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Emergence of FDI in CEE and its effects on Food supply

Emergence of FDI in CEE and its effects on Food supply. Dimuth Nambuge Assistant Professor Department of Economics Slovak University of Agriculture Nitra dimuth.nambuge@fem.uniag.sk. Foreign Direct Investment. What Foreign direct Investment?

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Emergence of FDI in CEE and its effects on Food supply

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  1. Emergence of FDI in CEE and its effects on Food supply DimuthNambuge Assistant Professor Department of Economics Slovak University of Agriculture Nitra dimuth.nambuge@fem.uniag.sk

  2. Foreign Direct Investment • What Foreign direct Investment? • Key terminology is – the “controlling interest” in a foreign company. • Does not need to be 100% ownership. • Importance of FDI • Host country • Ownership country

  3. Factors to consider when entering a foreign market as direct investment • P - Political • E - Economical • S - Social • T - Technological • L - Legal • E - Environmental • C - Cultural

  4. CEE economic reforms • Spontaneous privatization 1989 - 1991 • Privatization 1992 - 1995 • Concentration begins 1996 - 2000 • Accelerated concentration 2001 -

  5. Spontaneous privatization 1989 - 1991 • The period of spontaneous privatisation happened in 1989-1990, when the smaller shops were privatised, but when a significant number of private shops were established as well. Therefore the number of food retail shops started to grow. • Prior to the period food chains were vertically Integrated • Acquisitions and joint ventures in core products groups

  6. Privatization 1992 - 1995 • During the period of privatization (from 1991 to about 1995-96) the owners of the larger food retail chains have been changed. Most of the shops in the favourable areas have become the properties of multinational chains. • Some SME’s developed • Some were bankrupt • Large western companies concentrated on post acquisition issues; • Distribution, brand positioning, pricing strategy

  7. Concentration begins 1996 – 2000Accelerated concentration 2001 - • During this period number of self employed shops grew up. • Rationalization of manufacturing/ market strategy for “NEW EUROPE”

  8. Transition period and entering these markets • Transition period (1989- 1995) negative GDP growth. • Higher level of poverty and unemployment. • Entry costs were minimum • Entered mainly through acquisitions. • Anti dumping policies

  9. Comparative market entry in different regions

  10. Benefits from FDI • Knowledge spill over • High quality standards (ISO 22000 series) • High safety standards (HACCP) • Technological Transfers • Production line efficiencies • Increased yields through reserach • Environmental concerns

  11. Current situation of FDI in CEE • Tax holiday incentives • Government and EU grants • Buyouts of small farms

  12. Investment announcements in the CEE region (number of projects) Source: FDI markets, Financial Times, 2009, January

  13. PERSPECTIVES AND IMPLICATIONS FOR POLICY-MAKERS OF THERESTRUCTURING OF SUPPLY CHAINS • Wholesale markets • Market Information Systems (MIS) • Measuring International Competitiveness • Improving market access to the supply chains of multiple retailers • Human Capital • Improving access for small farms • Stimulating intermediary organizations and marketing cooperatives

  14. Conclusions Discuss

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