Direct investors are usually connected - directly or indirectly - to trading networks. Financial (portfolio) investors usually come only much later, when the local capital markets have matured and have become much safer. A country can encourage the inflow of foreign investment by providing investors with tax incentives (tax holidays, tax breaks, even outright grants and subsidized loans). It can provide other incentives - there are too many to enumerate here. Above all, though, it must protect the property rights of investors of all kinds - domestic, as well as foreign.

Property rights is the countries in transition’s weak point in this respect: the appropriate legislation is lacking, courts are slow, ignorant, and indecisive, law enforcement agencies are immature and uncertain of their authorities and how to exercise them. Some countries are outright xenophobic. This is not conducive to foreign investment. But all this is not enough. A skilled, well educated workforce is a prerequisite for the development of export industries. Even low-tech industries (textiles, shoes) require the workers to be literate and to know basic arithmetic.

The nation must make education as a top priority. education is as much an infrastructure as roads and electricity. To think differently is to be left behind and to be left behind in today’s competitive world is to die a slow economic death. All this will be to no avail if a country does not make an intentional, conscientious effort to identify those things that it is good at, its “relative, competitive advantages”. But should a nation leave the forces of the marketplace to take their course, unhindered?

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