Utilizing FDI to Build Peace in Post-Conflict Countries: A Case Study of Croatia

Abstract

Countries in conflict are not a favourite place for foreign investors to undertake FDI projects. When the conflict ends, uncertainty remains, especially among foreign investors, who are in a worse position than domestic investors to assess developments in a post-conflict country, and in particular, the chances of the definite resolution of post-conflict issues. Croatia is not an exception to these general rules. In addition, it is located in a region where foreign investors had plenty of other FDI opportunities in transition countries with economic characteristics similar to those of Croatia, but implementing transition in peaceful conditions. But still Croatia has been able to attract some FDI during the conflict years of 1991-1995, increasing it significantly after the conflict ended during 1996-2000 (in spite of unresolved post-conflict issues resulting in its partial international isolation). FDI further increased after Croatia showed readiness to address post-conflict issues and was embraced by international community and, in particular, by the EU, launching the EU entry negotiations at the beginning of the 21st century. The paper examines FDI performance of Croatia in terms of the quantity of FDI, its effects for the economy and best practices in FDI policy making in the Croatian context.