FDI AS A FACTOR FOR REGIONAL DEVELOPMENT WITHIN THE EU

Abstract

Foreign direct investment (FDI) is an economic phenomenon that has been widely examined by numerous authors in a variety of different aspects. They are considered to be a key factor for generating economic growth in different countries or in specific regions. They could also be of significant importance to the processes of convergence between different countries, or regions within a country. At the same time there are cases where studies show they have negative influence on the processes of generating growth or convergence. One of the core ideas of the European Union (EU) is to correct imbalances between its regions. The concept of convergence is related to the regional development, assisted by purposeful steering of capitals in different countries and regions in order to generate growth there. The following paper aims to examine the role of FDI in the regional development within the EU. The methodology included consists of conceptual analysis of the FDI potential to influence the regional development processes within the EU, backed up by empirical data for the inward FDI flows and the funds provided by the European structural investment funds, focusing on the European regional development fund. The methods used for the purposes of the analysis are correlation analysis, historical and comparative analysis, inductive and deductive approach. Result of the conducted analysis show that despite the proven potential of FDI to have positive influence on the regional development (and respectively convergence) processes, within the EU, there is evidence that they don’t work as effective. Correlation analysis finds that there is even inverse correlation between the inward FDI flows and the distributed capitals via the fund for regional development. We can conclude that despite the fact FDI does bring positive influence regarding regional development, convergence and growth in general, it could actually have minor, or even negative effect on these processes for some of the participants in them. The logical explanation for it is the lag in time, on the one hand, due to the long-term character of the FDI and related to them effects on the economies in the recipient countries, but also the level of development and specific characteristics of the economies of these countries, on the other. All this comes to show the fact that EU institutions and policy makers have future work and efforts to put in this direction, in order to accomplish the goals, set in the future time frames for regional development and convergence within the community. All of the above presented matter, shapes guidelines for future work of scientific character as well as the one on institutional level, underlining the importance and necessity of such studies at a national and supranational level among the member-states of the Union.