CEFTA offers a dynamic investment landscape, making it an attractive destination for businesses seeking to expand their operations in Central and Eastern Europe. With its strategic location, skilled workforce, and growing consumer market, CEFTA presents numerous opportunities for foreign direct investment (FDI). In 2023, FDI inflow into the region reached approximately EUR 4.5 billion, highlighting the region’s increasing attractiveness as an investment destination, while FDI outflow amounted to around EUR 300 million.

The key investment opportunities in CEFTA are the following:

  • Manufacturing: The region has a strong manufacturing base, particularly in automotive, electronics, and machinery, and highly skilled workforce;
  • Services: The services sector, including IT, business process outsourcing (BPO), and tourism, is experiencing rapid growth;
  • Energy: CEFTA Parties possess significant energy resources, offering investment opportunities in renewable energy and traditional energy sources; and
  • Infrastructure: Investments in transportation, energy, and telecommunications infrastructure are crucial for the region’s economic development.

Benefits of investing in CEFTA:

  • Access to a large market: CEFTA provides access to a substantial regional market;
  • Skilled workforce: The region boasts a highly skilled and multilingual workforce;
  • Favourable business environment: CEFTA Parties have implemented reforms to improve the business climate and are aligning regulations within CEFTA and with the EU; and
  • Public support: Supportive policies and incentives for foreign investors.

Foreign Direct Investment (FDI) involves a company from one Economy investing in another Economy, typically by establishing a subsidiary or acquiring an existing business. This provides the investor with direct control over the foreign operations. In contrast, Foreign Portfolio Investment (FPI) involves investing in foreign securities like stocks and bonds, without gaining direct ownership or control over the foreign company. While FDI is often seen as a long-term strategy for expanding business operations, FPI is often a shorter-term investment strategy aimed at financial returns.

Trade and investment are closely intertwined. Trade facilitates the exchange of goods and services, which can stimulate economic growth and create opportunities for investment. Investment, on the other hand, can enhance productive capacity, leading to increased trade. For instance, foreign direct investment (FDI) can bring in capital, technology, and managerial expertise, boosting competitiveness and attracting more trade. In turn, increased trade can provide incentives for further investment. This symbiotic relationship between trade and investment drives economic development.

The WTO Agreement on Trade-Related Investment Measures (TRIMs) aims to curb trade-distorting investment measures. It targets specific TRIMs, such as:

  • Local content requirements, which refers to measures mandating that a certain proportion of a product must be sourced or produced domestically; and
  • Trade balancing requirements, which refers to measures restricting the entry of products used in or related to local production, often tying the amount of imports to the volume or value of local products exported.

Such measures can hinder fair competition and are inconsistent with the national treatment and non-discrimination principles of the WTO system. The TRIMs Agreement mandates the notification and elimination of non-conforming TRIMs within specified timeframes.

The TRIMs Agreement applies to investment measures related to trade in goods only, while the General Agreement on Trade and Services (GATS) covers trade in services and recognises foreign investment in services as one of the four possible modes of supply of services and establishes a general regime and measures for its facilitation. 

As a measure to enhance its investment regime, CEFTA has established the Joint Working Group on Investment Policy and Promotion in collaboration with the Regional Cooperation Council’s South East Europe Investment Committee, with the aim of setting up a forum for dialogue on the possible harmonisation of policies in determined economic sectors and for developing joint promotional efforts.

More information is available here.

CEFTA Parties shall provide Party-specific information regarding investments.