Investment Security Management in Transition Economies: Legal and Organizational Aspects

Abstract

Purpose: There are significant differences between countries in transition from socialism to market economy, and hence differences in investment flows. As a result, the level of economic growth, competitiveness, and integration into the world markets differs significantly. Different transformation strategies, economic policies, and the level of openness of the economy explain the differences between countries. It is revealed that the level of political rights, civil liberties and economic freedom significantly affect investment flows. The aim of this article is to highlight these differences and evaluate them. Design/Methodology/Approach: Data from 18 countries in transition are used to analyze investment security management. Findings: The study has found that countries in transition have a low level of investment flows and a low level of investment security. On average, net investment inflows account for 3.5% of GDP. There is a positive relationship between investment outflows and gross capital formation, gross savings, GDP growth, and the index of economic freedom, however, on the other hand there is negative relationship between capital outflows and the index of political rights and civil liberties. Originality/Value: Investment security management depends on institutions and institutional infrastructure as well as the ability to stimulate investment in the country. Reducing trade barriers and opening up the economy also contributes to increase investment in the country. Over the past ten years, investments in countries in transition have declined considerably due to weak investment security management.