Foreign direct investment: Motives, risks, and double standards

• Main Authors: Avramović Nenad M., Đukić Stanimir B.
• Format: Article
• Language: English
• Published: Institute of Serbian Culture Priština, Leposavić 2018-01-01
• Series: Baština
• Subjects: foreign direct investment; capital market; motives; non-commercial risks; transition; protection; legal system
• Online Access: https://scindeks-clanci.ceon.rs/data/pdf/0353-9008/2018/0353-90081846077A.pdf

The international movement of capital, and especially foreign direct investment, has become one of the initiators of globalization of world production and trade in recent decades. Liberalization of the market of ex socialist economies and privatization of state and social property was an additional stimulus to the growth of foreign investments. The entire concept of international lending has imposed a consensus on which transition countries (un) willingly agreed: foreign investment has become the main source of capital for structurally adjusting their economies to the new global economic system. Foreign direct investment exists when an investor from one country acquires property in another country in an amount not less than 10 percent with the intention to manage that property. SDIs take place between companies of highly developed countries, but also in the relations between economically developed and transition countries, i.e. underdeveloped ones. The main motive of multinational companies as investors are high profit rates, asset value increase, growth in competitiveness and the emergence of new markets. The light motive of the country of the importer of capital is the forced substitution of the lack of domestic accumulation, the increase in production and employment, and the consolidation of the balance of payments. Foreign investment entities are exposed to commercial as well as political risks. Out of non-commercial risks, the insurers are protected by diplomatic and international legal protection measures, which are mostly standardized through international practice. The Republic of Serbia has built a competitive national investment and legal framework for attracting foreign investments, which is in line with international standards. This is also confirmed by the 65th place on the Global Competitiveness Index of the World Economic Forum in 2018. Despite the fact that the Republic of Serbia has a unique legal system, it does not apply to the territory of the AP Kosovo and Metohija, which is contrary to the basic principles of international public law and law in general.