OPTIMIZATION OF FOREIGN INVESTMENT PROCESS IN UKRAINE UNDER THE GLOBALIZATION

Экономические науки / 2. Внешнеэкономическая деятельность

Taranenko I.V.

Candidat of Science, associate professor, doctorant

Donetsk State University

OPTIMIZATION OF FOREIGN INVESTMENT IN UKRAINE

UNDER THE GLOBALIZATION

Ukraine suffers the sharp shortage of home investment. Foreign investment could be an important source of Ukrainian competitiveness, economy reconstruction, modernization and growth. The author sets herself the following targets:

- to elaborate an approach to determine the foreign investment volume and its structure really needed;

- to analyze Ukrainian economy characteristics (attractive and non-attractive) for foreign investors and to evaluate the investment climate as a whole;

- to elaborate general principles for determining the most efficient spheres of foreign investment allocation;

- basing at such general principles, to analyze the statistic data on the foreign investment in Ukraine (rate of growth, geographical and industrial structure), to determine the spheres of the most efficient allocation of foreign investment;

- to elaborate the suggestions for optimization and increase of foreign investment efficiency in Ukraine.

The investigation is based on the theory of competitive advantages (M. Porter, USA) [1] developed by Alan M. Rugman (Canada) [2] and John H. Dunning (UK) [3], and on the theory of investment fields by Dmitry Lukyanenko – Vladislav Beloshapka (Ukraine) [4].

Michael Porter combines the basic determinants of international competitiveness of firms and a nation as a whole into the system ("diamond" model) and examines its characteristics. A. Rugman proves the importance of interaction of national "diamonds" of partner countries. J. Dunning analyses the influence of international investment on the national "diamond". D. Lukyanenko and V. Beloshapka create the macroeconomic model of investment fields using the "diamond" model.

When determining the real needs of Ukraine in foreign investment, it is worth while to take into account:

- national economy priorities;

- real possibility of the economy to absorb some amount of investment in a fixed period of time.

So it is necessary to determine the volume and the rate of increase of foreign investment in different industries required by Ukraine in the short-run and in the long-run periods.

The determinants of high potential attractiveness of Ukrainian economy for foreign investors (also the national competitive advantages) are:

- rich deposits of mineral resources;

- extremely cheap labor (including highly qualified);

- high scientific level and technological basis of some sectors and industries (space, weapons and relative industries, some branches of machinery, etc.);

- relatively high level of economic development as a whole .

Investment climate in Ukraine is evaluated in general as non-beneficial for foreign investors. The negative determinants are:

- unstable economic, law and political environment; unclear and contradictory laws; high bureaucratization; administrative voluntarism; corruption; non-market opportunistic behavior of government, organizations and individuals;

- difficulties of obtaining the necessary information.

Therefore - high risks, high transaction costs, relatively low rate of return.

Moreover, the direct correlation between the home investment process and foreign investment inflows exists. So without overcoming the investment crisis, increase of foreign investment is impossible.

The complete change of investment climate is required for stimulating home and foreign investment processes. Ukrainian foreign investment law, the activity of the government and its recent initiatives aimed at foreign

investment stimulation are analyzed.

To determine the spheres of the most effective foreign investment allocation, it is necessary to combine:

- interest of Ukraine in foreign investment inflows according to officially announced national economy priorities;

- attractiveness of Ukrainian economy for foreign investors significantly determined by national competitive advantages.

The author develops the theory of investment fields by Lukyanenko-Beloshapka, uses Porter's "diamond" model and comes to the following conclusions.

1. The field of investment interest of foreign firms in a host country is formed within the area of interaction of country-importer of capital and country-exporter of capital national "diamonds". Analysis of geographical and industrial structure of foreign direct investment in Ukraine proves that in most cases the most intensive capital inflows are directed to clusters of industries (according to Porter's terminology) which are relatively well developed in both countries. This field may be extended as a result of economic growth and increase of the number of competitive industries.

2. The field of the host country (Ukraine) investment interest is determined by:

- the national "diamond" characteristics;

- the national economy priorities.

This field is non-homogeneous. Its intensity is higher in the sphere of current national priorities and lower in the spheres of future priorities and minor importance.

3. The field of mutual investment interest is determined by interaction of fields (1) and (2). It is possible to separate within it a narrower field of the highest foreign investment effectiveness. Its boundaries are determined as the area of intersection of national "diamonds" of two countries and the sphere of current economic priorities of the host country. For the firms-importers of capital, as well as for the host country, the highest foreign investment effectiveness may be reached in the industries and sub-industries included into this field.

The field of the highest foreign investment effectiveness is determined and investigated for the cases of interaction between Ukraine and the most important countries-investors, such as the USA, Germany, Russia, UK and others. The following conclusion is done: real FDI structure corresponds significantly to the fields of the highest foreign investment effectiveness determined for each country.

Consequently, taking into account the requirement of radical change of investment climate in Ukraine, general government targets are:

1. Extension of the field of mutual investment interest by mobilization of home resources and increase the competitiveness of the industries and national economy as a whole.

2. Extension and optimization of the field of the highest foreign investment effectiveness by elaboration of the beneficial investment climate and well grounded governmental policy of foreign investment priorities.

The author elaborates the suggestions for optimization of foreign investment process in Ukraine by determining its prospective actual and potential partners as well as the most effective directions and spheres of foreign investment.

Литература:

1. Porter, M.E. (1990, 1998) "The Competitive Advantage of Nations", Free Press, New York, 1990.

2. Alan M. Rugman "The Double Diamond Model of International Competitiveness: The Canadian Experience" (with Joseph D'Cruz) Management International Review 33(Special Issue 2)(1993), pp. 17-40.

3. Global Capitalism, FDI and Competitiveness (The Selected Essays of John H.

Dunning, Volume 2, Cheltenham: Edward Elgar, 2002, pp. 458.

4. Белошапка В.А., Киреев Л.Д., Лукьяненко Д.Г., Макогон Ю.В., Орехова Т.В. Транснациональные корпорации. Учебное пособие. – Донецк: ДонНУ, 2003. – 208 с.