The condition for successfully managing the transition to a new EU comprehensive investment policy is drawing a clear regulatory framework which will enable the exchange of best practice between member states.
Undoubtedly, globalization and the emergence of the knowledge economy have created opportunities for multinational companies to expand their activities in markets around the world, seeking locational advantages of countries, natural resources, proper institutional frameworks, favorable labor conditions and high-quality infrastructure. Market seeking FDI involves the attempt by MNCs to establish their business in important export markets, in order to exploit advantages such as trade barriers, cost factors and investment factors ( Rugman & Verbeke, 2010). Strategic asset seeking FDI incorporates R&D operations to maintain competitiveness and firm growth through acquisitions, strategic alliances and joint ventures, all of which contribute to the creation of synergies and knowledge capital ( Rugman & Verbeke, 2010). On the other hand, domestic economies have a lot to gain from attracting foresight direct investments.
The EU Lisbon treaty promoted the implementation of investment policies aimed at creating an open investment environment, characterized by uniform and optimal conditions for FDI. EU is considered to be an important trading entity of both inward and outward FDI, yet the lack of a co-ordinated voice has led to limited opportunities in international agreements and has diminished the negotiating power of the EU in a multilateral framework. It is evident that a unified voice would provide the European Union with consistent rules and practices in development and competition in line with the overall principles and objectives of economic activity in the EU towards the promotion of human rights, sustainable development, decent work conditions and cultural diversity. Another critical factor for the successful implementation of FDI from and across Europe is the imposition of a common set of rules, standards and procedures, which would limit risks, lower costs, allow the transference of know-how and expertise across different member states and overall would provide support and protection especially in the more vulnerable economies. It seems that in order to stay competitive, economies need to internationalize and perform FDI. Indeed, efficiency enhancing competition laws and enforcement agencies will render the European Union a leading, global player in international trade. The need for reinforcing a unified and tactical approach to investment is all the more critical if we consider that European TNCs slowed their pace of expansion in East and South East Asia in 2011 due to the worsening sovereign debt crisis and the related liquidity problems at home.
An increase in investment flows are documented to depend on macro, micro and institutional reforms -low inflation rates, realistic exchange rates, reasonably efficient legal and regulatory systems that reward property and reward savings and investment, low levels of corruption-in general conditions favorable for business operations. Although the level and outcome of investment activity is different from country to country and is dependent on political, economic, geographic and social factors unique to each one of them, it becomes apparent that regulatory and legal convergence in FDI activity within the EU is vital in enhancing its role in international (bilateral) trade negotiations. The condition for successfully managing the transition to a new EU comprehensive investment policy is drawing a clear regulatory framework which will enable the exchange of best practice between member states.
Future perspectives.
It is well known that today, in the era of economic recession it is more important than ever to enhance FDI activities in Europe. Now is the time for governments, especially those of Southern Europe, to provide incentives in order to attract the interest of multinational corporations that seek investment opportunities around the world. That means that barriers to entry need to be eliminated, start up costs need to be lower. Lower taxation is one thing, along with the implementation of policies that target bureaucracy and corruption hindrance. Greater flexibility and other financial incentives in the host economy will create an environment attractive and open to competition. Investments, in order to be profitable and contribute in the host country’s GDP must be flexible.
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