Current Issues of the Formation of the Investment Environment and Potential in Georgia

Nearly all developing countries actively seek capital and technology from the advanced countries. Although private direct foreign investment (mainly in the form of multinational enterprise) is viewed with ambivalence by many developing countries, it is nonetheless true that direct investment remains a substantial source of capital and is sometimes the only source of specific technologies. Indeed, given the slow growth in official external assistance, developing countries are becoming more, not less, dependent on direct foreign investment. While disbursements of official development assistance by the OECD countries rose 43% from 1961 through 1970, direct investment flows rose almost 90% over the same period. In the later year, the flow of direct investment was more than two-fifths of all official assistance, $3.2 billion compared to $7.8 billion.1 Furthermore, the United States and other major capital exporting countries would prefer, for economic as well as ideological reasons, to channel more of their capital outflows to developing countries through private investment. It is highly probable, therefore, that developing countries will continue to rely on direct foreign investment in the foreseeable future to carry out their development programs. It is against this background that the present study seeks to identify the empirical determinants of direct foreign-investment flows in the manufacturing sectors of developing countries. Our purpose is to select from the many economic, social, and political features of a developing country those features that are critical to making that country attractive or unattractive to private foreign investors. Available empirical studies are limited

საინვესტიციო გარემოს შეფასების აქტუალური საკითხები

THE PURPOSE OF THE ARTICLE is to study methodological approaches to assessing and realizing the investment potential of the country’s economy in the context of sustainable development. RESEARCH METHODS. In writing the article, the following research methods were used: analytical method – to study the indicators of the country’s investment potential, study trends and previous studies in this area; theoretical analysis – in analyzing modern theoretical approaches to assessing and realizing investment potential in the context of sustainable development; method of empirical research and comparative analysis – to identify advantages and disadvantages; case study – to identify factors of successful realization of investment potential, taking into account the principles of sustainable development. PRESENTING MAIN MATERIAL. In the context of globalization and increasing environmental risks, the issue of rational use of investment potential in the context of sustainable development is of particular relevance, where investments are becoming a key element that ensures economic growth, improvement of social welfare and environmental protection. The investment potential of a national economy is a set of resources and conditions that enable the attraction and efficient use of investments in various sectors of the economy, including: economic resources; social resources; natural resources; and institutional resources. Among the methodological approaches to assessing investment potential, the most popular is the classical approach, where the assessment of investment potential is based on the analysis of such indicators as the level of domestic and foreign investment, GDP structure, level of savings and investment activity of enterprises. In the context of sustainable development, the assessment of investment potential takes into account additional factors such as environmental risks, the level of social responsibility, and the availability of green investment projects. Innovations and the introduction of green technologies are key elements in the context of sustainable development, where government support is directed to funding research and supporting green investments. Countries that have succeeded in realizing their investment potential in the context of sustainable development are characterized by: a developed institutional framework (availability of effective institutions that support investment activities), a high level of innovation activity (active implementation of innovations in various sectors of the economy), and effective environmental policy (active state support for environmentally friendly technologies and projects). Therefore, approaches to assessing and realizing investment potential take into account the main aspects of innovative development and the introduction of green technologies, where the state helps to create a favorable investment climate and support sustainable development by stimulating investment, developing infrastructure and supporting innovation. CONCLUSIONS. In today’s world, the concept of sustainable development is central to the economic development strategies of countries, where one of the key aspects is the effective use of investment potential to ensure sustainable economic growth. The main approaches to realizing investment potential include: creating a favorable investment climate (legislative regulation that stimulates investment in low-carbon sectors; reducing bureaucratic barriers for foreign and domestic investors; developing infrastructure that supports sustainable production and consumption); integrating sustainable development principles into investment projects (assessing the impact of projects on the environment and social aspects; implementing investments in energy efficiency and renewable energy). It has been established that the realization of the country’s investment potential in the context of sustainable development requires an integrated approach and systematic integration of economic, social and environmental requirements, which requires active cooperation between government, business, academia and the public to achieve common goals of sustainable development and provide future generations with a stable and environmentally friendly living environment. KEYWORDS: investment potential; national economy; sustainable development; methodological approaches; economic development of the country; economic growth; assessment and implementation; investment climate; investment projects; financing; infrastructure.

Does foreign investment crowd in domestic investment? Evidence from Vietnam

Актуалізовано виключне значення іноземного інвестування в розвитку країн. Представлено статистичні дані щодо сумарних обсягів прямих іноземних інвестицій в економіці України протягом 2010—2017 рр. Ідентифіковано причини низького темпу приросту прямих іноземних інвестицій в українську економіку за останні роки. Узагальнено позиціонування України у світових міжнародних рейтингах. Продіагностовано географічну структуру прямих іноземних інвестицій. Акцентовано увагу на проблематиці надходження інвестицій з офшорних зон. Визначено чинники, що визначають низький рівень інвестиційної привабливості України, які диференційовано за двома блоками: перший з яких визначається характеристиками держави як системного об’єкта інвестування, другий – несприятливим інвестиційним кліматом. Акцентовано увагу на низькому стимулювальному впливі прямих іноземних інвестицій на становлення виробництв вищих п’ятого і шостого технологічних укладів. Обґрунтовано пріоритетні напрями активізації іноземного інвестування: створення сприятливого інвестиційного клімату в країні, забезпечення відповідності розподілу прямих іноземних інвестицій стратегічним завданням економічного розвитку держави. Відзначено об’єктивну необхідність реального, а не декларативного поліпшення інвестиційного клімату, зменшення бюрократичних процедур, спрощення регуляторно-реєстраційних вимог і вжиття радикальних заходів щодо дієвого захисту інвестицій, розроблення і імплементацію раціональної інвестиційної концепції, яка забезпечить підвищення інвестиційної активності за наявності певних економічних передумов.

Private investors respond to risk return tradeoffs. The policy environment and regulatory framework significantly influence risk as well as return in the power sector. Power sector reform and policy initiatives for enhanced private participation have been undertaken in a number of developing countries. The economic crisis faced by India in the early 90s led to opening up of the power sector for private investment there. Major policy initiatives were undertaken to encourage private and foreign investment. The investment climate was further strengthened by gradual restructuring of state electricity boards (SEBs) and regulatory reforms. More recently, the Electricity Act 2003 has enabled competition in the sector and improved the policy environment for private investment. Abolition of the single buyer model and phased access to consumers has opened substantial potential for private investment in the sector. The scale of private investment in the Indian power sector is not as encouraging as in the case of some reforming countries in Latin America and Asia. This paper undertakes a comparative analysis of the policy and regulatory environment in the power sector in Argentina, Brazil, People’s Republic of China, India, Mexico and Thailand. We find that the scope, pace and sequencing of the reform process has significant influence on private and foreign investment. Policy clarity and independent regulatory institutions reduce risk perception of investors as well as lenders.

During the late 1970s and early 1980s, many African countries experienced a profound slowdown in economic growth. The growth rate of real per capita GDP fell from 0.4% per year during the 1973-80 period to 1.2% per year during the 1980-89 period.' The causes-internal and external-of Africa's economic decline and the strategies for restoring economic growth are much debated. Nevertheless, broad consensus has emerged on the importance of (i) increasing total investment and (ii) promoting private-sector development and increasing its share of total investment for long-term growth.2 It is widely recognized that gross domestic investment fell substantially in Africa during the 1980s and remains severely depressed across the region. The proportion of total domestic investment in GDP fell from 20.8% per year during 1973-80 to 16.1% per year during 1980-89. In some countries, investment has fallen to less than 10% of GDP-a level that is insufficient even to replace depreciated capital. In Africa, the minimum investment needed to replace depreciated capital is estimated at 13% of GDP.3 In recent years, there has also been a growing recognition among many African leaders, faced with new realism and pragmatism, that the private sector could play a significant role in economic development. The focus in the longer term of structural adjustment programs and sectoral reforms adopted by these countries is on creating more appropriate incentives and a framework for private-sector development as the basis for achieving sustainable economic growth. In addition, multilateral and bilateral institutions have developed new initiatives with priorities for private-sector development. In 1989, the International Finance Corporation, an affiliate of the World Bank, es-

The article considers foreign direct investment as an economic phenomenon. It is noted that the investment climate of the country plays a special role in attracting foreign capital. The main factors of formation of investment attractiveness of Ukraine, which contribute to the expansion of its investment ties, are named. The East Invest - 2 project and the main recommendations for improving the efficiency of attracting foreign investment into the economy of Ukraine are considered. Particular attention is paid to identifying the threats that foreign investment can pose to the host country, such as: the relocation of hazardous environmental production, control over raw materials, capital flight and others. The main tendencies of foreign investment in Ukraine are considered. Also, the study found that increasing productivity is one of the positive effects of foreign investment, as it is associated with a high level of innovation in such investments. In Ukraine, labor productivity in enterprises with foreign investment is on average 3.5 times higher than in enterprises without them. This is, in particular, due to a larger amount of investment in fixed capital per employee, which in firms with foreign capital is more - 5 - 7 times. In modern economic conditions, the investment environment has a significant impact on attracting foreign investment, which in Ukraine remains not the most favorable. The main factors of the need to further increase foreign investment in the economy of Ukraine are indicated. The main problems that hinder the processes of attracting foreign investment to Ukraine have been identified. At the same time, the main aspects of Ukraine's attractiveness as an investment recipient have been identified. Outlining the main directions of formation of a favorable investment climate in Ukraine. The directions of further activity of Ukraine concerning formation of effective strategy of increase of investment attractiveness are named. The ways to stimulate investment are identified and the objects of investment that can bring more profit to the investor at the present stage are identified.

The article establishes that investments are necessary for the enterprises for the organization of effective process of production of qualitative production, ensuring profitable economic activity. The state is obliged to regulate and promote the creation of an attractive investment climate in the country, attract and direct investment in priority sectors of production to meet the priority needs of the population. Studies show that the economy of Ukraine now cannot meet the requirements of Western investors. Among the main reasons for the unattractiveness of the Ukrainian investment climate are the slow pace of reforming the economy, the legislative framework, as well as the irrational distribution of domestic investment – private and public, high taxes, excessive regulation and politicization of the economy. It is proved that when determining the feasibility of investing in the national economy, a foreign investor should also take into account the peculiarities of development and the available set of opportunities of each administrative-territorial unit. The lack of a sound methodological approach to the assessment of development does not allow a potential investor to determine the real state of affairs in a particular region and the country as a whole, which, as a result, can lead to a decrease in the volume of foreign capital in the domestic economy. The level of investment attractiveness of the Kherson region is estimated. It is revealed that the main reason for miscalculations in attracting foreign investment is that in Ukraine there is still no systematic policy on the formation of the investment climate. The results of the study can be used by all stakeholders, including public authorities and local self-government, leading enterprises in the region.

The article reasons that foreign direct investments play a crucial role in the economy of every world country, since they ensure the effective functioning of economy and economic growth. It is found that the volume of foreign direct investments into the economy of a certain country depends on the investment climate, whose main indicator is the position of countries in international investment ratings that allows us to evaluate the investment climate, possible investment risks and the degree of investment safety.The subject of the study is the investment climate in Ukraine and its position in the main international investment ratings. The research methods used in the study include theoretical generalization, comparison, abstraction, analysis and synthesis.The paper presents a list of the main international investment ratings that should be taken into account by potential investors while analyzing the investment climate and investment image of the country and considering the practicality of investing into the economy.The current position and dynamics of Ukraine’s rankings in these ratings are analyzed: according to Global Competitiveness index – 81st position among 137 countries; according to index of Economic Freedom – 150th position among 180 countries; according to Ease of Doing Business index – 76th position among 190 countries; according to Investment Attractiveness index – 134th out of 174 countries. Based on the analysis of Ukraine’s position in the main international investment ratings, it is concluded that the investment climate in Ukraine is not favorable; therefore, Ukraine needs to take measures to improve its investment climate and its positions in these ratings in order to attract foreign investment to the required extent.

The article examines the current state of attracting foreign investment in recent years. The dynamics of foreign investment are presented, and monitoring of attracting foreign investment into the economy of Ukraine is carried out. The sectors of the national economy of Ukraine that attract the most foreign investment are characterized. The reasons that have a negative impact on the volume of their attraction are substantiated. The focus is on the key factors influencing the attraction of foreign investment, the investment field, and a favorable investment climate. Methodology. The sectoral structure of the distribution of foreign direct investment and their distribution by type of economic activity are studied. It is established that in terms of sectoral attractiveness, the priority areas for investment are industry and agriculture. The necessity of attracting foreign investment in modern conditions is substantiated, the main problems of foreign investment inflow are outlined and the main ways of solving them are proposed. The role of foreign investment in the economic growth of Ukraine is considered, factors that provide a positive impact on the investment climate and problems of forming a favorable investment environment are identified. Investments, including foreign ones, are not only a mechanism for development, but also a way of regulating the economy through capital transfers. Results. The purpose of the article is to analyze foreign direct investment as a factor of economic growth of the state. At the current stage of market development, foreign investments are the main source of obtaining the latest competitive technologies. At the same time, the chances of applying best practices in the field of obtaining new technologies and cash circulation during a protracted crisis are increasing. Practical implications. Therefore, among the problems that require immediate resolution, one of the first places is occupied by the problem of lack of investment resources in the Ukrainian economy and the creation of favorable conditions for their accumulation. Value / originality. It is worth noting that the processes of economic growth are determined by the volume and growth rates of investments, their structure and qualitative characteristics. It has been proven that for the full operation of enterprises and business structures there is a need to finance their current activities, introduce new technologies, insure existing risks, and develop trade and transport infrastructure.

Escalation of geopolitical tension after the beginning of the Special Military Operation resulted in severance of many well-established economic ties between the Russian Federation and countries that are now considered "unfriendly". In particular, as a result of sanctions pressure and retaliatory counter-sanctions, the situation in the Russian Federation's foreign direct investment sector has changed, both in terms of partner countries and in terms of investment environment elements. The assessment of Russia's investment climate by a number of international institutions not only underwent a significant negative change during the period of economic and political uncertainty in early 2022, but also failed to improve against the backdrop of actual growth in the Russian economy in subsequent periods. At the same time, the investment rating is one of the main factors in initiating capital inflows into the national economy, which increases the relevance of the topic under study after the geo-economic shifts that have occurred. The purpose of the study is to identify signs of a structural underestimation of investment climate factors in the Russian Federation by a number of international organizations, such as the World Bank and the Big Three global rating agencies, both before 2022 and after the start of the SMO, amid escalating geopolitical tensions between Russia and "unfriendly countries." Materials and methods. The materials for the study were estimates of the components of Russia's investment climate, calculated and published by international organizations based on their own methodologies, as well as statistical data on Russia's macroeconomic indicators provided by the World Bank. The study used regression analysis, and the author of the article presented a formula based on the World Bank methodology that allows a number of separately calculated indicators to be combined and their values be converted into a composite index. In addition, general scientific research methods such as analysis and synthesis, as well as methods of induction and deduction were used in the course of the work. Results. The article presents a segmentation of investment attractiveness factors into "economic" and "political" components with a further assessment of the relationship between these two components by regression analysis. The results obtained also reflect the conjuncture of the area under study until 2022, demonstrating structural underestimation of certain factors in Russia's investment climate that existed even before the start of the Special Military Operation. The results of the conducted research suggest that it is possible to judge on identifying the signs of a structural underestimation of Russia's investment climate by international institutions, both before 2022 and after the start of the Special Military Operation. Conclusions. The values of a number of analyzed macroeconomic indicators of the Russian Federation, which are both economic factors of the investment climate, were characterized by growth either in 2022, in 2023, or in both periods. At the same time, assessments of Russia's investment climate by the Big Three international rating agencies and the World Bank were relatively low both prior to the start of the SMO, underwent a significant negative change after 2022. Inconsistency between the above-mentioned "economic" and "political"’ factors of the investment climate can be explained by actual absence of a noticeable correlation between the two groups of parameters, which, in turn, was established through regression analysis.

In order to optimize the country's investment relations, it is necessary to introduce a system of correct assessment of investment activities, planning and implementation of such effective measures by the state, which will contribute to the elimination of existing gaps in the investment environment, its improvement and economic growth of the country. A foreign investor invests capital resources only in countries with a stable investment environment, which in turn is characterized by the confidence of the local investor. A healthy investment environment is vital for the economic growth of the country, which has become especially relevant in the light of modern global challenges, therefore, FDI is a form of global business relationship that is an integral part of the stimulating factor of an open market economy. Despite the extensive discussion of the essence of the investment environment and the methodological issues of its assessment in foreign and Georgian scientific literature, it became especially relevant after the Covid-pandemic crisis and then the Russian-Ukraine war conflict. According to the trend established in recent years, the national economic system of the world countries, especially in developing countries, is directed towards the growth of investment flows. This trend has become vital for the rehabilitation and development of the post-Covid economy. For the development and modernization of the economy of Georgia, it is necessary to make the maximum use of the opportunities of direct foreign investments and to create an appropriate environment, which determines the effectiveness of this process. The task of the research is to reveal both theoretical-methodological and pragmatic aspects of the current investment environment in Georgia. Based on the results of the research, the formation of suggestions and recommendations about the role of the investment climate in the country's economic growth. The subject of the research is direct foreign investment on the example of Georgia and its importance for the economic growth of the host country. The object of the research is the investment climate and the role of foreign investments in the process of its improvement. Article in Georgian.

Stimulating the Economy of Southeast Europe.- Setting the Stage for Stability and Progress in Southeast Europe.- The Scenario for EU Accession by Southeast European Countries.- Infrastructure Finance, Accession, and Related Policy Issues in Southeast Europe.- Making It Easier to Do Business in Southeast Europe.- Financial Regulation for Stability and Protection in Southeast Europe.- Financial Sector Development in Southeast Europe - The Roles of EU Accession and Basel II.- Implementing European Standards of Banking Regulation in Georgia.- Issues Concerning Foreign Banks' Operations in Bosnia and Herzegovina.- The Role of Foreign Banks in SEE.- The Impact of Basel II on Banking in Albania and Southeast Europe.- Financial Stability in Southeast Europe - Basel II and the Challenges Ahead.- Bankers' Perspectives - Dynamic Banking in the Changing Market of Southeast Europe.- Bankers' Perspectives - Dynamic Banking in a Changing Market.- Evolution of the Banking Sector in Southeast Europe - The Role and Business Strategies of Domestic Banks.- Financing Small and Medium-Sized Companies.- The Business Strategies of Domestic Banks in the Long Run - SME Lending as an Attractive Market Segment.- Building a Market Niche Also Builds a Market - Opportunity Bank in Montenegro.- Clients' Perspectives on Access to Financial Services for Micro and Small Enterprise in Southeast Europe.- Clients' Perspectives - Providing More Effective Financial Services for Micro and Small Enterprises.- Access to Finance: Issues and Opportunities in Southeast Europe.- Nonfinancial Obstacles to SME Financing in Serbia.- Constraints to Business Development in Bulgaria and the Case for Action.- Degrees of Competition in Serving Target Groups - They May Be Closer than You Think.- A New Approach to Business Development Services in Southeast Europe.- Looking Ahead - Public-Private Partnerships in the Financial Sector in Southeast Europe.- Public-Private Partnerships for Financial Development in Southeast Europe.- Replicable and Transparent PPP Models for Financial Sector Development.- Using PPPs to Facilitate Transactions in Financial Markets.- Sustainable Microfinance Banks - IMI as a Public-Private Partnership in Practice.- Opportunities for Public-Private Partnerships in Financial Sector Development.- Public-Private Partnership - Results in the Banking Sector in Southeast Europe.- Microfinance Investment Funds - An Innovative Form of PPP to Foster the Commercialisation of Microfinance.- Summary and Conclusions.- An Overview of Banking, Financial Regulation, and Access to Financial Services in Southeast Europe in the Context of EU Enlargement.

The article analyzes the factors affecting China’s investment attractiveness, the features of creating a favorable investment climate in China, and investigates new trends of FDI in China. The article highlights the main directions of attracting foreign direct investment in the Chinese economy. The paper aims to systematize the theoretical aspects of the state’s investment attractiveness and analyze the investment attractiveness of the Chinese economy at the present stage of development. The purpose of the article is to determine the PRC’s contribution to global sustainable development, taking into account the fact that the PRC is strengthening its position in the world arena due to the inflow of foreign investments. The article initially examines the role of foreign direct investment in the development of the state’s economy. Each country has a specific approach to attracting foreign investment, which is predetermined by the level of socio-economic development, the degree of external openness, and the established objectives. Therefore, the first stage of the research was an analysis of investment inflows and outflows. Changes that took place due to the implementation of the “open door” policy were considered. Then the advantages and disadvantages of China’s policies aimed at stimulating foreign investment were analyzed in detail. We studied the state and dynamics of investment processes in the PRC, examined the specifics of the regional and sectoral structure of foreign investment in China, evaluated the economic essence and classification of foreign investment, forms and methods of state regulation of foreign investment, as well as some aspects of the legal regulation of investment activity in China. We have systematized the main advantages and risks of the PRC investment climate. It was found that, despite the significant investment attractiveness of China, there are many investment risks. Still, the Chinese government continues reforms aimed at improving the investment climate of the state. A review of China’s position in the ratings of investment attractiveness, such as the Ease of doing the business score, the Global Competitiveness Index, and the Global Sustainable Competitiveness Index was carried out. It was made an intermediate conclusion that foreign capital is increasingly rushing to developing countries, especially to the dynamically developing economies of the BRIC countries, the undisputed leader in attracting foreign investment among which is China. The work results give every reason to predict the growth of foreign investment in the PRC’s economy since the country is characterized by stable and positively dynamic development. It is also assumed that the inflow of investments into the PRC’s economy is reciprocal since China is smoothly turning from a recipient of investments into an investor ready to contribute to global sustainable development.