The impact of the state on inflow and efficiency on foreign direct investment

Abstract

It is widely known and well documented in practice that foreign direct investment already two decades dominating on the global level as a promoter of economic growth and development, particularly in developing countries and countries in transition. However, the use of foreign direct investment in a manner that contributes to the long-term development goals, is the main task and the main challenge facing policy-makers in countries in transition. Practice has proved that, in order to attracting larger flows and fully absorbing the benefits of foreign direct investment, governments in the economies in transition should not only follow the 'open door' policy for foreign direct investment, but also to more liberal regime for foreign direct investment used in combination with other measures of policy support. Serbian authorities during the last ten years achieved remarkable results in terms of creating a favorable environment for attracting foreign direct investment. However, in the previous transition period, it is achieved a relatively low level of FDI inflow, followed by relatively minor modification to the model entry, points to the urgent need to undertake measures aimed at improving the quality of the environment. The aim of this paper is to highlight the importance and role of government in stimulating the inflow and creating the conditions for maximum use of the positive developmental effects of foreign direct investment, and based on comprehensive analysis of investment environment in Serbia points to the possible directions for its improvement.