Abstract: The flows offoreigndirectinvestments constitutes a major component ofthe phenomena that manifest themselves inthe world economy, these representing financial resources geared toward a particular investment area that allow those who invest to develop operations over which they have the control and the decision-making power. Given the fact that the world economy is characterized by the increasing interconnectedness of national states as a result of spreading the links inthe spheres of economic, political, social and cultural life, following starting with 2008 a period of unusual developments, the purpose ofthe paper is to analyze theevolutionofworldwideforeigndirect investment (FDI) inflows, before and after the onset ofthe global economic crisis.
Before exploiting studies related to each ofthe four types of risks that we are studying, we can conclude that country risks that stem from government actions such as breach of contractual agreements, changes in law and regulations or the outright nationalization offoreign-owned property have an adverse affect on FDI (Asiedeu et al., 2008). In addition, these types of risk have a more profound effect on FDI than other types ofinvestments (e.g., portfolio investment). One reason is that FDI is partially irreversible – many ofthe costs associated with FDI are sunk and therefore cannot be recovered if disinvestment occurs. Asiedu at al. (2008) derive three main results: (i) the threat of expropriation leads to underinvestment; (ii) the optimal level of FDI decreases as the risk of expropriation rises; (iii) under certain conditions, aid mitigates the adverse effect of expropriation risk on FDI.
Foreigndirect investment (FDI) has gained signifi cant importance over the past decade as a tool for accelerating growth and development of transition economies. It is widely believed that the advantages that FDI brings to the standard of living and prospects for economic growth ofthe host nation largely outweigh its disadvantages. Despite the growing interest inthe subject, to our knowledge, there is still no satisfactory empirical work which can explain the determinants ofthe spatial distribution of FDI fl ows into the separate regions of Roma- nia, one ofthe largest new EU-member states. Thus, this research attempts to fi ll this gap by using a primary data from a questionnaire that covers the entire transition period. The main goal of this study is to identify the main determinants ofthedirectforeigninvestmentsin Central, West and North West Romanian regions. Basically, the study is constructed so, that it will provide a list ofthe main strengths and weaknesses of Center, West and North West regions, that would infl uence a foreign investor to choose the proper location for a future investment when developing his strategy.
The flows offoreigninvestmentsin Brazil starting from the 1990s have called attention due to the magnitude ofthe invested value, the prevalence of properties acquisitions as a preferential way of carrying out these investments, and for the primacy ofthe operations involving rivals companies. This article searches for an explanation for the cycle offoreigndirect investment flows, which is happening in Brazil. Arguments were reconsidered on the existence of sole assets and the advan- tages of property and control as a basis for carrying out overseas investments, and to explicit their link with the M&As.
The difference inthe trade performances of China and India is very interesting because the two countries share a variety of common social and economic characteristics. Bot the countries adopted the heavy industry-oriented development policy and even launched their first Five-year Plan inthe same decade. China and India’s trade difference is mainly caused by the differences in their development strategies. Since the 1980s, China had already adopted the export-oriented development strategy in accordance with its abundance in labor. In contrast, India began to switch from the inward-oriented controlled regime to the outward-oriented regime only inthe early 1990s. The late adoption of an export- oriented development strategy partially results in India’s relatively lower export volume at present. China initially adopted a heavy industry-oriented development strategy after independence. However, China lacked sufficient capital to finance heavy industries, it had to overvalue its currency and adopt the import substitution strategy by setting high import tariffs for foreign products in accordance with the idea of infant industry protection (Tian and Yu 2011).
For the variable LogINF (inflation), that proxy the economic stability, it was expected a negative sign (Sun et al., 2002, Naudé, and Krugell, 2007). Our result is different: the coefficient is positive and significant at 1% level. May be the higher inflation rate allows, in Portugal, a specific type of FDI. It would be interesting to investigate this situation using a larger period of time.
The term “FDI incenives” covers iscal and inancial beneits. Fiscal incenives include full or parial holidays from tax; reducions inthe standard rate of tax; tax reducions condiional on reinvestment of proits; investment allowances and investment tax credits; accelerated depreciaion of assets; preferenial treatment of proit on exports; tax deducions based on speciic types of expenditure (e.g. R&D); and exempions from import duies on capital goods or other inputs (list adapted Financial incenives include: cash grants related to the value of assets invested or numbers employed or training costs; provision of subsidized faciliies such as factories or sites; provision of infrastructure related to new faciliies, such as roads and links to uiliies; and direct subsidies 16 .
The present paper is a formalization ofthe critique ofthe growth with foreign savings strategy that one of its authors has been doing in recent years. Although medium income countries are capital poor, current account deficits (foreign savings), financed either by loans or by foreigndirectinvestments, will not usually increase the rate of capital accumulation or will have little impact on it in so far as current account deficits will be associated with appreciated exchange rates, artificially increased real wages and salaries and high consumption levels. In consequence, the rate of substitution offoreign savings for domestic savings will be relatively high, and the country gets indebted not to invest and grow but to consume. Only when there are large investment opportunities, stimulated by a sizeable difference between the expected profit rate and the long term interest rate, the marginal propensity to consume will get down enough so that the additional income originated from foreign capital flows will be used for investment rather than for consumption. In this special case, the rate of substitution offoreign for domestic savings tend to be small and foreign savings will contribute positively to growth.
Foreigndirectinvestments are becoming very interesting in nineties for economic analysts and for economic policy makers in transition countries. Inthe early nineties, which are marked by the transition to a market economy, there was a significant inflow foreigndirect investment inthe countries of Eastern and Central Europe, which have become much more liberal to foreigndirectinvestments. The privatization processes, in manufacturing companies and inthe service sector, have enabled foreign investors buying shares inthe largest and most important Croatian companies. Measures and activities to attract foreigndirect investment and regulating the status offoreign investors, and the privatization of major enterprises, coincided with the most rapid growth offoreigndirect investment inthe world's history, what has happened in recent years ofthe 20th century. Foreigndirectinvestments are one ofthe main factors ofthe investment cycle of a particular country and they have a lot ofdirect and indirect effects on the growth and stability ofthe entire economy. When a company decides to invest in another country there are risks that investors should consider. The market is always changing and there is always present risk which means there are required constant changes to adapt in order to survive in such a market.
Effects of destruction of jobs have been observed especially inthe early days of transition and as the transition process has evolved, they reduced. Job cuts, absolutely necessary in restructuring is compensated by theforeign investors through the financial resources and especially the managerial one, that they provide and that do not exist at domestic level.. This will lead to streamline the company and soon create new jobs (both directly and indirectly) through the backwards and upwards links that foreign branch has inthe global production network. (Meyer, 2003). Analyzing the unemployment we may notice an increase iof this indicator for the former communist states during 1991-2000, ie inthe first stage of transition. This is a direct cause of restructuring enterprises leading to job cuts and unemployment. For Hungary the unemployment rate has a tendency of decline, possibly due to completion ofthe privatization process and high economic performances that have contributed to mitigate the negative effects of transition. Romania kept unemployment rates low in early years due to delay ofthe restructuring process and achieve double-digit unemployment rates, even in 1998, the year privatization process started an upward trend. For Poland high unemployment during the first phase of transition was one of macroeconomic problems most severe. Inthe second decade of transition, unemployment is reduced in most countries of Central and Eastern Europe, including Poland (even if a reduction of this indicator was achieved much later compared to other states)
Efficiency Seeking occurs when an organization enters in a new country, in order to benefit from economies of scale and scope (Dermirhan & Masca, 2008). Normally, this type ofinvestments occurs in a more advanced stage offoreign investment, since it aims to consolidate theinvestments by increasing the efficiency (Sârbu & Gavrea, 2014). In fact, companies choose to produce in countries in which one or more ofthe production factors are cheaper in relation to their productivity (Akpansung & Okun, 2013). In this case, the motivation is to economize inthe production factors in order to maximize the profits (Artige & Nicolini, 2005). In addition, companies opt for FDI in order to reduce sourcing and production costs. This is possible through the choosing of inexpensive labor and cheap inputs inthe production process. In other cases, companies can choose to change the location of their productions to near the customers, since organizations are highly sensitive to the changes ofthe customer needs. Additionally, companies can be motivated by the government incentives. Normally, government offer incentives, such as subsidies and tax concessions in order to attract FDI. Finally, companies decide to invest through FDI since this allows avoiding trade barriers, such as tariffs (Cavusgil et al., 2014).
c) on the impact ofthe spectacular grow ofthe international financial markets, the destination ofthe international financial founds modified as rapport between thedirect and the portfolio investments; hereby, inthe developed economies occur every day huge capital transfers on the share markets and extra-share markets. On the other side, for the under-developed economies, the portfolio investments are insignificant. For example, Romania has a very small daily transaction volume.
Investmentsin tangible assets are not less diverse than in finance. This category may include any material value, which allows to generate profits or increase the value of its own and is not dependent on any changes inthe stock market. However, due to relatively high labor intensity ofdirect investment for investor are more appropriate instruments for indirect investment. In particular, specialized mutual investment funds or general funds of bank management. Through these tools, allowing for indirect investment, it will be much easier to include tangible assets inthe investment portfolio.
The actual policy ofthe south-eastern countries is to support any kind offoreigninvestments, sometimes trying to control the dispersion ofthe capital within the territory and to somehow conduct these investments to regions whose development is wished. Theforeigndirectinvestments are the main levier from which the governments of these countries may use, in fully compliance with the market economy and fair competition. It is a transition approach to the pragmatic policy ofthe experienced developed countries, where foreigninvestments are not seen as ultimate resource for regional development, but also as cost generating. While a pragmatic government will always analyze first if a package of incentives granted in order to support investments generate more public costs than their benefits, the south-eastern Europe countries are more opened to foreign capitals.
It is known that membership in regional economic integrations has an important effect in determining foreigndirectinvestments (FDI). In this study, the effect of regional economic integration on FDI was empirically analysed for ASEAN and MERCOSUR established by developing countries. The model constructed in this paper included a dummy variable for regional economic integrations for the 1980-2007 period and fixed effects panel data method is used. According to estimated results, membership to regional economic integrations together with other factors has increased FDI flows. With the current increasing regionalization trend, this study suggests that in order to attract higher amounts of FDI, developing countries should emphasize regional economic integration, or at least they should make trade agreements.
Regarding consolidated budget, the positive effects are recorded where entities created through FDI pay taxes and employ salaried staff. Instead, if privatization is done with restructuring of staff, will be recorded additional expenses, properly unemployment benefits and payroll tax revenues fall. The budget may be affected by the granting of tax incentives (which may generate lower revenues FDI implementation phase, but may be represented determinant elements for attracting foreign investors and the positive impact will be registered on long-term). In Romania the transition to a market economy has influenced the type of FDI, inthe sense that most aimed the investment through privatizations. This has had an impact on the budget inthe negative sense, a recovery recorded inthe period in which the greenfield investment became prevalent.
Abstract: This article is meant to reveal the way in which the theory of interconnections between systems and sub-systems partici- pating to the creation of economic value, which have been described by professor Paul Bran in his book Economics of Value is outlined in practice and how its analysis may help us to control the effects ofthe policies applied at the level of each macroeconomic sub-system.
In terms of FDI, in 2009, the area most affected by the crisis were metallurgy, food, beverages and tobacco, wood products, including furniture, computers, radios, TV, communications, textiles, clothing, leather, financial intermediation and agriculture. Inthe field of construction and real estate, we recorded the biggest decline in 2010, with a gap increasing year by year. By default, the decrease in FDI has negative repercussions on the dynamics of production and exports of these industries and their competitiveness. Concerning guiding theforeigndirect investors towards economic branches (Chart no. 3), FDI were located mainly in manufacturing (32% of total). In this industry, best-represented industries are
There have been two previous mass privatization programs in Uzbekistan, the first announced in late 1998 and the second in late 1999. Neither were particularly successful, largely due to continued foreign currency exchange restrictions and the Uzbekistan Government’s reluctance to allow foreign investors to obtain control over the most attractive enterprises offered for privatization (Braude, 2003). Many ofthe enterprises listed inthe 2001 Privatization Program have been previously subject to privatization, including the seven joint stock companies of Uzbekneftgaz and the Uzbekneftigaz Holding Company. With one exception, as previously, all ofthe Uzbekneftigaz companies are slated to remain majority controlled by the state. Inthe oil and gas sector, the Uzbek government has been offering a 49% stake in UzbekNefteGaz (UNG), but until recently, little progress seems to have been made (Anonimous, 2004). To improve its chances of a sale, the government is again restructuring UNG to make it more profitable. The government has also been offering to sell its 44% stake of Uzneftegazdobycha (UNG's oil and gas exploration arm), 44% of UzTransGaz (in charge of gas transport and the country's gas pipelines), 39% of UzNeftePereRabotka (oil refining), and 39% of UzBurNefteGaz (a drilling company) (Anonimous, 2004).
In Croatia, most foreign investment comes down on buying majority ownership in domestic valuable companies, which causes reduction in employement. Previous investments did not raise the competitiveness ofthe economy as it was expected. And the revenues were used for state budgetary purposes. There is a lack in greenfield investments for which is responsible unfavorable investment climate and inadequate institutional framework. In Republic of Croatia, it is necessary to make an effort to attract foreign investors who would be willing to invest. Due to the lengthy process of attracting foreign investors and because of past experiences, short-term and medium-term policy should be oriented towards the eu countries, and only inthe long term Croatia can think of other markets. To attract investment, both domestic and foreign ones, it is necessary to create a good business surrounding, only then we could expect contribution of FDI to economic growth Croatia. In conclusion, we can say that Croatia has not yet taken full advantage of all its resources and comparative advantages over the countries ofthe region, which are primarily favorable geographical position, mild Mediterranean climate, and educated workforce which are just some ofthe positive factors to attract theforeigndirect investment inthe Croatian economy. Just mentioned facts indicate that now is time to design effective economic development strategies, and to encourage foreigndirect investment. Despit the fact that Croatia is a small country, it has a very great potential that has to be economically exploited to positively affect the Croatian economic condition.