Anali za istrske in mediteranske študije
Annali di Studi istriani e mediterranei
Annals for Istrian and Mediterranean Studies
Series Historia et Sociologia, 30, 2020, 2
UDK 009                     Annales, Ser. hist. sociol., 30, 2020, 2, pp. 177-342, Koper 2020  ISSN 1408-5348

KOPER 2020
Anali za istrske in mediteranske študije
Annali di Studi istriani e mediterranei
Annals for Istrian and Mediterranean Studies
Series Historia et Sociologia, 30, 2020, 2
UDK 009                               I SSN 1408-5348
e-ISSN 2591-1775

ANNALES · Ser. hist. sociol. · 30 · 2020 · 2
ISSN 1408-5348 UDK 009  Letnik 30, leto 2020, številka 2
e-ISSN 2591-1775
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ANNALES · Ser. hist. sociol. · 30 · 2020 · 2
Pavel Jamnik, Borut Toškan, Matija Križnar, 
Tjaša Tolar & Bruno Blažina: Jama Globoška peč, 
novo paleontološko in paleolitsko najdišče 
na Kraškem robu – rezultati poskusnega 
vkopa v plasti ....................................................... 177
La grotta Globoška peč, un nuovo sito 
paleontologico e paleolitico sul Ciglione 
carsico – risultati del saggio stratigrafico 
preliminare 
The Globoška peč Cave, a New Paleonthological 
and Paleolithic Site on the Karst edge – 
Results of the Experimental Trial Excavation
Stanko Flego & Lidija Rupel: I siti romani 
di Boccadino e Braida (Duino-Aurisina, 
Trieste): due ricerche di Ludwig Karl 
Moser ignorate dagli studiosi ................................ 201
Roman Sites Boccadino and Braida 
(Duino-Aurisina, Trieste): Two Researches of 
Ludwig Karl Moser Ignored by Academics
Antični najdišči Bokadin in Brajde 
(Devin-Nabrežina, Trst): dve spregledani 
raziskavi Ludwiga Karla Moserja
Ladislav Placer: Kulturno in zgodovinsko 
sporočilo Milanje (Slovenija) ................................ 215
Messaggio culturale e storico 
di Milanja (Slovenia)
Cultural and Historical Significance 
of the Milanja (Slovenia) 
Jurij Selan: Kako govori likovni jezik? 
Analiza položajev in smeri v 
likovnih delih iz zbirke 
Narodne galerije Slovenije ................................... 235
Come parla il linguaggio dell'arte? 
Analisi delle posizioni e direzioni nelle opere 
d'arte della Galleria Nazionale Slovena
How does the Language of Visual 
Art Speak? Analysis of Positions and 
Directions in Artworks of the 
National Gallery of Slovenia
Zoran Vaupot: Foreign Direct Investments, 
Cultural Heritage and Public-Private 
Partnership: A better Approach for Investors? .......... 261
Investimenti diretti esteri, patrimonio 
culturale e partenariato pubblico-privato: 
un approccio migliore per gli investitori?
Tuje neposredne naložbe, kulturna dediščina 
in javno-zasebno partnerstvo: boljši pristop 
za vlagatelje?
Daniela Angelina Jelinčić & Sanja Tišma: 
Ex-Ante Evaluation of Heritage 
Management Plans: Prerequisite 
for Achieving Sustainability ................................. 275
Valutazione ex ante dei piani di gestione 
del patrimonio: prerequisiti della sostenibilità
Ex-ante vrednotenje načrtov upravljanja 
dediščine: predpogoj za doseganje trajnosti
Anali za istrske in mediteranske študije - Annali di Studi istriani e mediterranei - Annals for Istrian and Mediterranean Studies
VSEBINA / INDICE GENERALE / CONTENTS
UDK 009                                  V olume 30, Koper 2020, issue 2                                  ISSN 1408-5348
e-ISSN 2591-1775

ANNALES · Ser. hist. sociol. · 30 · 2020 · 2
Anali za istrske in mediteranske študije - Annali di Studi istriani e mediterranei - Annals for Istrian and Mediterranean Studies
Jasna Fakin Bajec: An Integrated Approach 
to the Revitalization, Safeguarding and 
Management of Cultural Heritage: 
How to Establish a Durable and Active 
Local Group of Stakeholders ................................ 285
Un approccio integrato alla rivitalizzazione, 
alla salvaguardia e alla gestione del patrimonio 
culturale: come creare una comunità locale 
permanente e attiva?
Celostni pristop k revitalizaciji, varovanju in 
upravljanju kulturne dediščine: kako ustvariti 
trajno in aktivno lokalno skupnost?
Borbála Gondos & Gábor Wirth: The Role of 
Nádasdy Castle in Tourism of Sárvár – 
the Appearance of Disabled People in 
Cultural Tourism .................................................. 301
Il ruolo del castello di Nádasdy nel turismo di 
Sárvár – l'aspetto dei disabili nel turismo culturale
Vloga Nadasdijskega gradu v turizmu mesta 
Sárvár – vidik oseb s posebnimi potrebami 
v kulturnem turizmu 
Veselin Mićanović, Nada Šakotić & 
Dijana Vučković: Utemeljenje i razvitak 
osnovnog školstva i obrazovanja učitelja 
u Crnoj gori od početka 
XIX. stoljeća do 1916. godine .............................. 313
Fondazione e sviluppo dell'istruzione 
elementare e della formazione dei maestri 
in Montenegro dall'inizio del XIX secolo al 1916
Začetki in razvoj osnovnega šolstva in 
izobraževanja osnovnošolskih učiteljev 
v Črni gori od začetka 19. stoletja do leta 1916
Petr Scholz: Development of Football Fandom 
after 1989: Evidence from Czechia ........................ 323
Sviluppo della tifoseria calcistica dopo 
il 1989: l'esempio della Cechia
Razvoj nogometnega navijaštva po 
letu 1989: primer Češke
Kazalo k slikam na ovitku ..................................... 342
Indice delle foto di copertina ................................. 342
Index to images on the cover ................................. 342

ANNALES · Ser. hist. sociol. · 30 · 2020 · 2
261
received: 2019-09-15                  DOI 10.19233/ASHS.2020.15
FOREIGN DIRECT INVESTMENTS, CULTURAL HERITAGE AND PUBLIC-
PRIVATE PARTNERSHIP: A BETTER APPROACH FOR INVESTORS?
Zoran VAUPOT
Catholic Institute, Faculty of Law and Business Studies, Krekov trg 1, 1000 Ljubljana, Slovenia
e-mail: zoran.vaupot@kat-inst.si
ABSTRACT
The aim of this research is to analyze the influence and propose arguments for using the PPP framework for 
FDI projects, directly or indirectly connected to cultural heritage. In the literature overview we analyze topics of 
determinants and barriers to FDI, relations between FDI, cultural heritage, PPP , project and country risk manage-
ment. Then, four business cases of FDI in connection to cultural heritage are presented and evaluated through the 
lens of the previous theoretical findings. The main conclusion is that the use of the PPP framework can add value 
to FDI projects in connection to cultural heritage. 
Keywords: foreign direct investments (FDI), cultural heritage, risk management, public-private partnership (PPP)
INVESTIMENTI DIRETTI ESTERI, PATRIMONIO CULTURALE E 
PARTENARIATO PUBBLICO-PRIVATO: UN APPROCCIO MIGLIORE PER GLI INVESTITORI?
SINTESI
L’obiettivo della ricerca è quello di analizzare l’influenza e proporre argomenti per l’utilizzo del quadro PPP per i 
progetti IDE, direttamente o indirettamente collegati al patrimonio culturale. Nella panoramica della letteratura ana-
lizziamo i fattori determinanti e gli ostacoli agli IDE, le relazioni tra IDE, il patrimonio culturale, il PPP , la gestione dei 
progetti e del rischio per il paese. Successivamente, vengono presentati quattro casi commerciali di IDE in relazione 
al patrimonio culturale e valutati attraverso la lente dei precedenti risultati teorici. La conclusione principale è che 
l’uso del quadro PPP può presentare un valore aggiunto ai progetti IDE in relazione al patrimonio culturale.
Parole chiave: investimenti diretti esteri (IDE), patrimonio culturale, gestione del rischio, partenariato 
pubblico-privato (PPP)

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Zoran VAUPOT: FOREIGN DIRECT INVESTMENTS, CULTURAL HERITAGE AND PUBLIC-PRIVATE PARTNERSHIP: A BETTER APPROACH FOR INVESTORS?, 261–274
INTRODUCTION
Since the 1980s, foreign direct investments (FDI) 
have continuously registered cumulative worldwide 
growth. This is in-line with the worldwide trade lib-
eralization trend in the last decades which directly 
resulted in the lowering of risks and costs for interna-
tional investors. It is nowadays widely accepted that 
FDI’s positive impacts are far more important than the 
negative consequences. At the country level world-
wide, specialized institutions (IPA-investment promo-
tion agencies) are established and financed by the 
governments in order to promote the whole country, 
selected regions and/or cities as attractive destinations 
for foreign investors. 
However, not in all cases are foreign investors 
welcome. Even in the situations when there should 
be no real doubt about the existence of the real 
national interest
1
, the opposing partial interests of 
economically powerful local individuals and interest 
groups, publicly presented as the constitutive part of 
the national interest, can prevail and negatively influ-
ence the foreign investor’s decisions. The negative 
experiences from disabling, or at least obstructing the 
investor’s efforts, can also lead to their decision to 
abandon or postpone the planned projects because of 
the additional risks and costs occurred as the conse-
quence of additional formal and informal barriers to 
investment.
Cultural heritage itself is generally considered 
as being a constitutive part of the national, cultural 
identity. By consequence, any attempt to jeopardize 
cultural heritage can quickly be evaluated as a threat 
and thus it would be in the national interest to stop 
this kind of danger. It is easy to imagine that in the 
case of (potential) foreign investments into projects 
linked directly or indirectly to cultural heritage, public 
opinion
2
 can be effectively manipulated toward an 
outcome desired by the most influential participant in 
mass communication. 
In our research we try to verify whether and when 
the public-private partnership (PPP) approach could 
represent the right choice for the foreign investor in 
order to realize their project linked to the cultural her-
itage of the country meant to accept an inward invest-
ment? Is it realistic to expect that the risk management 
dimension of the project organized in accordance to 
the selected PPP scheme would better be managed in 
order to avoid possible obstacles in the form of formal 
(e.g. local legislation) and/or informal institutions (e.g. 
negative public opinion)? 
1 See, for example Robinson (1961) who classified national interest into six categories: primary interests (preservation of physical, political, 
and cultural identity of the state), secondary interests (less important but still vital for the existence of the state), permanent interests (relatively 
constant and long-term interest of the state which changes slowly), variable interests (considered vital for the state in certain circumstances), 
general interests (refer to those positive conditions which apply to a large number of nations or in several specified fields such as economics, 
trade, etc.) and specific interests (in connection to the general interest, specific interests are defined in terms of time or space).
2 Defined by Key (1961, 14) as „opinions held by private persons which governments find it prudent to heed.”
METHOD AND LITERATURE OVERVIEW
We start our literature overview with the presenta-
tion of the main research concerning FDI determinants 
and barriers. We link these results with a listing of 
research focused on FDI in connection with cultural 
heritage where we point out the role of informal in-
stitutions influencing FDI projects. Next, the possible 
relations between cultural heritage and projects using 
the PPP approach are presented with special attention 
paid to the project risk management. The latter topic 
is then covered more extensively and connected first 
with the FDI related risk management which is treated 
under the country risk topic and later also in relation 
to the concept of PPP. 
In the second part, four selected cases of FDI in 
direct or indirect connection to cultural heritage are 
presented. Special attention is paid to their outcomes, 
positive and negative. 
In the third part we combine findings from the 
literature overview, and we use them to evaluate the 
presented business cases. At the end, we propose 
an overall conclusion concerning the use of the PPP 
concept for foreign investments in direct or indirect 
connection to cultural heritage. 
Determinants and Barriers for FDI
The research on FDI determinants was, in its early 
phase, generally focused on the location aspect of 
the so-called OLI (ownership, localization and inter -
nalization advantages) model or 'eclectic paradigm' 
(Dunning, 1979). With a growing importance of the 
institutional theory another group of FDI determi-
nants has appeared significantly in research since 
1990s. In the first period authors mostly focused on 
reliability and safety of institutions (North, 1991, 
2005; Coase, 2002). Later, institutional quality has 
been analyzed also as an inward FDI determinant, 
with special attention paid to the CEEC economies 
(Bevan & Estrin, 2000; Pournakakis & Varsakelis, 
2004). The academics were first focused on the 
quality and effectiveness of a country’s mostly for -
mal institutions such as property rights, rule of law, 
civil liberties, and political stability. This is in line 
with the 'new institutional economics' (Williamson, 
1975) which considers both efficiency and distribu-
tion issues, in contrast to 'traditional' institutional 
economics, and extends economics with social and 
legal norms that influence market function in the 
neoclassical framework.

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Zoran VAUPOT: FOREIGN DIRECT INVESTMENTS, CULTURAL HERITAGE AND PUBLIC-PRIVATE PARTNERSHIP: A BETTER APPROACH FOR INVESTORS?, 261–274
In the last two decades, a narrower concept of 
'informal institutions' started to attract the attention 
of researchers in the area of FDI determinants. How-
ever, it remains a very much underexploited theme in 
comparison to the more general topic of 'institutions'. 
There are numerous definitions of 'institutions' which 
seem to result in a common understanding, for exam-
ple: “Humanly devised constraints that structure politi-
cal, economic, and social interaction. They consist of 
both informal constraints (sanctions, taboos, customs, 
traditions, and codes of conduct), and formal rules 
(constitutions, laws, property rights)” (North, 1991, 1) 
or “Rules and procedures (both formal and informal) 
that structure social interaction by constraining and 
enabling actors’ behaviour” (Helmke & Levitsky, 2004, 
727). 
However, when trying to define a narrower con-
cept of 'informal institutions' definitions differ more, 
for example: “Traditions, customs, moral values, 
religious beliefs, and all other norms of behaviour that 
have passed the test of time. Thus, informal institutions 
are the part of a community’s heritage that we call 
culture” (Pejovich, 1999, 166), “Socially shared rules, 
usually unwritten, that are created, communicated, 
and enforced outside of officially sanctioned chan-
nels” (Helmke & Levitsky, 2004, 727) or “Informal 
rules (that) are unwritten norms of repeated human 
interactions. They embody moral codes and norms, 
which can be very diverse across cultures” (North, 
2005, 50).
The FDI determinants are logically connected to 
the FDI barriers. When an important FDI determinant 
for a specific country is objectively (e.g. market size, 
geographical position, etc.) or subjectively (e.g. lack 
of clearly defined legislation, bureaucracy, corruption, 
etc.) worse in comparison to the other, especially in 
relation to the neighbouring countries, it represents a 
FDI barrier for this country. An interesting literature 
overview of barriers for FDI has been presented by 
Bitzenis (2006) and Bitzenis and Žugič (2016). The au-
thors propose that "empirical investigations on the de-
terminants of FDI barriers can be broadly categorized 
in groups according to their observations: economic 
and political risk, transition progress and privatization, 
national culture and the general country risk factor" 
(Bitzenis & Žugić, 2016, 230).
While the first two groups and at least partially 
also the fourth can be identified as mostly including 
determinants linked to formal institutions, the third 
and partially the fourth one include determinants in 
connection with informal institutions. 
However, we point out that not all authors make 
clear distinction between the broader concept of cul-
3 Source:  http://www.unesco.org/new/en/culture/themes/illicit-trafficking-of-cultural-property/unesco-database-of-national-cultural-herit-
age-laws/frequently-asked-questions/definition-of-the-cultural-heritage/ (last access: 26.6.2020)
4 Source: https://investmentpolicy.unctad.org/international-investment-agreements (last access: 26.6.2020)
ture and informal institutions, e.g. before mentioned 
Pejovich (1999). On the contrary, Helmke and Levit-
sky  (2004) propose that culture is defined by shared 
values and not by shared expectations as informal 
institutions.
The presented overviews concerning barriers for 
FDI show clearly that the topic of informal institu-
tions and its broader concept of culture still deserve 
attention from academics. However, there are already 
several interesting studies that explain the role of 
informal institutions in the decision-making process of 
foreign investors. Seyoum (2011) argues that informal 
institutions influence FDI in two ways: directly and 
indirectly through formal institutions by influencing 
formal rules. Mondolo (2019) highlights three types 
of informal institutions influencing FDI: trust, social 
networks and corruption. Trust is not only important in 
connection with FDI but also as an informal institution 
for the national economy in general; as stated by Sey-
oum (2011) more trust results in more growth because 
of its positive influence on lowering transaction costs 
and facilitating cooperation.  
FDI and Cultural Heritage
As 'cultural heritage' UNESCO defines
3
 tangible 
(movable (paintings, sculptures, coins, manuscripts), 
immovable (monuments, archaeological sites, etc.) 
and underwater cultural heritage (shipwrecks, under-
water ruins and cities)) and intangible (oral traditions, 
performing arts, rituals) cultural heritage.  Cultural 
heritage is closely linked to its historical background, 
but also to the geography or the physical environment 
in which it resides (Vaupot, 2018). It constitutes an 
important component part of cultural rights which 
include both the duty to respect cultural freedoms 
and the duty to protect cultural heritage (Vadi, 2008). 
According to the World Heritage Convention (WHC) 
which uses the criticized listing approach, protect-
ing cultural heritage becomes a duty owned by the 
international community. This shift from the national 
sovereignty is, however, mostly theoretical (with 
exception of blame and shame mechanisms which 
may be efficient to some extent) since there are no 
compliance mechanisms if a state does not respect the 
WHC obligations. 
International investment law is presently regulated 
by almost 3.300 international investment agreements. 
The overwhelming majority (more than 88%) of these 
agreements are bilateral investment treaties and the 
remaining are so-called treaties with investment pro-
visions.
4
 Obviously, international investment law did 
not yet succeed in establishing a veritable multilateral 

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Zoran VAUPOT: FOREIGN DIRECT INVESTMENTS, CULTURAL HERITAGE AND PUBLIC-PRIVATE PARTNERSHIP: A BETTER APPROACH FOR INVESTORS?, 261–274
investment agreement and this absence of multilateral-
ism is considered as a factor causing fragmentation and 
inconsistencies in the cases of arbitral interpretation 
(Titi, 2017).
As claimed by Sauvant and Mann (2017) cultural 
heritage protection is part of the social dimension of 
sustainable FDI. From the foreign investor’s perspective 
social, civil and cultural rights should be considered 
already in the early project planning phase. The same 
as for potential local investors, both should accept for -
mally (in the investment agreements) all the connected 
costs linked to the specific situation of the investment 
project influencing local cultural heritage. Moreover, 
De Germiny (2013) proposes to foreign investors con-
sidering investing near a (existing or possible in the 
future) WHC site to pay special attention. Even more 
attention should be paid when an investment area is 
close to the site which is on the List of World Heritage 
in Danger. This list includes sites whose protection 
according to the WHC requires “major operations [] 
and for which assistance has been requested" (WHC, 
art. 11). 
Cultural heritage is (also) huge international 
business. Not only in connection to the tourism 
industry (Richards, 2001; McKercher & Du Cros, 
2002; Timothy & Nyaupane, 2009) but also from 
the wider perspective (Bishoff & Allen, 2004; 
Gražulevičiūtė, 2006; Labadi & Long, 2010; Starr, 
2010; Masele, 2012). However, a legal point of view 
(formal institution) is not the only one that needs 
to be taken into account by foreign investors. The 
communicated 'threat' of foreign investors’ project 
to cultural heritage, with a goal to negatively influ-
ence public opinion (informal institution), may also 
serve as the justification for protecting publicly hid-
den local interests. In some cases, foreign investors 
are just not welcome because the domestic players 
were meant to win the project, or the new project 
would establish unwanted competition in the lo-
cal market. Vaupot and Fornazarič (2019) present 
the role of local print media in creating generally 
unbalanced and negative public opinion toward 
foreign investors/investments in general. In Slove-
nia in 1992, this resulted in the adoption of hostile 
foreign investor privatization legislation but also 
sent a clear non-welcome message to other possible 
foreign investors in this country with a long-lasting 
effect. Almost three decades later, the inward FDI 
stock-to-GDP share in Slovenia is still only just 
above 50% of the average of the four Visegrad 
countries, which are perfect for comparison from 
a geographical, historical, and perspective of eco-
nomic development.
5 Source: https://resources.riches-project.eu/wp-content/uploads/2016/04/rch_thinkpapers_07.pdf (last access: 26. 6. 2020).
6 Ministry of Culture: https://www.culture.si/en/Heritage_preservation_and_restoration_in_Slovenia (last access: 26. 6. 2020).
7 Source: https://www.interreg-central.eu/Content.Node/RESTAURA.html (last access: 26. 6. 2020).
8 Source: https://financial-dictionary.thefreedictionary.com/Economic+risk (last access: 26. 6. 2020).
Cultural Heritage and Public-Private Partnership
The public-private partnership (PPP) is broadly 
defined as a long-term partnership between the public 
and the private sector in different business activities in 
the areas which are traditionally considered as part of the 
public sector (Webb & Pulle, 2002). In avoiding an all-
embracing definition, Jelinčić et al. (2017) list the main 
characteristics of PPP: collaborative effort of at least two 
public and private autonomous organizations; projects 
linked to public service or goods for public consumption; 
long-lasting project; mutual products and/or services; all 
parties share risk, costs, and benefits; regulatory respon-
sibility of the public sector; private sector is paid for the 
services delivered and mutual added value. 
Traditionally, protection of cultural heritage is consid-
ered as one of the very basic tasks of a country’s govern-
ment. According to Macdonald (2011, 893) "PPPs began 
to be used for heritage conservation in the late 1960s 
within the context of urban regeneration schemes. 
Their use has slowly expanded to the conservation 
and management of archaeological sites, buildings, 
landscapes, urban areas, collections and natural areas 
of heritage significance." 
As stated by RICHES,
5
 PPP is better understood and 
accepted by the general public, in comparison to the 
concept of 'privatisation'. The latter implies a durable 
loss of ownership over public goods. PPP seems instead 
to be a 'safer' engagement for the public sector since it 
is normally limited to a specific project. In the area of 
cultural heritage, PPP is mostly used for: digital services, 
management of cultural services and conservation of 
immovable heritage. Some types of immovable cultural 
heritage are especially expensive to manage or conserve. 
The example of Slovenia is certainly not isolated: 
One of the major problems for the monument 
protection service relates to castles and manors… 
Since these are large architectural complexes, 
their renovation require enormous funds, as well 
as a clear concept of future function and a vision 
of development (e.g. marketing). Many castles in 
Slovenia are still waiting to be restored. At present 
they can only be maintained, since only 20 per 
cent of the entire fund is available for this purpose.
6
 
However, in the literature we can find significative 
examples of  successful PPP in cultural heritage: Ireland 
(Cooke, 2006), Australia (Macdonald & Cheong, 2014), 
Tatarstan (Absalyamov, 2015), Herculaneum (Ferri & 
Zan, 2017), Uncastillo (Khorassani et al., 2019), Buzet 
(Croatia),
7
 Nowy Dwór Mazowiecki (Poland),8 Rihem-
berk (Slovenia),
8
 etc. 

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Risk Management and Country Risk
The academic research which deals with inter-
national project management and risk assessment is 
extensive. For example, Williams (1995) proposes a 
bibliography of research relating to project risk man-
agement, Raz and Michael (2001) present a study con-
cerning identification of the most widely used tools in 
project management and risk management in particular, 
Raz et al. (2002) focus on the relationship between the 
project types and the application of risk management 
practices, Soederlund (2004) discusses the emerging 
perspectives within the project field, Kwak and Anbari 
(2009) examine project management research from the 
perspective of its relationship to allied disciplines in 
the management field, Fang et al. (2012) present an 
approach based on network theory, as a complement 
to classical project risk analysis, to deal with risk in 
large engineering projects, Rodney et al. (2015) dem-
onstrate the need to develop an integrated approach 
to project risk management, Carvalho and Rabechini 
Junior (2015) focus on the relationship between risk 
management and project success, considering the 
contingent effect of project complexity, Cagliano et 
al. (2015) discuss approaches for choosing project risk 
management techniques and Aven (2016) presents the 
advances in general principles and methods about how 
to conceptualise, assess and manage risk. 
The general conclusion based on the research pre-
sented is that risk management should be understood 
and used as a constitutive part of project management 
and not as a separate discipline. The use of an appro-
priate method or tool is crucial and depends mostly 
on the type of information available (qualitative or 
quantitative), but also on the nature, complexity, level 
of innovation, size and phases of the life cycle of a 
project. According to Chapman and Ward (2003) risk 
management is crucial in the planning stage, then its 
scope and depth increase towards the execution phase 
and decrease in the project finalisation phase.
From the perspective of (potential) foreign investors, 
a specific area of risk management exists: evaluation 
of country risk. According to McGowan and Moeller 
(2009) the country risk analysis to be conducted by 
foreign investors consists of two main components: po-
litical risk and economic risk. The political risk can be 
defined "as the risk that a sovereign host government 
will unexpectedly change the 'rules of the game' under 
which businesses operate" (Butler & Joaquin, 1998, 
599) and economic risk as "the possibility that an eco-
nomic downturn will negatively impact an investment."  
Two types of economic factors must be considered 
by foreign investors: macroeconomic (inflation, taxes, 
interest, and exchange rates) and micro-economic fac-
9 The CSFs are defined by Rockart (1982, 4) as the "few key areas of activity where favorable results are absolutely necessary for a manager to 
reach his/her goals". The CSFs "facilitate achievement of organizational goals and objectives including risk management" (Kikwasi, 2018, 7).
tors (local demand, wages, educational levels…). One 
of the first widely used tools for measuring country 
risk has been proposed by Bhalla (1983) who created 
a two-dimensional matrix with four variables for each 
dimension of political risk and economic risk called 
FIRM (foreign investment risk matrix). This approach 
has later been further developed by several authors 
(Madura, 2000; McGowan & Moeller, 2009) but the 
basic importance of political and economic dimensions 
of country risk remained in use to differentiate countries 
according to their level of acceptability for FDI. 
Risk Management and Public-Private Partnership
We continue our research with a review of research 
concerning risk management in PPP. As presented, this 
topic attracted the important attention of academics, 
especially in the last decade. 
Chan et al. (2014) analyze Critical Risk Factors 
(CRF) for PPP projects in China in connection to water. 
They conclude that out of 37 factors initially taken into 
consideration, the completion risk, inflation, and price 
change risk have a higher impact on Chinese water PPP 
projects. 
Next, Osei-Kyei and Chan (2015) propose a review 
of worldwide studies from some selected academic 
journals concerning the Critical Success Factors (CSF)
9
 
for PPP projects in the period 1990–2013. Their main 
conclusion is that the five most reported CSFs in the 
mentioned period were: risk allocation and sharing, 
strong private consortium, political support, commu-
nity/public support, and transparent procurement. 
Also in 2015, Wang (2015) argues that PPP models 
evolve when some of the critical success CSFs for PPP 
are changed/improved over time based on the project 
sponsors’ risk management in the American toll road 
development. The results confirm the theoretical frame-
work and find that public institutions’ risk management 
can effectively explain the PPP evolution.
The same year, Chou and Pramudawardhani (2015) 
publish research where they compare the categories of 
key drivers, CSFs, and preferred risk allocation in PPPs 
established in Taiwan, Singapore, China, the UK, and 
Indonesia. The results revealed that Indonesia and Tai-
wan share certain similar key drivers, Indonesian CSFs 
were very similar to those of China, and Indonesia and 
Singapore present the highest similarity of risk alloca-
tion preferences.
In 2016, Liu et al. (2016) conducted a compara-
tive analysis of CSFs affecting the effectiveness and 
efficiency of PPP tendering in Australia and China. 
The research identified 14 CSFs underpinning the 
implementation of PPP tendering, under 7 dimen-
sions. The analysis suggested that there were statisti-

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cally significant differences in 8 CSF between the two 
countries. 
When we focus on the use of PPP in cultural herit-
age, it relates to several types of risks. According to 
Rypkema and Cheong (2016) the risks connected to 
cultural heritage projects can be categorized into six 
categories: design/development risk (design defects, 
failure to meet heritage conservation standards…); 
revenue and operating risk (cost overruns; failure or 
delay in obtaining permission, consents, approval…); 
financial risk (unpredicted changes in exchange and 
interest rates); unexpected event risk (riots, strikes…); 
unexpected political events (breach or cancellation 
of contract expropriation, failure to obtain or renew 
approval…) and environmental risk (destructive envi-
ronmental events).
10
10 Source: Vadi (2008); https://2009-2017.state.gov/s/l/c10986.htm (last access: 26. 6. 2020); Bernasconi-Osterwalder & Johnson (2011).
SELECTED CASES OF FDI IN CONNECTION WITH 
CULTURAL HERITAGE
In Table 1 we present four cases of foreign invest-
ments with influences on different types of cultural 
heritage, as presented in the literature or accessed in 
other publicly available sources. For every business 
case we propose a short description of the investment 
project, connected problems concerning the cultural 
heritage, and the project’s outcome.
The four cases presented in Table 1 include several 
characteristics that can be observed. First, the cultural 
heritage implications described were not of the same 
type. We can list tangible (Noto Valley, Heuersdorf 
and Vilnius) and intangible type of cultural heritage 
implications (Imperial County). Three investment 
Table 1: Selected cases of foreign investments with implications on cultural heritage.
10
 
Location Description Cultural heritage issues Outcome
Noto Valley 
(Italy)
Local authorities 
granted a Texan 
investor a concession 
to drill gas in the 
Noto Valley.
The site is considered 
in permanent danger of 
earthquakes and Etna’s 
eruptions, 
if investor made use of this 
authorization the area would 
risk an environmental collapse. 
The government has declared its willingness 
to override Sicily’s autonomy and to stop the 
project, 
investor has thus decided to cut the number of 
wells planned in the region and to avoid the Val 
di Noto.
Heuersdorf 
(Germany)
An American 
investor acquired a 
concession over a 
coal mine close to 
the village. 
The conservation of the 
750-year-old Emmaus Church 
was in danger.
The investor agreed to relocate the church to a 
nearby town and then had a chance to exploit the 
investment.
Imperial 
County 
(USA)
A Canadian 
corporation engaging 
in the extraction of 
gold acquired full 
ownership
of federal mining 
sites in California to 
create a large open-
pit gold mine.
Open-pit cyanide mining is 
hazardous to health and has a 
negative environmental effect, 
the project was connected to the 
area which includes sacred and 
ancestral sites of the American 
natives.
In 2001, the Interior Department denied the 
project but in 2002 the denial was revoked, 
however, the Californian authorities adopted 
a regulation requiring the backfilling of all 
future open-pit mines in the state to achieve the 
approximate contours of the land prior to mining 
and to reserve funding to ensure the coverage of 
clean-up costs,  
the investor applied for an arbitration proceeding, 
in 2009, the Tribunal released the Award, 
dismissing the investor’s claim.
Vilnius 
(Lithuania)
The city of Vilnius 
signed an agreement 
with Egapris 
Consortium to design, 
build and operate an 
integrated parking 
system in the City.
The project extended 
significantly into the Old Town, 
defined as cultural heritage,
the historical and archaeological 
preservation and environmental
protection were justification for 
the refusal of the project.
Due to various key activities
contemplated by the Agreement, the parties 
attempted to renegotiate the deal, 
after more than a year of negotiations, the City 
decided to terminate the Agreement, 
the investor has initiated request for arbitration, 
but his claims have been rejected.

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projects were in the domain of mining (Noto Valley, 
Heuersdorf and Imperial County) and one in construc-
tion (Vilnius). For two cases the problems have been 
resolved by additional agreements made between the 
local authorities and foreign investors (Noto Valley and 
Heuersdorf). Both agreements resulted in the success-
ful continuation of the projects. The other two cases 
(Imperial County and Vilnius) have not been resolved 
locally and the claims of the investors have been con-
sidered in the process of international arbitration. The 
alleged treaty violations of the latter projects were:
Imperial County:
11
 (1) certain federal government 
actions and California measures with respect to open-
pit mining operations resulted in the expropriation of 
its investments and (2) denied its investments the mini-
mum standard of treatment under international law,
Vilnius:
12
 (1) equitable and reasonable treatment/
fair and equitable treatment, (2) expropriation, (3) 
most favoured nation treatment and (4) protection/full 
protection and security.
In both cases all foreign investors’ claims have been 
rejected by the arbitration court.  
11 Source: https://2009-2017.state.gov/s/l/c10986.htm (last access: 26. 6. 2020).
12 Source: https://www.iisd.org/itn/2018/10/18/parkerings-v-lithuania/ (last access: 26. 6. 2020).
RESULTS AND DISCUSSION
Based on the literature review and case analysis 
we propose several conclusions concerning the rela-
tionship between the topics of FDI, cultural heritage, 
risk management and PPP.
Foreign direct investments are not welcome in 
every country or at least not in every sector, although 
in the last decades there is a clear worldwide trend in 
trade and investment liberalization. This phenomenon 
is formally enabled by the growing number of interna-
tional agreements (formal institutions). However, these 
general agreements cannot define how to resolve all 
possible obstacles which may occur in connection to 
specific projects. Besides that, the numerous obstacles 
to international investments also remain in the form of 
informal institutions which cannot be addressed either 
easily, quickly or directly by changes in the legislation. 
In such cases especially, the importance of a strategic 
management approach from the investor’s side, which 
includes efficient project risk management, is crucial 
for the success of the FDI project.
Image 1: Cathedral in Noto, Sicily (Photo: Sabrina Mazzeo, Unsplash).

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The analysis of the four presented cases from the 
risk management perspective reveals that the claims 
of both investors in front of arbitration court have 
been rejected. The logical question linked to the pro-
ject risk management issue and which rises from all 
four cases presented is: what could have been done 
differently in connection to the cultural heritage is-
sues of the projects? In other words, were the cultural 
heritage issues unpredictable for the foreign investors 
so they were incapable to evaluate the connected pro-
ject risk? Or they have just been badly managed and 
their (potentially) negative influence underestimated 
in the risk assessment phase? 
On the basis of publicly available information 
we claim the answer concerning unpredictability is 
mostly negative. The Noto Valley’s natural character-
istic (prone to earthquakes and volcanoes eruptions) 
was known environmental fact.  The Emmaus Church 
was there already for 750 years. The sites of American 
natives were ancestral cultural heritage. Finally, the 
Vilnius Historic Centre has been included on the 
World Heritage List since 1994.  
It seems that the effort invested in risk manage-
ment was insufficient during the projects’ preparation 
phases. However, investors’ reactions to the problems 
that occurred in the Noto Valley and Emmaus project 
could be evaluated as appropriate. This was not the 
case for the last two presented projects where the ar-
Image 2: Emmaus church in Heuersdorf, Germany 
(Wikimedia Commons).
Image 3: Example of the open-pit gold mine (Photo: 
Curioso Photography, Unsplash).

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bitration procedure has been followed by the investors 
with equally negative results for the claimants. 
As we have already argued, most of the information 
about the four projects’ potential problems concerning 
cultural heritage issues had been publicly available. 
There are basically two most probable reasons they 
weren’t considered appropriately:  insufficient risk as-
sessment in the project preparation phase and absence 
of general cross-cultural sensitivity from the investor’s 
side; the latter should already have been included since 
the first project phase. For the purpose of evaluating 
investors’ behaviour in all presented cases we may also 
use the information flow about decision-making on 
risks as proposed by Hanson and Aven (2014, 1178). 
Using this model, it seems that investors either did not 
consult the appropriate ‘knowledge base’ or the ‘broad 
risk evaluation’ phase was not conducted properly.
As also proposed by the analysis of the four case 
studies, the FDI projects in direct or indirect connec-
tion to cultural heritage may be strongly influenced 
by both types of obstacles based on formal and infor -
mal institutions. When the obstacle appears, the ap-
propriate reaction of investors can save the project’s 
outcome although it may suffer from lower efficiency. 
In the case of wrong, delayed or even absent reaction 
of investors, the project itself may be endangered and 
the outcome strongly differentiated from what was 
initially desired.
Still, the real question is not about how to resolve 
the problems when they appear but rather what ap-
proach and risk-management connected activities in 
the crucial, project planning phase, should be used in 
order to first avoid the predictable obstacles but also 
to more effectively and efficiently manage the non-
expected events in the project execution and finaliza-
tion phase.
In verifying the risk management topic for PPP 
projects, we conclude that it is under the attention 
of academics especially in the last decade. However, 
based on the literature reviewed we may observe that 
the project management risks in connection to cul-
tural heritage issues are not listed explicitly. Certainly, 
they may be included within other listed types of CRF 
or CSF, such as: government intervention, political/
public opposition, legislation changes, etc. But, also 
in these cases, the appropriate management of risks 
within the PPP indirectly suggests having a positive 
impact on the risks connected to the cultural heritage 
issues.
This overview of literature and case analysis brings 
us back to the basic research question of our contri-
bution: can the use of PPP in FDI projects connected 
Image 4: Old town of Vilnius, Lithuania (Photo: Courtesy of Vilnius Tourist Information Centre).

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to cultural heritage positively influence the expected 
project’s outcome? We argue there are several argu-
ments that support a positive answer. Using the well-
known CAGE framework (Ghemawat, 2001) the main 
differences in shifting from domestic to international 
business can be classified within four types of distance 
between domestic and foreign country: cultural; ad-
ministrative and political; geographic and economic 
distance. 
Using PPP in FDI projects can have a positive 
impact on diminishing the importance of the before-
mentioned distances since the local (public) partner 
would serve as the perfect source of information for the 
foreign investor. 
This can be especially true for FDI projects in 
cultural heritage since the public sector is normally 
considered a protector of the country’s culture and 
heritage (Macdonald, 2011) and, by consequence, 
public opinion (informal institution) can be quickly 
negatively manipulated when foreign investors alone 
might negatively impact any kind of national cultural 
heritage. The role of domestic (public) partner is thus 
also to be the partner who guarantees that the cultural 
heritage remains unharmed.
Besides that, the investment projects in cultural 
heritage are generally considered as relatively low 
profitable, so the partnership can be seen by both par-
ties also as a cost-sharing approach.
When cultural heritage is only indirectly connected 
with the main FDI project, the situation is not so obvious 
for any of the potential PPP partners. The issues about 
protection of cultural heritage may only appear in the 
advanced project phase (e.g. in the area of mining) when 
the legal base of the project has already been well de-
fined. The renegotiation or potential change of the legal 
framework of the PPP would require serious effort with-
out a necessarily fruitful result for both the contractual 
parties. We argue that it is thus crucial that the potential 
cultural heritage issues are resolved previously, maybe 
as a separate (smaller) project in the scope of PPP with 
the local partner which may create a healthy foundation 
for the ‘normal’ (bigger) investment project in the second 
phase. This kind of first, separate project, not necessarily 
cost-intensive, could also serve as an ‘entry ticket’ to the 
foreign market and a toll to effectively manage potential 
issues with local authorities and public opinion but also 
as an appropriate strategic approach to international 
expansion where country risk is well managed. 
CONCLUSION
FDI projects often lack a cultural sensitivity dimen-
sion even in cases without any connection to cultural 
heritage. When cultural heritage is directly or indirectly 
connected to the investment project, then additional 
CRF/CSF may appear. Certainly, the investment should 
ensure its information sources on the country are the 
most informative and up to date, so they can be man-
aged well and early enough to avoid any unexpected 
barriers to the project. 
By its very basic reason for existence, local au-
thorities play a double role from the foreign investor’s 
perspective. First, they define the ‘rules of the game’, 
the legal framework which must be considered by the 
investor. And secondly, the local authorities are also 
interested in successful projects. However, the PPP ap-
proach may not only be proposed by the local authori-
ties but also by the potential foreign investor whose 
project is directly or indirectly connected to local her-
itage.  In creating a partnership with local partners, the 
project risk management gains are obvious since both 
project parties will take all necessary steps to avoid 
possible problems which might endanger the project in 
its execution phase.
We hope that we proposed a comprehensive quali-
tative explanation of the potentially positive role of a 
PPP framework in FDI projects connected to cultural 
heritage. The next step in our research could represent 
an empirical evaluation of a real FDI project realised 
within the proposed framework.

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TUJE NEPOSREDNE NALOŽBE, KULTURNA DEDIŠČINA IN JAVNO-ZASEBNO 
PARTNERSTVO: BOLJŠI PRISTOP ZA VLAGATELJE?
Zoran VAUPOT
Katoliški inštitut, Fakulteta za pravo in poslovne vede, Krekov trg 1, 1000 Ljubljana, Slovenija
e-mail: zoran.vaupot@kat-inst.si
POVZETEK
Vse od  osemdesetih let prejšnjega stoletja dalje beležimo rast obsega tujih neposrednih naložb (TNN) 
v svetovnem merilu. Velika večina znanstvenih raziskav jasno potrjuje pozitiven neto vpliv TNN za države 
prejemnice. Toda vsaj v nekaterih državah so v preteklosti že obstajale formalne ali neformalne ovire za tuje 
vlagatelje in to velja tudi v današnjih časih. Kulturna dediščina je še posebej občutljivo območje za tovrstne 
naložbe. Zato tuji vlagatelji zlahka najdejo svoje projekte, neposredno ali posredno povezane s kulturno dedi-
ščino, pod negativnimi vplivi strogih lokalnih oblasti in nasprotujočega javnega mnenja. Oboji lahko ogrozijo 
želeni rezultat projekta. V naši raziskavi poskušamo odgovoriti, ali bi uporaba pristopa javno-zasebnega par -
tnerstva (JZP) za projekte TNN, ki so neposredno ali posredno povezani s kulturno dediščino, lahko zagotovila 
boljše obvladovanje projektnega tveganja in posledično želeni rezultat projekta. Ugotovitve pregleda literature, 
povezane z dejavniki in ovirami za TNN, odnosi med TNN, kulturno dediščino, JZP , projektnim in državnim 
tveganjem so uporabljene pri analizi štirih poslovnih primerov TNN v povezavi s kulturno dediščino. Splošna 
ugotovitev je, da lahko uporaba JZP v projektih TNN, povezanimi s kulturno dediščino, vpliva pozitivno.
Ključne besede: tuje neposredne naložbe (TNN), kulturna dediščina, obvladovanje tveganj, javno-zasebno 
partnerstvo (JZP)

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