The Role of Multinational Enterprises' Investments in Emerging Country's Economic Development, Case of Georgia
From the strategic point of view, not all Foreign Direct Investments (FDIs) are always positively benefiting the host economy, i.e. not all Multinational Enterprises (MNEs) are promoting local/host economies. FDI could have different impact on different sectors of the economy, based not only on annual investment amount, but MNE motivations and peculiarities of the host economy in particular. FDI analysis based only on its amount can lead to incorrect decisions, it is much more important to understand the essence of investment. Consequently, our research is oriented on MNE’s motivations, answering which sectors are most popular among international investors and why, what motivated them to invest into one or another business. Georgian economy for the last period of time is attracting more and more efficiency seeking investments, which could be translated as - concentrating production in a limited number of locations to supply various markets, while benefiting local economy with: new technologies, employment, exports diversification, increased income for the local economy and so on. Foreign investors and MNEs in particular are no longer and not so much interested in the resource seeking investments, which was the case for Georgia in the last decade of XX century. Despite the fact of huge progress for the Georgian economy, still there is a room for foreign investors to make a local market oriented investments. The local market is still rich in imported products, which should be replaced by local ones. And the last but not the least important issue is that approximately 30% of all FDIs in Georgia according to this research are “efficiency seeking” investments, which is an enormous progress and a hope for future Georgian success.
[1] OECD, Responsible Business Conduct in Georgia, p. 10. http://www.oecd.org/countries/georgia/RBC-in-Georgia-2014.pdf (last seen on 26.02.2017).
[2] Deloitte, Guide to Taxation and Investment in Georgia 2016. https://www2.deloitte.com/content/dam/Deloitte/ge/Documents/tax/Guide%20to%20Taxation%20and%20Investment%20in%20Georgia%202016.pdf (last seen on 26.02.2017).
[3] EU/Georgia Association Agreement. https://eeas.europa.eu/headquarters/headquarters-homepage_en/9740/EU/Georgia%20Association%20Agreement (last seen on 26.02.2017).
[4] Visa-free Europe Coalition http://visa-free-europe.eu/2017/02/georgia-visa-waiver-approved-by-parliament / (last seen on 26.02.2017).
[5] The World Bank, Doing Business 2017. http://www.doingbusiness.org/data/exploreeconomies/georgia (last seen on 26.02.2017).
[6] The World Bank. Georgia among Top Global Improvers, Says Latest Doing Business Report. http://www.worldbank.org/en/news/press-release/2016/10/25/georgia-among-top-global-improvers-says-latest-doing-business-report (last seen on 26.02.2017).
[7] Heritage Foundation Ranking, 2017 year. http://www.heritage.org/index/ranking (last seen on 26.02.2017).
[8] Trading Economics, Georgia. http://www.tradingeconomics.com/georgia/rating (last seen on 26.02.2017).
[9] Regulatory Impact Assessment on Estonian CIT Model Implementation in Georgia, 2016. http://pdf.usaid.gov/pdf_docs/PA00KXXW.pdf (last seen on 26.02.2017).
[10] World Bank Group. GDP per capita (current US$). http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD (last seen on 26.02.2017).
[11] National Bank of Georgia. https://www.nbg.gov.ge/index.php?m=304 (last seen on 26.02.2017).
[12] National Statistics Office of Georgia. FDI. http://geostat.ge/index.php?action=page&p_id=2231&lang=eng (last seen on 26.02.2017).
[13] National Statistics Office of Georgia. Wages. http://geostat.ge/index.php?action=page&p_id=149&lang=eng (last seen on 26.02.2017).
[14] Transparency International. https://www.transparency.org/country/#GEO (last seen on 26.02.2017).
[15] Crime Index for Country 2016. http://cbw.ge/georgia/georgia-ranked-among-top-6-safe-countries/ (last seen on 26.02.2017).
[16] Economic Freedom of the World 2016 Annual Report. Frazer Institute. http://www.freetheworld.com/2016/economic-freedom-of-the-world-2016.pdf (last seen on 26.02.2017).
[17] National Statistics Office of Georgia, Foreign Direct Investment by Economic Sector. http://geostat.ge/cms/site_images/_files/english/bop/FDI_Eng-sectors.xls (last seen on 26.02.2017).
[18] V. Charaia, Trans Inguri Trade Partnership. 4th International Conference on Global Business Environment. International Foundation for Research and Development (IFRD). Bangkok, 2014. Pp. 209-211. https://www.academia.edu/10505580/The_Positives_of_Cross-Cultural_Interactions_in_Multinational_Companies_and_Multicultural_Groups (last seen on 26.02.2017).
[19] L. Papava, V. Charaia, Regional Railways in the Central Caucasus and Georgia’s Economic Interests. The Caucasus & Globalization. Sweden. Volume 8, Issue 1-2. pp. 58-67. http://www.papava.info/publications/regional-railways-en.pdf (last seen on 26.02.2017).
[20] V. Charaia, The Financial Side of the Conflict: The Case of the Georgian-South Ossetian Conflict. Cost of Conflict: Core Dimensions of the Georgian-South Ossetian Context. George Mason University, 2016, pp. 46-51. http://scar.gmu.edu/sites/default/files/global-documents/cpp/cost-of-conflict/Vakhtang%20Charaia_Eng.pdf (last seen on 26.02.2017).
[21] V. Charaia, Economics of Conflict: Core Economic Dimensions of the Georgian-South Ossetian Context. International Journal of Humanities and Social Sciences Vol:3, No:10, 2016. http://waset.org/abstracts/55987 (last seen on 26.02.2017).
[22] V. Charaia, Foreign Direct Investment (FDI) Inflow in Georgia. 9th International Silk Road Conference on Business, Economics, International Relations and Education, 2014, pp. 53-60. http://silkroad.ibsu.edu.ge/previous/nineth/9th%20International%20Silk%20Road%20Conference.pdf (last seen on 26.02.2017).
[23] V. Charaia, Local Investment Climate and the Role of (Sustainable) FDI: The Case of Georgia, International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, Vol:8, No:2, 2014, pp. 425-428. http://waset.org/publications/9997562/local-investment-climate-and-the-role-of-sustainable-fdi-the-case-of-georgia (last seen on 26.02.2017).
[24] O. Anguridze, V. Charaia, I. Doghonadze. Security Problems & Modern Challenges of the Georgian National Currency. Ivane Javakhisvhili Tbilisi State University. 2015. http://press.tsu.ge/data/file_db/nashromebi/Security-Problems-Modern-Challenges-of-the-Georgian-National-Currency2%20(1).pdf (last seen on 26.02.2017).
[1] OECD, Responsible Business Conduct in Georgia, p. 10. http://www.oecd.org/countries/georgia/RBC-in-Georgia-2014.pdf (last seen on 26.02.2017).
[2] Deloitte, Guide to Taxation and Investment in Georgia 2016. https://www2.deloitte.com/content/dam/Deloitte/ge/Documents/tax/Guide%20to%20Taxation%20and%20Investment%20in%20Georgia%202016.pdf (last seen on 26.02.2017).
[3] EU/Georgia Association Agreement. https://eeas.europa.eu/headquarters/headquarters-homepage_en/9740/EU/Georgia%20Association%20Agreement (last seen on 26.02.2017).
[4] Visa-free Europe Coalition http://visa-free-europe.eu/2017/02/georgia-visa-waiver-approved-by-parliament / (last seen on 26.02.2017).
[5] The World Bank, Doing Business 2017. http://www.doingbusiness.org/data/exploreeconomies/georgia (last seen on 26.02.2017).
[6] The World Bank. Georgia among Top Global Improvers, Says Latest Doing Business Report. http://www.worldbank.org/en/news/press-release/2016/10/25/georgia-among-top-global-improvers-says-latest-doing-business-report (last seen on 26.02.2017).
[7] Heritage Foundation Ranking, 2017 year. http://www.heritage.org/index/ranking (last seen on 26.02.2017).
[8] Trading Economics, Georgia. http://www.tradingeconomics.com/georgia/rating (last seen on 26.02.2017).
[9] Regulatory Impact Assessment on Estonian CIT Model Implementation in Georgia, 2016. http://pdf.usaid.gov/pdf_docs/PA00KXXW.pdf (last seen on 26.02.2017).
[10] World Bank Group. GDP per capita (current US$). http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD (last seen on 26.02.2017).
[11] National Bank of Georgia. https://www.nbg.gov.ge/index.php?m=304 (last seen on 26.02.2017).
[12] National Statistics Office of Georgia. FDI. http://geostat.ge/index.php?action=page&p_id=2231&lang=eng (last seen on 26.02.2017).
[13] National Statistics Office of Georgia. Wages. http://geostat.ge/index.php?action=page&p_id=149&lang=eng (last seen on 26.02.2017).
[14] Transparency International. https://www.transparency.org/country/#GEO (last seen on 26.02.2017).
[15] Crime Index for Country 2016. http://cbw.ge/georgia/georgia-ranked-among-top-6-safe-countries/ (last seen on 26.02.2017).
[16] Economic Freedom of the World 2016 Annual Report. Frazer Institute. http://www.freetheworld.com/2016/economic-freedom-of-the-world-2016.pdf (last seen on 26.02.2017).
[17] National Statistics Office of Georgia, Foreign Direct Investment by Economic Sector. http://geostat.ge/cms/site_images/_files/english/bop/FDI_Eng-sectors.xls (last seen on 26.02.2017).
[18] V. Charaia, Trans Inguri Trade Partnership. 4th International Conference on Global Business Environment. International Foundation for Research and Development (IFRD). Bangkok, 2014. Pp. 209-211. https://www.academia.edu/10505580/The_Positives_of_Cross-Cultural_Interactions_in_Multinational_Companies_and_Multicultural_Groups (last seen on 26.02.2017).
[19] L. Papava, V. Charaia, Regional Railways in the Central Caucasus and Georgia’s Economic Interests. The Caucasus & Globalization. Sweden. Volume 8, Issue 1-2. pp. 58-67. http://www.papava.info/publications/regional-railways-en.pdf (last seen on 26.02.2017).
[20] V. Charaia, The Financial Side of the Conflict: The Case of the Georgian-South Ossetian Conflict. Cost of Conflict: Core Dimensions of the Georgian-South Ossetian Context. George Mason University, 2016, pp. 46-51. http://scar.gmu.edu/sites/default/files/global-documents/cpp/cost-of-conflict/Vakhtang%20Charaia_Eng.pdf (last seen on 26.02.2017).
[21] V. Charaia, Economics of Conflict: Core Economic Dimensions of the Georgian-South Ossetian Context. International Journal of Humanities and Social Sciences Vol:3, No:10, 2016. http://waset.org/abstracts/55987 (last seen on 26.02.2017).
[22] V. Charaia, Foreign Direct Investment (FDI) Inflow in Georgia. 9th International Silk Road Conference on Business, Economics, International Relations and Education, 2014, pp. 53-60. http://silkroad.ibsu.edu.ge/previous/nineth/9th%20International%20Silk%20Road%20Conference.pdf (last seen on 26.02.2017).
[23] V. Charaia, Local Investment Climate and the Role of (Sustainable) FDI: The Case of Georgia, International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, Vol:8, No:2, 2014, pp. 425-428. http://waset.org/publications/9997562/local-investment-climate-and-the-role-of-sustainable-fdi-the-case-of-georgia (last seen on 26.02.2017).
[24] O. Anguridze, V. Charaia, I. Doghonadze. Security Problems & Modern Challenges of the Georgian National Currency. Ivane Javakhisvhili Tbilisi State University. 2015. http://press.tsu.ge/data/file_db/nashromebi/Security-Problems-Modern-Challenges-of-the-Georgian-National-Currency2%20(1).pdf (last seen on 26.02.2017).
@article{"International Journal of Business, Human and Social Sciences:75399", author = "V. Charaia", title = "The Role of Multinational Enterprises' Investments in Emerging Country's Economic Development, Case of Georgia", abstract = "From the strategic point of view, not all Foreign Direct Investments (FDIs) are always positively benefiting the host economy, i.e. not all Multinational Enterprises (MNEs) are promoting local/host economies. FDI could have different impact on different sectors of the economy, based not only on annual investment amount, but MNE motivations and peculiarities of the host economy in particular. FDI analysis based only on its amount can lead to incorrect decisions, it is much more important to understand the essence of investment. Consequently, our research is oriented on MNE’s motivations, answering which sectors are most popular among international investors and why, what motivated them to invest into one or another business. Georgian economy for the last period of time is attracting more and more efficiency seeking investments, which could be translated as - concentrating production in a limited number of locations to supply various markets, while benefiting local economy with: new technologies, employment, exports diversification, increased income for the local economy and so on. Foreign investors and MNEs in particular are no longer and not so much interested in the resource seeking investments, which was the case for Georgia in the last decade of XX century. Despite the fact of huge progress for the Georgian economy, still there is a room for foreign investors to make a local market oriented investments. The local market is still rich in imported products, which should be replaced by local ones. And the last but not the least important issue is that approximately 30% of all FDIs in Georgia according to this research are “efficiency seeking” investments, which is an enormous progress and a hope for future Georgian success.
", keywords = "Investments, MNE, FDI motivations, Georgian economy.", volume = "11", number = "3", pages = "721-4", }
