The impact of foreign direct investment on the unemployment rate in the Republic of Serbia

Abstract

This paper analyzes the Republic of Serbia in the period of transition from a planned economy with special social, political and economic conditions towards an open economy through the inflow of FDI and their impact on the unemployment rate. Creating the conditions for an inflow of FDI started in order to increase the employment rate. Since 2000, most FDI had entered the sector of non-tradeable goods which led towards increasing unemployment. That has had negative effects on Serbia from the development viewpoint, since the country needs FDI in the sector of non-tradeable goods, as they encourage productivity, technological progress and employment. Foreign investors in Serbia were primarily interested in profiting from the privatization (brownfield investments) of former state-owned companies which led to the rationalization of the privatized companies through redundancies. The benefits that Serbia has had from the inflow of FDI are significant transfers of technology and enhancement of competition on the local market. On the other hand, negative effect is increase of the unemployment rate at the national level.

Keywords

• brownfield investments
• FDI
• greenfield investments
• unemployment rate