The influence of foreign investments on employment and economic growth in FYROM

The relationship and influence of foreign direct investment (FDI) on the economic growth and unemployment has been the subject of long debates. In global terms, the relationship between FDI and economic growth has been the subject of many research studies: from purely theoretical analysis of the channels through which this is accomplished, the motives and determinants of investment, to empirical studies on a broad panel of countries. Because of these shared arguments about the impact of foreign direct investments on economic growth and unemployment, as an area of investigation in this paper we took FYROM, a country in transition, which has its own particularities in FDI inflows that uses or wants to use FDI as a form of rapid economic growth. The purpose of this paper is to examine the impact of foreign direct investment (FDI) on economic growth and unemployment in FYROM. The paper examines existing theory to create an analytical framework for the relationship between FDI and economic growth and unemployment, then to quantitatively evaluate the importance of these investments in economic growth and unemployment in FYROM. The theoretical literature, elaborated in this paper suggests that foreign direct investment affect economic growth and unemployment through the following channels: transfer of technology and know-how, upgrading the workforce, integration into the global economy, increasing competition and development in the host-country and reorganization of domestic firms and lowering difficulties in implementing economic policies. Theoretical literature and empirical literature suggest shared thoughts and conclusions on the impact of FDI on economic growth and unemployment. Foreign direct investment (FDI) attract much attention and interest in every country, especially countries in transition. Hence, each host-country stands for promoting and attracting foreign direct investment because of their contribution to the economy by offering affordable fees, taxes and financial incentives to attract FDI. In this context, the efforts that governments do to attract FDI significantly reduce budget revenues (due to the cost of attracting FDI, as well as direct budget subsidies allowed to foreign investors) who otherwise could be used for investments in education and infrastructure, which automatically speeds up the economic growth of the country which becomes attractive for investment in the long run