Analysing the megatrends ples to pears has been pointed out by Darvas(2018) and others(including Hunya 2017a). While foreign investors’ earnings are the necessary result of investments, there is a fair debate to be had about the level of profits and the extent to which they are reinvested. Foreign investors realise profits on their investments that make the investments viable. 26 In the first part of the 2010s, investors often made losses. In recent years, the cal­culated average profit rate of investors amounted to about 10 percent of the FDI stock. It reached 12 percent in the Czech Republic, Hungary, and Lithuania in 2017–2018, which is a rather high rate of profit for investors. Investors earned 8 percent in most other countries, which is also somewhat above the average in international comparison (see, for details, Adarov et al. 2019). The question, then, revolves around what happens to the income earned. A large part of FDI-related income, about 60 percent on average, is repatriated from the country where it was earned. Hungary, an extremely low-tax coun­try, manages to retain more than 60 percent of foreign profits while other EU-CEE economies retain less. Repatri­ated FDI income amounted to about 2.4 percent of GDP in EU-CEE on average in a year, close to the annual FDI inflow in 2010–2019. However, despite high income outflow, re­invested earnings have become the most important com­ponent of FDI inflow in the more advanced economies. Foreign affiliates in Hungary, the Czech Republic, Poland, and Slovakia are by and large self-sustaining; new invest­ments can be financed from retained profits. The balance of payments related benefits of FDI show up in the positive trade balance generated by export-oriented foreign affili­ates. Revenues on trade(1.9 percent of GDP) compensate for a large part of the losses made on the FDI income ac­count(2.2 percent of GDP). According to this logic, FDI that generates exports is superior to domestic market-oriented FDI. But, much of the services provided by local market-ori­ented FDI is indispensable for the efficient functioning of export generating firms. Most FDI contributes to long-term economic growth and sustainable development, but some investments have no positive spill-overs, seek rents from state subsidies, cream off the profits, and then leave(Alfaro 2013, OECD 2019). Such FDI projects cannot be prohibited in the EU market, but FDIs can be directed through incentives and other pol­icy measures(UNCTAD 2018). The general attitude of FDI policy, in conformity with EU competition rules, has been to give advantage and subsidies to technologically ad­vanced large investment projects in manufacturing, while shared service and domestic investors get additional help through SME policy. Incentives could be better targeted and institutions more efficient. It is not difficult to find in­ternational best practices for increasing the local benefits of FDIs(UNCTAD 2015). Problems emerge when govern­26 Profits made by the foreign investor are defined in gross terms ac­cording to the Balance of Payment position;»primary income, FDI in­come, debit«(Adarov et al. 2019). ments stray from their task to support development and in­stead serve the interests of specific political and economic elites. Negative attitudes towards FDI-based modernisation in several EU-CEE countries in the 2010s went hand in hand with the criticism of the post-communist economic and political transformation and the emergence of the notion of»illiberal democracy«(Kornai 2015). Economic national­ism, re-nationalisation of foreign-owned assets, concen­tration of state power, and anti-EU propaganda emerged in Hungary and Poland. These factors also emerged, albeit to a lesser extent, in the Czech Republic and Romania. Pop­ulist elites came into power, in Hungary more permanently than elsewhere, and undermined democratic institutions. Strong political power has been used for business capture, exercised through regulatory tools offering selective ad­vantages and disadvantages(Szanyi 2019). Mafia-type rent-seeking has reduced efficiency and re-distributed profits and EU-funds to cronies(Magyar 2016). Bulgaria and Romania have not taken a U-turn but show limited progress in establishing the rule of law as indicated by the Cooperation and Verification Mechanism. 27 The decreased predictability of business conditions in host economies, coupled with financial problems of investors inflicted by the euro-crisis, prompted disinvestments. This was especially the case in countries where host country in­vestors offered a relatively high price(Voszka 2018). Gov­ernments supported domestic investors to acquire foreign assets or invested themselves in Hungary and Poland. The strength of domestic owners increased by the takeover of former foreign affiliates, mainly in domestic market-orient­ed activities with limited competition. In Hungary, the state acquired foreign capital in companies such as E.ON, Anten­na Hungária, F ő gáz, Budapest Bank, and others in 2016– 2017. As a consequence, the equity component of the FDI inflow shrank to low sums after 2014 and turned negative in 2015, 2018, and 2019. Some of the nationalised compa­nies were later resold to local cronies(Civitas Institute 2018 and Reuters 31.10.2020). The political target of achieving Hungarian dominance in the banking system in terms of assets has been achieved(GlobalMarkets 2019). The na­tional recapture of the media brought domestic investors close to the government in a dominant position. In Poland, the sale of foreign assets and capital restructur­ing also benefited locals in the banking sector in 2017. Ital­ian UniCredit sold its 32.8 percent stake in Pekao Bank for EUR 2.4 billion to the state-owned insurance company PZU and the Polish Development Fund. The Polish government was engaged in reasserting domestic control(re-Polonisa­tion) in the financial sector. UniCredit took advantage of this policy, as they were eager to strengthen the capital po­27 European Commission(n.d.): Cooperation and Verification Mecha­nism for Bulgaria and Romania; https://ec.europa.eu/info/policies/ justice-and-fundamental-rights/upholding-rule-law/rule-law/assis­tance-bulgaria-and-romania-under-cvm/cooperation-and-verifica­tion-mechanism-bulgaria-and-romania_en 25