Page 94 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 1, 2023, pp. 94-105

THE EFFECT OF FOREIGN DIRECT INVESTMENT ON

AZERBAIJAN’S NON-OIL GDP

ORKHAN DADASHOV

Azerbaijan State University of Economics (UNEC)
E-mail: [email protected]

Received: February 10; accepted June 05, 2023; published online June 26, 2023

ABSTRACT
This paper examines the effect of foreign direct investment (FDI) on Azerbaijan's
non-oil GDP. Azerbaijan's economy has long been dependent on its oil sector and
diversifying the economy has become a priority for the government. FDI is seen as a
potential source of investment that can help diversify the economy and promote
growth in non-oil sectors. This study aims to investigate the relationship between FDI
and non-oil GDP in Azerbaijan and to provide insights into the factors that influence
the success of FDI in promoting economic growth. The study uses a quantitative
research method, and the data is collected from the World Bank and the Central Bank
of Azerbaijan. The results of the study suggest that FDI has a positive effect on
Azerbaijan's non-oil GDP, particularly in the manufacturing and services sectors.
However, the study also highlights the challenges that FDI faces in Azerbaijan,
including the lack of infrastructure, bureaucratic barriers, and political instability. The
findings of this study have important implications for policymakers in Azerbaijan, as
well as for investors who are considering investing in the country.

Keywords: foreign direct investment, diversifying the economy, non-oil sectors,
gross domestic products, Azerbaijan economy.

JEL Classification: F21, F23, O16

THEORETICAL ASPECT OF FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI) refers to the investment made by an individual,
company or entity in one country (the "investor") into a business or enterprise in
another country (the "host country"). (Dunning & Lundan, 2008). FDI involves a
direct ownership interest in the business or enterprise in the host country, with the
investor having control or influence over the management and operations of the
foreign enterprise.FDI can take several forms, including establishing new subsidiaries
or branches, acquiring existing enterprises, or creating joint ventures with local firms.

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