2 **i!lA*** RjP ; **L4 Fi** W(V P.i KI;N PAPER 1490

# **Summary** findings

A fewv 'Iars **:wo,** nman1 Westerin companies were eager to I 'i' cvnig 'n Eastern Furope and. **or,ev** recenitly I!i 3⁄4')uth A it. ietehrt igoino g rcfor-mn, largtk domelistic **:i.ik,tIS** **_'i.il_** I:ap h ut quaiified labor are transforming P/a' re,in M?int 3 o tltlly fier-ce competitor _for_ foreign !1'1 Ct _ilv<>1l?leir (rl)l)_ A -rhmlti) thi,; g rowving interest was refecited in large ; icia.tiltlitts Ki foreign in1vestor-s inl co)untriesi 'HI, :1 **tg miajor** FD! reorrimsn, actual disbursenients n!ve beetn modest. [his reflects the investors concerni lii(itIi rIe -rFeJbilirs of govriitleiests' lonlg-term :t!iti:tnetltfrit tchage. chli 1'h. crdihlilcrl: of policy announcements is I mportant nr, In .itzis becatuse the returnis from the siunk :iaet'!IL Pit **cani. be** affected by later changes in policy. l'o cii we investors eoiicern, governments call send citar ';Ii'l!1,1.0i ' iiixv tit ic C lr miinitilltent to chacnge. I k **ae** a iL veennits of trade teformn can he an effecrive 2 5 ttclt~tt _(!_ i ; gi)VOX'lillt't t aituttmeitt r'ns tit chanige aS **i) Lti1d[LId** the strong correlation bereenl increascs in 7; Jd,;e flovw-s dOLTl increases iin F'lM disbursemcn)ts. isiiitd , ( III.,, and Fsiache exaimine how countrie SCan esgiil) tradc ref0olmll to spred lIP increacss in trade. l utit's **call** tailor their CiitliM itifleiiC tO refoarni to **'rlt** tn is ii n O **ti** h; targeting the dcesign )f thiese 'to ririneiir.tolithe source of their credibilit' prPoblem.

( ri meVuInncirts 1;iCC r\L I **';** it' I!!tv pilNemins: (1) invest,)rs kno\s, zliC l.r,' ,, o nv. :1t s Pol;icy pile; e s A . .U ;tis or free tradeorient-)Wd hii g.. **ikm** si ;u n'. nc.s I thl' g,ernimierit wvili lter I a.he ii **L' C'ii''** -a h _nc 'ts I;Si,toiIIi, **and** (2) _IlS(''.rf i, .I)t'_ tli. _1:,1._ ^,'.! ': .ii ri.-.i! ;)' '' lI;ic'!l prclers **Ict" 5it'** I ' _<_ '. i ie Itg)vernmient s commliit eir'? t!. :iil1 '- .!l **'[I itt odel** o nce **i,'** the patper -ohws that the rctonimelid.;ir 1- u i ' tc n I ir. L trade orCevail when invesu)r, Kr!;iv' ti' U'rni:ii ints eilCs _and tht_ gitve"ii!teid F I i! s-e<l I. .; **'** nimitntent to chain .

bi. In tlbi i'd **r'** ii ali;i ftl in whici invcstors do lot **know I** th il: & n r:'e:'i' 1Cc' lULl tihe poiCVyill s L!Ai : P''se:SC wc .t. li iitst'tt their cuinimtit tit **i',** . r! .1"a ''t'r **t'** c ac! tally comlliwitret! To Ci! _'_ ii v. **t** ant ii **i** U? x,nal tnii COncl)lmitm'lnt .W'ci'ii **''chl** I **i 'it'il'Itts** 0' _Icmports_ i it wValtI t() **Iil** tt'' s **_)V_ ilit'** tot' i _1't_ 11. hr I hi s nmi **iL** 1 ! I !.K **.1** ! **.** attra ct 1: )i iS thca(ll:h . eb al II it,ils ; ;, ... **j11 L** tha most cost;ic--a-.in iOp;,t t ' im .1 te'i itiing giverulleni1 **r!** Iglit _Iit_ tiiii _''_ t~ :ti'[ Copies of the paper are available free froit the World Bank, IX I8 1 Srleet NW; (Ccsh;. grc , .:!' l . 104 '. Please rtontact Antonio Estache. roiom 17-137, telephione 202-458-144), tax 2(' ILlA. interict address AFS'I ACHEOtA\VORLIIBANK.ORG (29 pages). July 1995.

_I' Vl 1ics Research Work'ing Paper Series dissemimates the findirigs olt 11.ol k_ **_;n_** _pr;-_ **_t.;_** _.3_ **_It !i._** _'i' te icc tlnqge if_ **iaols** **_a/tM;it_** _jt '<.;'['met!sU' 3_<sup>_._</sup> _v/ectiits- 'sfshe tyles_ **_is_** _to gt h'l fimairg ,<t gs''t>u , q ,,k '.. vs n if_ **_t_** _i_ e **_!/{_** _'v[ s /' l,ris' ipolis'ed.. |I'_ **_p.42ici_** _an_ **_j,'tf*hc'_** _mt1mes ()rliteauthori and slitic/I lie seta cilteid_ ( ' ',t **, irOn. :** _tn,:rs:h:4. ju:;_ <in 3 _list_ **_a;_** _Jri'i're_ **_ilufth'lls <)i_** _n and suikd riot be_ **_ittributed_** _t( th/e'_ Won/cd _Bant' 'Is uc_ **" '** Br _car ri_ i' i i **I I1** ' _tM'tti.;'r_ **_cinrtUries._**

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