The effect of legal safety on foreign direct investment and economic development

Abstract

Foreign direct investment is one of the most important factors of economic development in modern business conditions. The growing importance of foreign direct investments is conditioned by the processes of globalization, integration and liberalization of market conditions of business operations. It has been further prompted by numerous activities of the state importing capital with the aim of improving the business climate and stimulating the inflow of foreign capital. The most important segment of the overall business environment is legal safety, as a fundamental principle for all democratic countries. Legal safety contributes to accelerating the inflow of foreign direct investment. The author points to the link between legal safety and foreign direct investment, as well as their impact on economic development, based on the assumption that if there is no legal safety, there are no foreign investments. Therefore, bearing in mind the importance of foreign direct investments, the author analyzes the impact of legal safety on their inflow, the constraints related to attaining legal safety in the Republic of Serbia, as well as the indication of the indirect operation of legal safety on the economic development of states.