SOLUTION OF SOCIAL PROBLEMS IN
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International scientific-online conference
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FEATURES OF ATTRACTING FOREIGN DIRECT INVESTMENTS IN
THE ECONOMY
Shomurodov Ravshan Tursunkulovich
Associate Professor of the Department
“Social-humanitarian sciences and Economics”, Ph.D. Branch of the Federal State
Budgetary Institution of Higher Education “National Research University of the
Moscow Energy Institute” in the city of Tashkent
E-mail: r.shomurodоv@mail.ru ORCID:0000-0002-9087-104X
Mukhammadiyev Dmitriy Dmitriy ogli
Student of the Department
“Social-humanitarian sciences and Economics” Branch of the Federal State
Budgetary Institution of Higher Education “National Research University of the
Moscow Energy Institute” in the city of Tashkent
E-mail: metallistener@yandex.ru
https://doi.org/10.5281/zenodo.15123186
Abstract
The scientific thesis examines the theoretical and practical issues of
attracting foreign direct investment. The issues of further development of the
real sector of the economy by attracting foreign investment into the country's
economy are analyzed. On the basis of research and analysis, the author's
scientific conclusions are made.
Foreign direct investment is one of the key factors in ensuring economic
growth and economic development. One of the main goals of any country is to
attract foreign investment. The role of foreign investment in achieving
sustainable economic growth, structural reforms in the economy and improving
the living standards of the population is significant.
Focusing foreign direct investment on priority sectors of the economy and
clearly defining their effectiveness, attracting science-based investment
decisions, taking into account all the conditions of foreign financial resources on
the basis of rational regulation of investment activities will determine the future
of the national economy. Finding the necessary foreign investment for all sectors
of the economy has become a prerequisite for economic growth. It is important
that these criteria are taken into account at the current stage of reform and
development of the national economy of Uzbekistan. Its main tasks are to
increase the role of export potential in ensuring sustainable economic growth,
increase the contribution of small business and private entrepreneurship,
deepen the liberalization process and increase the effectiveness of state support
for priority sectors of the economy .
SOLUTION OF SOCIAL PROBLEMS IN
MANAGEMENT AND ECONOMY
International scientific-online conference
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The attraction of foreign direct investment (FDI) is a pivotal objective for
countries seeking to bolster their economic development and global
competitiveness. Several critical factors influence a nation’s ability to draw in
FDI, and among these, economic freedom, institutions, and the rule of law stand
out as essential determinants. This dynamic interplay between political and
economic factors not only impacts a country’s FDI inflows but also shapes its
overall economic landscape and prospects for long-term prosperity.
The influence of institutional characteristics on FDI is a topic of paramount
importance in the realm of international economics and global business.
Institutions, which encompass a country’s legal, regulatory, and governance
frameworks, significantly impact the decisions of multinational corporations
when considering investment destinations. These institutional characteristics
serve as a critical lens through which investors assess the risks and
opportunities associated with a particular host country.
Democracy, as a system of governance characterized by political freedoms,
accountability, and the rule of law, has often been associated with greater
transparency and stability. Similarly, economic freedom, gauged by factors such
as regulatory efficiency, property rights, and trade openness, creates an
environment conducive to business activity. Institutions, including the quality of
government institutions and their effectiveness in safeguarding property rights
and enforcing contracts, play a pivotal role in shaping investor confidence.
Moreover, the rule of law provides a foundation of legal certainty, which is
essential for businesses operating within a country’s borders.
Therefore, without attracting foreign investment, especially without
expanding the participation of foreign investment in key sectors, it is impossible
to carry out structural changes and modernization of the economy, re-equip
enterprises with modern equipment and launch the production of competitive
products. Attracting foreign investment in the economy of our country is
important in accelerating the expansion of its economic potential, ensuring the
economic power of the state through the use of domestic potential and reserves
in all areas, the development of new equipment and technology, export-oriented
goods, their production earns.
The Atlantic Council’s Freedom Index plays a pivotal role in assessing the
intricate interplay between a nation’s freedom environment and its
attractiveness to foreign investors, particularly in the realm of FDI. This
comprehensive tool evaluates a country’s overall level of freedom across
economic, political, and legal dimensions. The literature on FDI already has
SOLUTION OF SOCIAL PROBLEMS IN
MANAGEMENT AND ECONOMY
International scientific-online conference
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extensively discussed the impact of a nation’s institutional quality on FDI
inflows.1 We aim to use the index data to further investigate this relationship.
Countries classified as “free” according to the Freedom Index exhibit the
most robust FDI per capita, boasting an average of $2,200 of FDI investment per
person in 2022. This remarkable FDI per capita suggests a strong correlation
between economic freedom, political stability, and foreign investment,
contributing to these nations’ thriving economies and prosperity .
“Free” economies significantly outperform “mostly free” economies in
terms of FDI per capita. “Mostly free” countries may have various factors, such
as some restrictions on economic activities or less developed legal and political
institutions, which can result in a lower level of FDI per capita. “Mostly unfree”
and “unfree” countries lag far behind in terms of FDI. Unfree economies often
struggle with issues such as political instability, weak property rights, and high
levels of corruption. These factors erode investor confidence and hinder the flow
of foreign capital. As a result, these nations find themselves at a significant
disadvantage when it comes to FDI.
In general, in recent years, investment in developed countries has focused
on extensive automation, resource restructuring, new modern technologies, as
well as structural restructuring of the economy based on a new system of
governance based on increasing the role and responsibility of local government.
Local governments have a key role to play in the management of investment
programs, environmental policy and regional planning. World experience shows
that the successful implementation of investment programs and projects
depends on ensuring the optimal proportion among its participants.
In North America, both nations are in the “free” category: The United States
and Canada. Neighboring Mexico is classified as “mostly free” and highly
attractive to foreign investors, who value the stable and business-friendly
climate it offers. The East Asia and the Pacific region also plays a prominent role
in the context of FDI. Six out of the eighteen economies in this region, Australia,
New Zealand, Japan, Taiwan, South Korea, and Singapore, fall into the “free”
category. These nations have not only embraced economic and political freedom
but also attracted substantial FDI, leading to economic growth and prosperity.
While most regions have their share of mostly free and mostly unfree countries,
Europe continues to dominate the “free” category with thirty out of a total of
forty-three countries. It serves as a prime example of how a commitment to
freedom, both economically and politically, can be a driving force behind
attracting FDI and fostering economic development.
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International scientific-online conference
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At the same time, it should be noted that the laws of different countries also
restrict the activities of foreign investors. In almost all countries, there are
sectors where foreign capital cannot be invested. In some countries, some
sectors are completely closed to foreign investment. It sets various restrictions
on the activities of foreign investors. For example, in the United States, some
states prohibit the attraction of foreign capital to minerals, while in some states
there are restrictions on the purchase of land. However, the world experience
shows that in many countries the provision of financial and economic benefits
and privileges in the regional investment policy creates the basis for economic
development of the regions.
The global economy demonstrated resilience in 2024, maintaining a steady
annualized growth rate of 3.2% in the latter half of the year. However, recent
economic indicators suggest that global growth may be losing momentum. The
OECD forecasts that global growth will be 3.1% in 2025 and 3% in 2026,
compared to 3.2% in 2024. The marginal fall in growth is because of rising trade
restrictions across economies, strict policy updates that often upend investment
opportunities, and uncertain household spending. Although growth in the
United States has been very strong as of late, it is expected to slow down to 2.2%
this year and 1.6% in 2026. Economic growth will be weak in the Euro Zone as
well, with OECD projecting real GDP growth of 1.0% in 2025 and 1.2% in 2026.
China follows a similar trend, with growth declining to 4.4% in 2026 from 4.8%
in the current year .
1. In conclusion, it should be noted that in recent years, investment
activities in developed countries are aimed at large-scale automation, resource
restructuring, new modern technologies, as well as structural restructuring of
the economy based on a new management system based on increasing the role
and responsibility of local government. Local governments have a key role to
play in the management of investment programs, environmental policy and
regional planning.
2. It is well known that one of the great wonders of the liberal economic
system that began between states after World War II was foreign investment.
Indeed, foreign investment has had a major impact on the country’s economic
growth in the four Southeast Asian countries known as the Asian Lions, then in
China, and now in Eastern Europe and Vietnam, and this process is still ongoing.
3. Increasing the activity and independence of regions and districts in
investment activities in our country can be an important criterion in attracting
foreign investment to the regions.
SOLUTION OF SOCIAL PROBLEMS IN
MANAGEMENT AND ECONOMY
International scientific-online conference
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4. As mentioned above, it is expedient to increase the independence and
role of local authorities in the investment activities of the Republic of Uzbekistan
and to expand the development and implementation of local programs to
encourage private investment. Also, the issuance of municipal and corporate
bonds as a source of investment in the regions and the establishment of
incentives for income from them can lead to an increase in investment flows.
List of used literature:
1. The official reports of Data Base the Central Bank of the Republic of
Uzbekistan in 2023 - www.cbu.uz.
2. Prepared by the author on the basis of the official website of the State
Statistics Committee - www.stat.uz
3. Yuri A.Rolik. A Complex Approach to Evaluating the Innovation Strategy of a
Company to Determine its Investment Attractiveness. // Procedia – Social and
Behavioral Sciences, Volume 99, 6 November 2013, pages 562-571;
https://www.sciencedirect.com
4. https://stat.edu.uz/Univer-list.php
