The Investment-Promotion Machines: The Politics of Foreign Direct Investment Promotion in Central and Eastern Europe

A variety of foreign-led economies emerged in Central and Eastern Europe in the late 1990s. State economic strategies in the Visegrad Four region (V4) of the Czech Republic, Hungary, Slovakia and Poland have converged towards a distinct model of competition states. This article investigates the politics of investment attraction and promotion of particular investors within the states and regions in Central and Eastern Europe. It analyses coalitions of social actors which form in the process of bidding for investors and promoting them in the regions. These coalitions, the investment-promotion machines, can be understood as power blocs underpinning the competition state at the regional level. The analysis draws primarily on case studies of attraction and promotion of foreign direct investment (FDI) in the Czech Republic and Slovakia. A VARIETY OF FOREIGN-LED ECONOMIES EMERGED in Central and Eastern Europe in the late 1990s (Myant 2003; Greskovits 2005; Vliegenthart 2007). After attempts to promote national accumulation failed in the Czech Republic, Slovakia, and—to a lesser extent—in Poland, the attraction of foreign direct investment (FDI) has become a priority throughout the region (Bohle 2002; Bohle & Greskovits 2006). State economic strategies in the Visegrad Four region (V4) have converged towards a distinct model of the competition state (Drahokoupil 2007a, 2007c). This article investigates the politics of investment attraction and promotion of particular investors within the states and regions in Central and Eastern Europe. It analyses the coalitions of social actors that are formed in the process of bidding for investors and promoting them in the regions. While the competition state has become a major developmental strategy in the V4 region, its hegemony is far from unchallenged. Hegemony is not the same as static domination, settlement, or agreement imposed or concluded once and for all. It leaves I am grateful to Don Kalb, Otto Holman and to two anonymous referees for their extremely insightful feedback and useful suggestions. This article also benefited from the discussion of its earlier iteration at the departmental seminar of the Sociology and Social Anthropology Department, Central European University, Budapest. This research was supported by GARNET Network of Excellence (FP 6 Network of Excellence Contract no. 513330). The usual caveats apply. EUROPE-ASIA STUDIES Vol. 60, No. 2, March 2008, 197 – 225 ISSN 0966-8136 print; ISSN 1465-3427 online/08/020197-29 a 2008 University of Glasgow DOI: 10.1080/09668130701820085 D ow nl oa de d by [ M PI M ax -P la nc kin st itu te F ur G es el ls ch af ts fo rs ch un g] a t 0 1: 58 1 5 A ug us t 2 01 3 openings for contention, and it must be sustained on a daily basis. Reproduction of hegemony does not take place only in the ‘big games’ of national-level politics, in which the policy framework is set and high-profile cases are decided; the competition state is regularly under challenge and its hegemony is reproduced through a process of attracting particular investors and promoting their investment projects. The power bloc promoting the competition state is continually reconstituted in a dynamic process of coalition-building that brings together various actors through promoting the project of the competition state in particular places and times. This article analyses the dynamic, continuous, and contentious process in which the competition state and its political underpinnings are reproduced in everyday politics. It investigates the formation of, and resistance to, what I call ‘investment-promotion machines’. Constituted in an ad-hoc fashion, around particular FDI-reliant regional development projects, or even around the promotion of a single investor within the region, these temporary articulations of the power bloc are mobilised when a locality is promoted to lure an investor into bidding for an investment location. Investment-promotion machines are extremely effective in promoting the interests of investors within the state and in the regions. They are driven by political and economic interests alike. Their activities exploit and recreate the legitimatory discourse of job creation that contributes to the hegemony of the competition state. The formation of investment-promotion machines has to be understood by taking into account the institutional and ideational environment in which they take shape. In this context, the question of scale—that is, the spatial organisation of social processes, their regulation, and governance—is crucial. In fact, this article does not merely provide an account of the political support of FDI attraction in the regions, but rather offers a scalar political analysis of the political support of the competition state. It shows that the scalar organisation of governance provides strategic advantages to those forces promoting an externally oriented project within the state. While focusing on politics in the region, this article accounts for a crucial aspect of the power blocs, which constitutes political support of FDI in Central and Eastern Europe. The analysis draws on my case studies of attraction and promotion of FDI in the Czech Republic and Slovakia. It also uses secondary sources on investment promotion in Hungary. In particular, I focus on the cases of Nemak investment in Havraň (Czech Republic); L.G. Philips Displays in Hranice na Moravě (Czech Republic); bidding for BMW investment in Banská Bystrica (Slovakia), Kolı́n (Czech Republic), and Leipzig (Germany); investment of TPCA Toyota and Peugeot-Citroën in Kolı́n (Czech Republic); PSA Peugeot Citroën in Trnava (Slovakia); Kia motors in Žilina (Slovakia); and Hyundai in Nošovice (Czech Republic). Table 1 provides an overview of the cases. The investments under consideration are mostly large plants of major car manufacturers. This reflects not only the interests of this type of investor in the region in the late 1990s and early 2000s, but also the strategic considerations of For my analysis of these ‘big games’, see Drahokoupil (2007b, forthcoming a, forthcoming b). For a detailed account of promoting Philips investment, see ELS (2004) and GARDE/ELS (2006), available at: www.sedlakjan.cz and www.responsibility.cz, both websites accessed 7 November 2007. For a detailed account of bidding for, and promotion of, the Kia investment, see Kolesár (2006). The research involved in-depth interviews with major actors in the localities and beyond and archival research. 198 JAN DRAHOKOUPIL D ow nl oa de d by [ M PI M ax -P la nc kin st itu te F ur G es el ls ch af ts fo rs ch un g] a t 0 1: 58 1 5 A ug us t 2 01 3