Multinational investment, international trade and contracts in transition economies: a case study for food-industries

Multinational investment, international trade and contracts in transition economies: a case study for food-industries

Published Jan 2004

Authors

E. Kaditi, J. Swinnen

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Multinationals and the economic development of transition countries

This paper investigates the effects of food-multinationals’ activity in terms of social welfare, in order to understand their role in the economic development of transition countries in Central and Eastern Europe.

Main findings of the study include:

  • equilibrium non-binding contract is preferred by both players to the equilibrium binding contract
  • foreign direct investments have gained importance, reinforcing a successful reintegration of all CEE countries into the world economy, which is and will continue to change their economic landscape
  • foreign investment can contribute to the structural transformation of the CEE economies by raising productivity and efficiency in such a way as to create a basis for the future integration of their productive capacity in the international economy
  • host governments played an important role in this framework as food industries crucially lacked the resources necessary to modernise their physical assets and production processes
  • whether governmental policies were FDI friendly or more or less reluctant to encourage foreign participation were likely to have a strong impact on the performance of the sector
  • generally, the food sector has actually attracted significant amount of FDI and in some transition economies, succeeded in improving its performance.

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