MONEY TRANSFERS OF THE RESIDENTS AS AN ALTERNATIVE TO DIRECT FOREIGN INVESTMENT

Array

Authors

  • Y. Fedotova O.M. Beketov National University of Urban Economy in Kharkiv
  • M. Naumov O.M. Beketov National University of Urban Economy in Kharkiv

Keywords:

economic growth, investment climate, foreign direct investment, labor migration

Abstract

The article deals with the lack of financial resources in the domestic market and the prospects for the recovery of the national economy linked to external factors. The volume of foreign direct investment in Ukrainian economy in 2018 was 60 % of the pre-crisis level. To attract foreign investment, it is necessary to create a favorable investment climate and increase the competitiveness of the national economy.

The success activities in attracting investments can be assessed using next ratings: raising the country by one point can lead to an increase in foreign direct investment by $ 250-500 million next year. Ukraine has climbed five steps in the Doing Business 2019 ranking, but the volume of foreign direct investments has not changed significantly. In addition, more than half of the investments that are classified as foreign come from countries that are attractive for favorable taxation, that is, probably has a Ukrainian origin, so-called "round-tripping". Thus, the steps taken do not solve the issue of attracting foreign investment, which requires finding alternative ways to attract funds from abroad. One of them is the transfer of migrant workers home. Such transfers are received exclusively in a freely convertible currency, do not result in a requirement to return the funds received in the future, are evenly distributed across the country's regions and are characterized by a low concentration.

Over the past five years, transfers of migrant workers to their homes have exceeded foreign direct investment in Ukraine every year. They also exceeded the losses of the country's economy from the reduction in the number of workers. At the same time, the experience of the leading countries shows, that in the long term, sustainable economic growth is possible only with a stable increase in the number of workers. Accordingly, the labor migration of Ukrainians abroad should be compensated by immigration flows from less developed countries. Otherwise, the lag between the Ukrainian economy and the world's leading countries will be maintained or even increased, primarily due to the inability to ensure high GDP growth rates. Reducing the negative consequences of labor migration requires the development of an effective migration policy.

Author Biographies

Y. Fedotova, O.M. Beketov National University of Urban Economy in Kharkiv

Ph.D., Associate Professor of Departament

M. Naumov, O.M. Beketov National University of Urban Economy in Kharkiv

Ph.D., Associate Professor of Departament

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Published

2020-04-03

How to Cite

Fedotova, Y., & Naumov, M. (2020). MONEY TRANSFERS OF THE RESIDENTS AS AN ALTERNATIVE TO DIRECT FOREIGN INVESTMENT: Array. Municipal Economy of Cities, 2(155), 83–87. Retrieved from https://khg.kname.edu.ua/index.php/khg/article/view/5587