THE IMPOSTANCE OF THE INVESTMENT ENVIRONMENT FOR DIRECT INVESTMENTS OF FOREIGN CAPITAL

Abstract

Based on experiences of european transition countries, in this paper, stability of investment environment is named as the key factor regarding FDI inflow increase. Positive impacts of Foreign direct investments (FDI) are confirmed in the most of empirical analysis. Negative effects are, on the other hand, mostly related to employment decrease due to the entry of foreign companies through the privatization process, low competitiveness of domestic enterprises comparing to forign firms, and grate share in overall import. Presense of export orientated foreign companies had the possitive impact in all cases, almost without exeptions. Optimal, principally stable investment environment, was substantially important for greenfield projects in all european transition countries. There is no doubt that Foreign direct investments are needful and extremely important for the Republic of Serbia, especially because of the investment package consists not only of capital, but also including new technologies, management and organization knowledges, market access, etc. Unfavourably situation regarding unemployment is evident and privatization process is near the end, so investment climate have to be improved in the nearest future in order to attract greenfield investments (which include new job creations). It means that grate efforts have to be concentrate on preserving the political stability and upgrading legal safety. Possibly extension of the political crisis should have particularly negative impact on FDI flows in Serbia, not to mention that greenfield investments shouldn’t be expected under those circumstances.

Keywords

• Foreign Direct Investments (FDI), European transition countries, Investment environment