Transformation in the Light of Theory and Globalization

FDI is seen as the fundamental part for an open and successful international economic system and a major mechanism for development. In growing economies there are many opportunities for profitable trade and investment. According to a report of the Vienna Institute for International Economic studies released on 5th of June 2007, the FDI inflows to Central, East and
Southeast Europe reached a new high in 2006, EUR 77 billion. This is 30% more than previous year. As a result of increasing economic growth and progress of transformation, as well as a support to both of these processes,
Southeast European countries in the Western Balkan received two times more FDI in 2006 than the year before. This paper will focus on analyzing the benefits from FDI inflow to the host countries. It has been recognize that the maximizing benefits of FDI for the host country can be significant, including technology spillovers, support human capital formation, enhance competitive business environment, contributes to international trade integration and improve enterprise development. Also, it will address concerns about potential drawbacks from FDI such us worsening of the balance of payments as profits are repatriated, a lack of positive linkages with local communities, the potentially harmful environment impact of FDI, especially in the heavy industries and the effects on competition in national markets. Moreover, the paper will
address the role of privatization as a channel for attracting FDI in South East Europe.