INSTRUMENTS EFFECTIVENESS OF STATE REGULATION OF INVESTMENT ACTIVITY IN TRANSITION ECONOMIES

Abstract

Abstract. The article examines the process of reforming the investment regulation in the Central and Eastern Europe (CEE) countries from the beginning of market liberalization of the economies of these countries. In particular, the analysis of the first steps in joining to the global investment capital market, with showing the volumes of inflow investments, which made it possible to determine the effectiveness of instruments in different countries. It was also determined that liberalization, privatization and macroeconomic stabilization have played a key role in activating the investment market. However, in CEE countries have been actively used different measures to facilitate the investment process. Thus, thanks to these incentives, countries managed basically to encourage foreign inves- tors, domestic, instead, been considerably limited by financial resources. The article considers in detail the invest- ment tax incentives application for different sectors of investment in countries of “Visegrad Four” – as they have designed the most flexible and advanced tax incentives system among the CEE countries, as well as different approaches to the use of financial incentives – depreciation charges. Another important factor in the investment process is the development of SMEs in CEE, which are actively involved in accumulation and distribution of invest- ment capital, job creation and GDP forming. The most common benefits among the countries studied were fiscal incentives. Also various subsidies, grants and subventions to foreign investors, loans on preferential terms, “attractive” standards of accelerated depreciation, adjusted public-private partnership, guarantees to investors to ensure compliance with debt liabilities were applied and granted. It was determined that due to high quality institutional support, competitive securities market, adequate standards of bank reserves and fair tax system in common allowed effectively apply the instruments of investment regulation in CEE countries.