Page 37 - Theoretical and Practical Interpretation of Investment Attractiveness

The flow of foreign direct investment fell by 49% in the first 6 months of 2020
compared to the same period last year. Under the influence of the deep recession, this decline
amounted to 40 percent by the end of the year.
According to the UN, $7 billion was lost from the European economy due to the decline
in foreign direct investment. This is the first time such a negative decline has been observed.
The US economy contracted by 61 percent. The reason for the decline in the flow of direct
investment internationally was that many people had money and in most cases investments
were delayed.
“This year, the flow of direct investment at the international level has almost halved.
This is a worse result than we expected. Investment flows are expected to decline by 30-40
percent by the end of the year, and by 5-10 percent in 2021,” said UN spokesman James Jean.
Typically, 80 percent of international remittances go to developed countries, so the
decline in investment flows hurts them more ($98 billion). The last time such a decline was
observed was in 1994.
The main recipient countries of FDI inflows in 2019 were Italy, the USA, Brazil and
Australia. For them, the decline this year is more noticeable. And China is trying to avoid this
decline. Direct investment in China is focused on e-commerce, specialized technical services,
and research and development.
A number of methods have been created for determining the value of a region’s
investment attractiveness (IP) and calculating the factors influencing it, taking into account
existing risks. These methodological models and presented formulas are the product of
preliminary scientific research and research conducted by foreign and domestic scientists in
different periods, and in a sense are an improved (modified) version of the calculations they
used.
In the above methods, scholars recommended defining IJ in two parts in the area
section or network section, but we interpret it through a single formula.
ࡵ࡭ ˍ࢐ ൌࢄ כ ࡵ࡭ ൅ࢅכ ࡵ࡭ ˕࢐ ( 1.4 )
᠖࢐
Here,
ܫܣ – IJ complex of country j;
ˍ௝
– IJ of a certain (analyzed) region of country j;
᠖୨
ܫܣ – IJ of a certain industry in country j;
˕௝
X, Y – relative weight/weight of each indicator of investment attractiveness.
To assess the regional and sectoral indicators of the country's ID, it is necessary to
determine: economic return (income from the business (object) to which investment funds are
allocated); investment risk (the risk level of different countries (by region and industry) is
calculated).
᠖ሺ˕ሻ୨ ൌʓʓ ሺ˕ሻ୨ ȗሺͳǦʟʓ ᠖ሺ˕ሻ୨ ሻ ( 1.5 )
᠖
Here,
ܫܣ ᠖ሺ˕ሻ௝ - investment attractiveness of the country by region/network;
- profitability or economic return of the business (object) to which investment funds
are directed, by region/network;
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