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Because transition governments too often treat foreign direct investment as a cure-all with automatically positive macro- and micro-level effects, they have failed to negotiate conditions sufficient to secure positive and sustainable development effects from what FDI has occurred.  Blind enthusiasm for FDI partially results from systematic confusion between pure 'asset swaps' which create no new productive capacity, the management changes that may or may not accompany them, and new 'real' investment in the correct and economically meaningful use of the term ('green-field' entities or upgrading of old production capacities).

LITTLE REAL SUCCESS FOR SMEs IN TRANSITION Recent research (McIntyre and Dallago 2003) shows that the reported success of SMEs in transition economies is largely illusory. Small retail shops and kiosks proliferated, at least temporarily, but productive local small enterprise systems have not developed, leaving a still gaping small enterprise 'black hole'. This paper further argues that: (a) the weight of SME stimulation policies as an anti-poverty measure had been wildly exaggerated; and (b) the mechanisms required for the healthy SME and local economy growth misunderstood. There is much resistance to such "negative" conclusions about the effects of the SME sector in the transition countries, but these results are supported by a new World Bank study covering 80 countries (2003). 

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