Foreign Aid and Foreign Direct Investment: Key Players in the Environmental Restoration of Central and Eastern Europe
For more than ten years, formerly centrally-planned economies of Central and Eastern Europe (CEE) have endeavoured to redress their environmental problems. For most CEE countries, the record of accomplishments is mixed. One of the least successful areas of reform has been cleanup and restoration of state-owned properties that were severely contaminated during the Communist era. In the early 1990s, concern was expressed that prospective foreign investors would shy away from these damaged properties for fear of incurring liabilities for cleanup and third party damages. The authors show that while aggregate levels of foreign direct investment (FDI) to CEE have not been greatly affected by environmental liability, prospective foreign purchasers have avoided investing in dirty industries and in sites harbouring serious contamination. To manage the cleanup of past pollution effectively, CEE governments must consider prospects for brownfields revitalisation. The authors have shown previously that the public resource requirements for brownfields revitalisation are impractical in the CEE context. In light of these constraints, in the near future, the most promising sources of financing for cleanup of past pollution are from external public actors. Several of these actors and their relevant programs are considered.