The Impact Of Liberalization On Foreign Direct Investment In The Slovak Republic

Abstract

Czechoslovakia became a “non-nation” in January 1993. The creation of the Czech and Slovak Republics resulted in two unique and distinct societies which moved in different economic directions. While the Czech Republic prospered within the first six years, the same could not be said for Slovakia. For the first six years, Slovakia’s economic growth was stifled due to factors of economic and financial repression. As a result of the political changes, financial liberalization began to emerge and, as a result, economic progress. As pronounced were the effects of repression, so too were the effects of liberalization. To truly understand the impact upon the society, the change must be viewed from the viewpoint of foreign direct investment. The factors which limited FDI due to their repressive nature, were now being replaced with factors that encouraged and expanded FDI within the Slovak nation. As a result of a complete turnaround transformation, Slovakia is now on a course to sustain and expand economic development through increased FDI. To understand the overall transformation that occurred within the Slovak Republic, one needs to define the factors that create financial repression and the liberalization factors that move an economy in a different direction. The determinants of foreign direct investment (FDI) must be examined along with the transition from repression to liberalization.