In the wake of the Balkan crisis, the Central and East European transition countries have been put into two groups, the seven South-East European countries (SEEC-7) and the five Central European countries (CEEC-5). SEEC-7 have not only been more immediately affected by the crisis but also show several common features of economic underdevelopment and distorted transition to a market economy. In order to help their future development, the Balkan Stability Pact has been set up. One of the aims of this internationally funded programme is to reduce investment risk in the region and lay the foundations for the inflow of private capital. This section looks at the main characteristics of foreign direct investment (FDI) in the region in comparison with CEECs. Further sections of the paper will provide a deeper insight into some crucial areas – foreign ...