Neven Mimica The relocation of some productive functions could increase economic welfare in both the investor's home country and the recipient country. But to reap the full benefits of this, the advanced European economies will have to implement some necessary reforms, foremost in the liberalisation of the markets for labour and products, and as regards social and economic policies. These reforms have been on the European agenda for quite some time, but since most tend to be quite unpopular, few countries have had the determination to implement them. Relocation has demonstrated that the recipient countries have been able to embark on similar reforms at home, thus creating competitive and appealing conditions for attracting investments, while simultaneously prompting developed economies to finally follow the reform path in creating the basic environment for improved competitiveness. FDI contributed significantly to the high economic growth of Spain and Ireland in the late 1980s and the 1990s. These countries thereby managed to reduce unemployment, and especially Ireland successfully developed a high­tech sector. These developments also enhanced the overall attractiveness of the EU for investors from overseas and led to FDI inflows notably from the US and Japan. CSEE countries are now seeking to catch up and emulate these successful models. CONCLUDING REMARKS One of the aims of this paper is to place relocation of economic activities abroad within the broader context of its potential contribution to rectifying problems that occurred in the recipient countries' labour market due to losses sustained through brain drain and the emigration of skilled workers. Furthermore, worrying aspects of relocation for the recipient countries are to be taken into account, such as having trade and economic relations with the source countries too dependent on the relocation phenomenon(for instance, 70% of Romania's trade with the EU is derived from outsourced facilities). Other aspects include the risk of unpredictable further relocation towards Asian countries; the unfavourable impact of competition with Asian countries based on cheaper labour, in that these may discourage wage increases in the European countries receiving investments; and the still limited scope for the transfer of technology and marketing capacities following the relocation of capital to many recipient countries. 164