BA-CA analysis: Foreign Direct Investment to boost economy

  • Strong rise in FDI in the growth region of South-East Europe.
  • Croatia, Romania and Bulgaria as main FDI destinations.
  • BA-CA has one million customers in South-East Europe.

While FDI flows to the new EU member states (CEE8)  fell by one half from EUR 21 billion in 2002 to EUR 9.3 billion in 2003, FDI to the countries in South-East Europe (SEE7)  jumped from some EUR 4.4 billion to nearly EUR 6.5 billion. The main FDI destinations in SEE in 2003 were the three EU candidate countries Croatia (EUR 1.8 bn), Romania (EUR 1.6 bn), and Bulgaria (EUR 1.3 bn). This is the result of a recent analysis conducted by Bank Austria Creditanstalt (BA-CA).
The decline in FDI experienced in the CEE8 countries and the increase in SEE7 is directly linked to privatisation-related FDI flows, which last year were modest in the new EU member states following the completion of numerous privatisation projects in 2002. Conversely, privatisation was the main driving force of direct investment in the SEE7. For 2004, BA-CA’s experts forecast total FDI inflows to SEE7 of EUR 7.5 billion. In 2005, FDI inflows are expected to reach EUR 8.4 billion.

“South-East Europe is expected to attract more FDI in the coming years than in previous years on account of progress already made in structural reforms and pending privatization deals,” says Martin Gruell, BA-CA’s Senior General Manager for CEE/SEE, on the occasion of a press conference within the framework of this year’s Euromoney Conference in Dubrovnik. “FDI will initiate further structural reforms and thus support further economic growth in the region,” Gruell adds. In SEE7, BA-CA’s economists expect GDP to grow by 5.1 per cent in 2004, and by 4.7 per cent in 2005.

The sectoral composition of inward FDI in SEE is gradually shifting from manufacturing (industry) towards services. Within services, network industries such as banking, telecommunications, utilities (water, electricity) are the main targets for direct investment.

FDI inflow to the SEE region points to an enormous catching-up potential: Current FDI stock in SEE is far below the average FDI stock in CEE5 , which is EUR 2,100 per capita or 35 % of GDP. “FDI inflows will be boosted by factors such as legal convergence with EU standards, strong economic growth, competitive investment climate, and pending privatisation projects,” says Gruell.

Bank Austria Creditanstalt: one million customers in SEE
Bank Austria Creditanstalt (BA-CA) is the largest bank in Austria and operates the leading banking network in CEE/SEE. On the occasion of the Euromoney Conference held in Dubrovnik on 26-27 October 2004, BA-CA organised a reception at which the bank welcomed its 1 millionth customer in the growth region of South-East Europe. With 400,000 clients in both Croatia and Bulgaria, another 120,000 customers in Bosnia-Herzegovina, and 80,000 clients in Romania, Serbia-Montenegro and Slovenia, BA-CA is one of the leading international banks in the region.

BA-CA’s business model in CEE/SEE is based on the strategy of offering a complete range of banking services to retail and corporate customers. For the past two years, BA-CA has been especially active in the retail banking business. “By acquiring Splitska banka as well as 32 branches of FINA in Croatia, Bank Biochim in Bulgaria, and Central Profit Banka in Bosnia-Herzegovina, we have created perfect conditions for further growth in retail business,” says Gruell.

While pursuing organic growth, BA-CA also intends to expand its banking network through further acquisitions. “Possibilities to acquire additional banks will result both from the ongoing privatization process in selected CEE/SEE countries and the further consolidation of the banking market in the region,” Gruell explains. “In any case, BA-CA will play an active role.” Thanks to its tier 1 ratio of 7.6 per cent and IAS equity capital in excess of 6 billion euros, BA-CA is well capitalized for further expansion.
 BA-CA started its successful CEE/SEE operations 30 years ago with the opening of a representative office of the former Creditanstalt in Budapest/Hungary. After the collapse of the Iron Curtain, BA-CA continued to expand into the other CEE/SEE countries. Today, the bank is active in 11 countries. In cooperation with HVB Group, which has operations in Russia, Ukraine and the Baltic States, it is represented in a total of 16 markets.

Enquiries:  Bank Austria Creditanstalt, International Press Relations
Ildiko Füredi-Kolarik, Tel: +43-50505-56102, e-mail: ildiko.fueredi-kolarik@ba-ca.com