Direct Foreign Investments in Serbia – a Factor in Promoting Consistent Economic Growth
October 13, 2017 by Nebojša Stanković
Foreign investments play a crucial role in the economic growth of a country. It does not only stimulate economic growth, but overall progress of a country. Through the process of foreign investments, a country such as Serbia experiences reduced unemployment rates, higher GDP, penetration of foreign markets, as well as higher competition in the local market. These are only some of the benefits a country receives from direct foreign investments.
Economic growth is directly correlated to the positive results of active and healthy economic activity. It refers to the growth of overall country income, as well as growth in per capita income, that is, the income based on increased production per capita.
This economic growth is depicted by a macroeconomic point of view, which implies that the economic growth is directly correlated with the growth of GDP. In other words, the better the economy of a country is, the more stable the whole country is, making it a great investment opportunity for foreign companies.
It is also important to note that economic growth is directly related to economic progress. However, having economic progress does not mean that economic growth is automatically achieved. It is necessary for time to pass, so that the economic progress can make a positive impact on economic growth.
Furthermore, the financial state of the country is not the only parameter that affects economic growth. Strength of law, adoption of new laws and their utilization also play an important role in the whole process. Also, when you add technological advancements made by the country (in the form of production modernisation) it is clear that multiple different elements affect the economic growth of a country.
The following are the main indicators of economic growth and economic progress in a country.
The first and most perceived indicator is GDP. However, it is not the only economic indicator. It is followed by economic society structure, that is, how many people are working in agriculture and how many are not.
Another indicator includes the amount of international trade and what goods are being traded.
The last economic indicator is the unemployment level.
Overall, the primary social indicator is the growth of population, but it is not the only one. The level of education within the population is also important for economic growth and progress.
Also, the stop of poverty and life expectancy are important indicators of economic growth. Infant death rates, as well as the number of doctors per thousand citizens are taken into account when a country is evaluated by social indicators.
When it comes to ecology, there are three important indicators that are evaluated:
- The amount of healthy products used in nutrition and general population use.
- The eco-friendly parts of the whole country's industry.
- Level of land degradation.
When all of these parameters are taken into consideration, it is easy to perceive the economic state of a country, i.e. whether it is growing, standing still or is in recession.
What steps does a country take to achieve growth?
Countries that are in the growth process have several things in common. The primary goal is continuous growth of per capita income. But, this is achieved by changing and improving two different things. A country needs to undergo the industrialization process and achieve a higher efficiency in agriculture.
The overall goal is to make the industries that do not spend a lot of resources grow. This helps the country negate the effects of resource hogging industries that slowly affect GDP growth. Through the improvement of these industries, the macroeconomic picture of a developing country becomes much better, as the right types of industries become more productive and efficient.
To make this happen in a faster and easier manner, it is necessary to acquire investments from other countries. Following investments, a developing country also needs to focus on technological advancement (efficient production), science and research, education and the legal system.
Each of these elements is important during the investment period. A company that decides to take this step, needs to go through a easy process, and one that will ensure that the investment is going to pay off as well.
For example, there needs to be enough workforce. The workforce has to be well educated and know how to operate the new tools. Also, the law of the country needs to make sure that the investment is going to be handled completely legally and in a timely manner.
All these elements affect the investor’s decision making process. The better the conditions, the more likely it is that an investment is going to be made, to the benefit of both sides in the agreement.
What is the outcome?
According to the Europe 2020, a coherent European Union Strategy, the goal of economic growth is to improve the state of the whole population. It includes improvement in the population living standards, improvement in resource usage efficiency, promotion of efficient economy. This means that higher emphasis is going to be put on an eco-friendly “green” economy.
The ultimate goal is to achieve low unemployment rates, a industry with low carbon emissions, higher productivity, and flawless social cohesion. Therefore, investments made by the European Union are in the best interest of both parties, the Union and the country that is being invested in.
Even though investments are a very important factor in economic growth, there is also a lot of responsibilities that a country should take as well. To ensure that economic growth occurs, economic progress should include the protection of the population from natural disasters, biodiversity, as well as environmentally friendly laws and practices.
In order to achieve the desired outcome, it is necessary for a country such as Serbia to actively work on improving all the abovementioned simultaneously. This is going to create great grounds for future investments, driving the overall economic growth and stability forward.