Home  Journals  Regional Economics: Theory and Practice  43(370) - 2014 November

Factors affecting the inflow of foreign investment to the regions

Available online: 20 November 2014

Subject Heading: REGION INVESTMENT POLICY

JEL Classification: 

Pages: 51-62

The aim of the study is to assess the factors influencing the attraction of investment to the regions. There is no systematic evidence that there is a factor, which clearly influences the investment decision. To determine the cause of the uneven distribution of FDI in the Russian regions, as well as to identify the most attractive regional potentials for foreign investors, the author formulated the following potential factors: the high level of economic development of the region; the lack of investor confidence to the regional administration; the social development of the region; the availability of border region with a foreign State; the special favorable conditions for foreign businessmen within the framework of investment projects. The empirical base included the data of 83 regions of the Russian Federation for 2011, and the method of linear regression. In the result of the evaluation, the author identified the significant factors affecting the volume of incoming direct foreign investment in the constituent territory of the Russian Federation. In order to attract FDI, the administration of the constituent territory should continue to work to improve the efficiency of fixed assets (subsidizing the equipment purchase, reimbursement of charges for connection to the power grid), reduction of unprofitable organizations through the financial support measures (interest rate subsidies on loans, and also providing of tax breaks), improving of the social climate, an innovative projects development, and the manufacturing industry development. The paper, by the example of the Penza region, demonstrates that the measures based on the factors identified in the research are able to attract the foreign investment amounted to 982.41 million rubles. The improvement of the investment climate in the regions will create favorable conditions for attracting foreign investment to Russia and as a result will promote the sustainable economic growth and market economy development.

Keywords: foreign investment, economic and mathematical modeling, regional policy

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