AN ANALYSIS OF THE MOTIVES UNDERLYING FOREIGN DIRECT INVESTMENTS (THE CASE OF GEORGIA)

Vakhtang CHARAIA; Mariam LASHKHI


Vakhtang Charaia, PhD in Economics, Invited Lecturer at the Tbilisi State University, Associate Professor at Grigol Robakidze University (Tbilisi, Georgia)

Mariam Lashkhi, BA in Economics, Junior Researcher and Project Coordinator, Tbilisi State University Center for Analysis and Forecasting (Tbilisi, Georgia)


ABSTRACT

In general, Foreign Direct Investment (FDI) is considered a beneficial factor for local and international economic development. However, it is not always the case. Without taking into account the peculiarities of local economy and MNE motivations, FDI could play a neutral, or in some cases even a negative role in the process of economic development, especially in case of developing countries with small markets. Historically, foreign investments have played a significant role in the economic growth of different countries, by increasing local production and connecting the country to foreign markets. Georgia, as well as the whole world, has long ago recognized the positive impacts of FDI on its economy, especially for an import-dependent country with unstable / unreliable macroeconomic indicators and, moreover, with the ambition to become the regional economic hub. It is important to know that FDI has led to significant positive spillover effects on the labor productivity of domestic firms and on the rate of growth of domestic productivity.

Keywords: MNE motivations, FDI, IPD, Scott-Kennels Model, Georgian economy.


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