms and 
improved creditworthiness are the key drivers that will attract capital 
flows into the CIS. Investor sensitivity to these factors indicates that 
CIS countries need to pay considerable attention to the development 
of a healthy economic and political environment in order to improve 
their investment climates.
Foreign Direct Investment (FDI) Flows into the CIS
FDI inflows into the CIS averaged $19 billion a year between 2000 and 
2006; half of it went to Russia. Although FDI in the CIS has increased 
over the last decade, the quality and type of investment is still limited. 
On average, the CIS economies have been less dependent on FDI than 
other transitional economies in Central and Southeastern Europe. 
Moreover, the majority of non-oil multinational enterprises (MNEs) 
that dominate the investment landscapes of Ukraine, Kyrgyzstan, 
Moldova and Georgia operate as “isolated players”, serving local 
markets through strong links with parent companies, rather than 
cooperating with local firms or exporting finished products to markets 
outside the region. Most foreign firms site volatility in the economic 
and political environment, ambiguity of the legal system, and high 
levels of corruption as the greatest operational barriers in the region.
The success and failure of FDI in the CIS is highly dependent on investor 
type (market-, resource- and efficiency-seeking) as well as their 
investment motives and operating model.  A recent report by CASE3, 
based on a survey of 120 foreign-owned companies, examined the 
motives behind FDI in the four aforementioned countries in addition 
to tangible ways of improving their investment climates.
Up until the early 2000s, the abundance of natural resources in several 
CIS economies had been one of the most important determinants of 
FDI. The majority of these investments were related to resource/energy 
extraction, construction of transport pipelines, large privatizations, 
and debt/equity swaps to pay for energy supplies. 
However, the dominant motive for investment in the four non-oil 
producing CIS countries has been driven by market expansion. According 
to investors the opportunity to supply products and services to local 
domestic markets as well as proximity to the European Community 
were the main drivers of investment. Foreign firms’ share of recipient 
country markets range from 20 to 47 percent and so choosing to serve 
the local market has been shown to be the most profitable strategy for 
past investors.
It is expected that together with closer integration with the global 
economy (particularly with the EU) and the fall in overall protection, 
low-cost CIS labour will attract new waves of investments, similar to 
those experienced in CEE and SEE countries at the beginning of the 
decade. However, the growing threat of protectionism and general 
downturn in FDI towards developing countries will present major 
challenges for the CIS’s labour markets. Also, access to CIS research 
and technological expertise is not a leading factor in attracting FDI, 
suggesting that investors have yet to view the region’s domestic 
suppliers as possessing the necessary skill-sets or efficiency capabilities 
to export CIS made products to outside markets. Therefore, the 
influence of technological spillover onto domestic firms is still quite 
limited.
In light of current economic realities competition for increasingly scarce 
investment capital will become steeper in the years to come. In order 
to attract future investments CIS economies need to quickly address 
some of the major impediments that are holding back economic 
development.
The most urgent problems facing the CIS include volatility of the 
political environment, growing economic uncertainty, ambiguity of 
the legal system, and high levels of corruption.  Political and economic 
instability, along with an inadequate physical infrastructure, deter many 
investors from Georgia and Kyrgyzstan. Last August’s war between 
Russia and Georgia only undermined Georgia’s credibility as a stable 
investment destination. Ukraine and Moldova may appear to be more 
stable, but investors continue to perceive bureaucracy, corruption, and 
domestic legislative uncertainties as the main obstacles to successful 
business operations. Ukraine’s recent gas crisis, which cut-off both 
domestic and EU-wide energy supplies, severely tarnished its image 
as a secure energy provider. In addition, all of these countries need 
to take bold steps to curb both petty and institutional corruption. 
The majority of CIS countries, with the exception of Georgia (ranked 
67 of 163 countries), placed in the bottom third of Transparency 
3 Kudina, A. and Jakubiak, M. (2008), “The Motives and Impediments to 
FDI in the CIS”, CASE Network Studies and Analyses, No. 370.
Policy Implications for Increasing Capital 
Flows into the CIS
Policy-makers can assist in attracting more portfolio investment 
into CIS countries with the following actions:
-1-
Supporting strong macroeconomic performance. As investors 
link actual investment with country performance, inadequate 
macro policies may transfer into sudden capital flight in time 
of distress. Otherwise, negative consequences for the economy 
and, in particular, the financial sector, may be even more 
pronounced.
-2-
Positive economic developments in the CIS region should be 
accompanied by lowering/abolishing restrictions on the current 
account, reforming domestic financial sectors and further 
integrating with the global economy. 
-3-
CIS countries must continue to grow, reform and integrate with 
global trading blocks. This will allow the return of short-term 
capital and thus contribute to the development of stronger 
domestic financial markets and allow for the cheaper financing 
of budget deficits over time.   
       2/2009                                       February 2009   
www.case-research.eu
International’s 2008 
Corruption Perception 
Index.   
An ambiguous legal 
system and lack of clear 
property rights continue 
to be major concerns for 
investors seeking cheap 
factors of production 
in the CIS, whereas 
the uncertainty of the 
economic environment is 
most harmful for investors 
seeking skilled labour or 
use of local R&D. Thus 
improving macroeconomic 
stability should be of 
primary importance for 
governments hoping to 
attract skilled labour- 
and R&D-seeking FDI. 
Interestingly, these two 
types of investments bring 
the greatest economic 
benefits and development 
to the host country. Improving the legal system will also help foreign 
companies to develop their operations and build links with domestic 
businesses, thus helping them to make a development impact much 
sooner.
Conclusions
Institutional investors notice positive developments in the CIS and 
tend to react to them. If positive economic developments in the CIS are 
accompanied by bold action, including reform of the domestic financial 
sector, further integration within the region and global economy, and 
strengthening of legal, political, and regulatory institutions, an upsurge 
in portfolio flows and FDI into the region is sure to be expected.  
However, the majority of future investments, at least in the short-term, 
will be focused mostly on market-seeking and low-cost production 
and labour investment strategies. Current analysis suggests rather 
pessimistic implications for the influence of technological spillovers 
from FDI on the productivity of domestic firms in the CIS. In studies 
examining CEE data, it was apparent that the highest productivity-
increasing gain for local firms took place when foreign-owned and 
technologically superior firms bought local supplies, taught suppliers 
and made them acquire new technologies.  In the case of the CIS it 
seemed that potential spillovers from FDI were rather limited to certain 
firms and/or sectors of economic activity. Foreign firms in the CIS seem 
to buy supplies locally only when necessary, and prefer to concentrate 
on capturing domestic demand. 
Although the economies of the CIS are still in the process of maturing 
and developing, taking the necessary steps to improve their investment 
climate, sooner rather than later, will help them secure a greater 
chance of more diverse and longer-term investment in the future. 
Alina Kudina is a lecturer of International 
Business at Warwick Business School 
(University of Warwick), and an Associate 
of CASE and the U.K.’s Advanced Institute of 
Management Research. She has a PhD from 
SAID Business School, University of Oxford. 
Before coming to Warwick she was a lecturer 
at University College London and held fixed 
term appointments with the International 
Monetary Fund and World Bank.
Problem Ukraine Moldova Kyrgyzstan Georgia Total average
Volatility of the political environment 3.4 3.3 4.5 2.8 3.5
Uncertainty about the economic environment 3.3 3.4 4.4 2.9 3.5
Ambiguity of the legal system 3.9 3.5 3.5 2.7 3.4
Corruption 4.0 3.9 3.1 2.1 3.3
Bureaucracy 3.9 3.9 3.1 2.0 3.2
Lack of physical infrastructure 2.5 2.8 3.9 2.9 3.0
Backward technology 2.4 2.9 3.1 2.4 2.7
Lack of business skills 2.4 2.6 3.1 2.7 2.7
Finding a suitable partner 2.5 2.9 2.3 2.8 2.6
Problems in establishing clear ownership conditions 3.2 2.9 1.7 2.4 2.6
Table 1. Assessment of problems faced by foreign investors in the CIS
Source: survey results (CASE Network Studies and Analyses No. 370)
Note: higher number indicates that a given impediment is more important. Numbers are simple averages.
Policy Implications for attracting 
additional and higher quality fdi into the 
cis
Policy-makers can assist in attracting higher quality FDI into the 
CIS by doing the following:
-1-
Securing greater macroeconomic and political stability, and 
reducing the ambiguity of the legal system.
-2-
Removing legal deficiencies to stimulate more active interaction 
between foreign companies and local businesses, as well as the 
development of infrastructure (transport, industrial).
-3-
Fighting corruption in order to attract efficiency-seeking (R&D) 
investment. Political willingness is the key and will define the 
effectiveness of actions taken. 
In the long-term promoting linkages with the domestic economy 
(through business incubators, information clearing houses) and/
or building local technological capabilities via R&D, high tech 
industrial parks, and training institutions. More immediately an 
improvement in intellectual property rights would go a long 
way in attracting greater amounts of higher quality FDI.
The opinions expressed in this publication are solely the author’s; they do not necessarily reflect the views of CASE - Center for Social and 
Economic Research, nor any of its partner organizations in the CASE Network.  CASE E-Brief Editor: Ewa Błaszczynska


CASE Network E-briefs
No. 02/2009 How to improve the investment climate in the CIS?

Policy Documentation Center

Not a member yet

Freedom and heteronomy: an essay on the liberal society

CASE Network E-briefs No. 08/2009 Global economic crisis and Belarus: a look back

Why Ukraine and Georgia have not used the opportunities they had?

NPLD Local Youth Report: Estonian/Estonia

The new transatlantic agenda \u2013 a view from Poland

CASE Network E-briefs No. 02/2009 How to improve the investment climate in the CIS?

Forestry Sector Reform in Georgia

Media aspects of the pre-election struggle

Comparative Report on Educational Policies for Inclusion

Examining the impact of European Regional Policy

5,270

5,911