Page 67 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.81, # 1, 2024, pp. 65-75

It is an important channel for the transfer of technologies, and also contributes to the
development of international trade through access to foreign markets (OECD 2024).
The main characteristic of foreign direct investment is that it imposes effective control
over the foreign business or at least substantially influences its decision-making
(Hayes 2023). By contributing to economic growth, job creation and integration into
global value chains, foreign investment benefits both the host and home countries
(European Commission, Investment 2023). The benefits of FDI include job creation,
increased productivity and gross domestic product (Le 2021).

Given the benefits of foreign direct investment, most countries, regardless of their
level of development, devote significant resources to attracting it (The World Bank,
Retention and Expansion of Foreign Direct Investment : Political Risk and Policy
Responses : Summary of Research Findings and Policy Implications 2019). Based on
international studies and practical experience, it can be said that direct foreign
investments in the country are determined by a stable environment and investment
climate (Budget Office of the Parliament of Georgia 2019).

The EU is the world's leading provider of foreign direct investment by EU resident
investors to the rest of the world (outgoing investments) at the end of 2022 amounted
to 9.382 billion euros (European Commission, Investment 2023). The European
Union is one of the most open places for investment in the world. Since 2009, the EU
has implemented foreign direct investment policy on behalf of EU members as part
of the EU's common commercial policy.

Through investment promotion, the EU tries to encourage the creation of a more
transparent, efficient and predictable business climate for investors. This includes the
publicity and easy access to information on investment rules, as well as the reduction
of delays in obtaining permits (World Trade Organization 2020). At the sectoral level,
EU member states have almost no restrictions on foreign direct investment in the
manufacturing sector.

The process of economic, monetary and institutional integration in the European
Union was the main driver of foreign direct investment. Accession to the European
Union has significantly increased bilateral investment flows between member states.
On average, between 2000 and 2007, EU countries attracted 43.1% of the world's
foreign direct investment (Carril-Caccia და Pavlova 2018). The Great Recession
caused by the financial crisis of 2007-2008 adversely affected the EU's ability to
attract foreign direct investment, although the fallout was less pronounced in the euro
area than in the non-euro area.

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