Business Environment and Foreign Direct Investment in Western Balkan Countries

Session

Management, Business and Economics

Description

This paper is an attempt to estimate the relationship between foreign direct investment inflow and improving the business environment via ease of doing business indicators. The research aims to explore statistically significant linkages between improved overall World Bank rankings and inward foreign direct investment inflow performed on a sample of six Balkan countries: Albania, Bosnia and Herzegovina, Montenegro, Northern Macedonia, Kosovo, and Serbia. The hypotheses are formulated and basic tests are performed on data from the World Bank’s Doing Business official rankings from 2010 to 2020. The empirical data tested via multiple regression using the stepwise method show that an improved overall ranking has, on average, an insignificant influence on foreign direct investment inflow. On the one hand, the results of testing 10 World Bank Doing Business indicators show that only improvements in protecting minority investors and trading across borders have an impact on foreign direct investment inflows. On the other hand, the results of the Pearson correlation coefficient test show that the level of corruption in the host country has a statistically significant negative correlation with foreign direct investment inflow. Furthermore, the study shows that the six countries that were analyzed from the Western Balkans region managed to achieve appropriate levels of improvement in regulatory reforms in the ease of doing business rankings; however, these countries have not been successful enough in attracting foreign investments. Therefore, this paper can inform policymakers who, in addition to the regulatory reforms of the ease doing business index, advocate drafting relevant strategies in the hope of attracting foreign direct investment inflow.

Keywords:

FDI, ease of doing business rankings, Balkan countries

Proceedings Editor

Edmond Hajrizi

ISBN

978-9951-550-50-5

Location

UBT Kampus, Lipjan

Start Date

29-10-2022 12:00 AM

End Date

30-10-2022 12:00 AM

DOI

10.33107/ubt-ic.2022.406

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Business Environment and Foreign Direct Investment in Western Balkan Countries

UBT Kampus, Lipjan

This paper is an attempt to estimate the relationship between foreign direct investment inflow and improving the business environment via ease of doing business indicators. The research aims to explore statistically significant linkages between improved overall World Bank rankings and inward foreign direct investment inflow performed on a sample of six Balkan countries: Albania, Bosnia and Herzegovina, Montenegro, Northern Macedonia, Kosovo, and Serbia. The hypotheses are formulated and basic tests are performed on data from the World Bank’s Doing Business official rankings from 2010 to 2020. The empirical data tested via multiple regression using the stepwise method show that an improved overall ranking has, on average, an insignificant influence on foreign direct investment inflow. On the one hand, the results of testing 10 World Bank Doing Business indicators show that only improvements in protecting minority investors and trading across borders have an impact on foreign direct investment inflows. On the other hand, the results of the Pearson correlation coefficient test show that the level of corruption in the host country has a statistically significant negative correlation with foreign direct investment inflow. Furthermore, the study shows that the six countries that were analyzed from the Western Balkans region managed to achieve appropriate levels of improvement in regulatory reforms in the ease of doing business rankings; however, these countries have not been successful enough in attracting foreign investments. Therefore, this paper can inform policymakers who, in addition to the regulatory reforms of the ease doing business index, advocate drafting relevant strategies in the hope of attracting foreign direct investment inflow.