CORRUPTION ENVIRONMENT AND FOREIGN DIRECT INVESTMENTS IN CROATIA

Abstract

With this research, the authors would like to contribute to the understanding and identification of corruption, which is an important factor that can affect FDI in Croatia. The scientific and pragmatic purpose of this research is to identify an appropriate anti-corruption policy to influence the increase of FDI in Croatia. The research sample includes data for all countries that have FDI in Croatia as well as countries where Croatia has FDI. The authors added indicators on the level of FDI for the level of corruption in Croatia which were statistically processed. The statistical analysis is performed based on a total of 614 different values where the FDI of individual countries is put in relation to Croatia on a yearly basis, and the CPI was measured in those countries in the same year as in Croatia. The main hypothesis is that corruption "as sand" significantly negatively affects foreign direct investment in Croatia. An alternative hypothesis has also been formulated that corruption "as sand" significantly affects Croatia's foreign direct investment in foreign countries. The results showed that in the period from 1999 to 2019 there was no connection between corruption and FDI in Croatia. However, when the connection between corruption and Croatian FDI is observed, such a connection is becoming stronger as the FDI increases. Such a relationship between corruption and Croatia’s FDI can be characterized as "as grease." However, when only seven countries in which Croatia has the most direct investments were considered, a significant positive correlation was found between such investments and measured corruption in those countries, therefore the alternative hypothesis was accepted. The obtained results of the conducted research can provide important knowledge to the creators of Croatian economic policy that the impact of corruption on Croatian FDI abroad "as grease" in the future may be a very limiting factor to an increase in investments when the level of corruption in these countries decreases, which already applies to countries where corruption is shown to be at a low level.