The Influence of TNC Investment Activity on the Economic Growth of Countries with Emerging Economy

TNCs provide asignificant part of the global industrial production. For developing countries, the issue of attracting FDI has never lost its relevance. TNCs have always been among the priority foreign investors and the main structural element of most world economies. TNCs solve critical issues of economic growth in developing countries with the help of foreign direct investment. The aim of this article is to study the dependence of a developing country’s economic growth on FDI, i.e. consider and explore the relationship between these two indicators. The object of the study is FDI and the GDP of Russia and Kazakhstan. Initially,the study was aimed at identifying the positive and negative aspects of TNCs through the analysis of FDI in Kazakhstan and Russia over the years of independence. Next, the study includes a regression analysis of the contribution of FDI to the GDP of Russia and Kazakhstan. SPSS software was used. The share of GDP for FDI for Kazakhstan and Russia was used as an independent variable. GDP for both countries was taken as the dependent variable. The analyzed period was from 1992 to 2020. Statistical data was used from official sources. Regression analyses performed with dependent variables are significant. Upon the research results, the independent variable for the RF model is higher than for the KZ model. Thus, the level of FDI contribution to GDP growth for Russia is much higher than for Kazakhstan.

1. Serfati, C. (2008). Financial dimensions of transnational corporations, global value chain and technological innovation. Journal of Innovation Economics & Management, 2, 35-61. https://doi.org/10.3917/jie.002.0035

2. Farida Sadvokasova — Why does Kazakhstan need transnational corporations? (2016), [updated January 10,2022; cited January 19,2022]. Available at: https://yvision.kz/post/687168

3. Nazarova, R., & Sultanova, M. (2019). Transnational corporations as a factor of innovative investment.ISJ Theoretical & Applied Science, 05(73), 329-334, https://doi.org/10.15863/TAS.2019.05.73.48

4. Gilmore, A.B., &McKee, M. (2004b). Tobacco and transition: An overview of industry investments, impact and influence in the former Soviet Union. Tobacco Control, 13(2), 136–142. https://doi.org/10.1136/tc.2002.002667

5. Gilmore, A. B., & McKee, M. (2004a). Moving East: How the transnational tobacco industry gained entry to the emerging markets of the former Soviet Union - Part II: An overview of priorities and tactics used to establish a manufacturing presence. Tobacco Control, 13(2), 151–160. https://doi.org/10.1136/tc.2003.005207

6. Dunning, J.H. (2000). The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review, 9, 163–190. https://doi.org/10.1177/0972150914564439

7. Forsgren,M. (2002). The concept of learning in the Uppsala internationalization process model: a critical review. International Business Review, 11, 257–277.

8. Gilmore, A. B., & McKee, M. (2005). Exploring the impact of foreign direct investment on tobacco consumption in the former Soviet Union. Tobacco Control, 14(1), 13–21. https://doi.org/10.1136/tc.2003.005082

9. Potapov, A.V. (2016). Strategy of International Companies in Local Markets: Theory and Kazakhstani Practice. Management. Business. Analytics, 3, 241–244.

10. Gilmore, A., Collin, J., Townsend, J., & Gohil, E. (2007). Transnational tobacco company influence on tax policy during privatization of a state monopoly: British American Tobacco and Uzbekistan. American Journal of Public Health, 97(11), 2001–2009. https://doi.org/10.2105/AJPH.2005.078378

11. Gilmore, A.B., McKee, M., Collin, J. (2007). The invisible hand: How British American Tobacco precluded competition in Uzbekistan. Tobacco Control, 16(4), 239–247. https://doi.org/10.1136/tc.2006.017129

12. Allahverdiyeva, T. (2016). Corporate Social Responsibility; Mutual Expediency of Transnational Companies and Developing Countries. Open Journal of Business and Management, 04(02), 355–360. https://doi.org/10.4236/ojbm.2016.42038

13. Karasanova E.E. (2017). Evolution of the role of TNCs in the economies of developed and developing countries. Economics: Yesterday, Today and Tomorrow, 7(4A), 239–248.

14. Kovalev A.I., & Tanerbergenova G.I. (2020). The complexity of the work of transnational companies in the cis countries, including kazakhstan, and solutions to problems. Economics and Management: problems and innovations, 2, 33-36. https://doi.org/10.36919/2312-7812.2.2020

15. Nantharath, P., & Kang, E. (2019). The Effects of Foreign Direct Investment and Economic Absorptive Capabilities on the Economic Growth of the Lao People’s Democratic Republic. The Journal of Asian Finance, Economics and Business, 6(3), 151–162. https://doi.org/10.13106/JAFEB.2019.VOL6.NO3.151

16. World Investment Report.UNCTAD, (2012),[updated December 07,2021; cited January 21,2022] Avaliable at: https://unctad.org/system/files/official-document/wir2012_embargoed_en.pdf

17. Wang, P., & Hadi, T. A. (2019). The Positive Impact of FDI Inflows and Transnational Enterprises on GDP per Capita: Evidence from China. International Conference on Education, Management, Economics and Humanities, 1(5), 183–187.

18. Foreign direct investment, net inflows (% of GDP) [https://data.worldbank.org/] The World Bank; 2021 [updated January 19,2022; cited 2022-01-19] Avaliable at: https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS

19. EY: Russia entered the top 10 European countries attractive for investors. RIA Novosty, (2020), [updated May 15,2021; cited January 19, 2022] Avaliable at: https://ria.ru/20200706/1573926956.html

20. Investments of foreigners in Russian companies fell by more than 20 times. RBK,(2021), [updated January 11,2022; January 19,2022] Avaliable at: https://www.rbc.ru/economics/19/01/2021/6006e0609a79472ba73d18f2

21. Study of Investment Attractiveness of European Countries for 2020: Russia.EY, (2021). Avaliable at: https://assets.ey.com/content/dam/ey-sites/ey-com/ru_ru/news/2021/06/european-attractivenesssurvey-2021-russia-ver-2.pdf

22. Garanina, O., & Abramova, A. (2019). The impact of sanctions on the development of Russian MNCs in the global value chains (on the example of energy and ICT). Russian Foreign Economic Journal, 2, 35–48.

23. Klinova, M., &Sidorova, E. (2014). Economic Sanctions and EU-Russia Economic Relations. Economic Issues, (12), 67–79. https://doi.org/10.32609/0042-8736-2014-12-67-79

24. Philip Morris became the leader of the rating of the largest foreign companies in Russia. Forbes, (2021) [updated April28,2021; cited January 19,2022] Avaliable at: https://www.forbes.ru/biznes/441741-philip-morris-vysla-v-lidery-rejtinga-krupnejsihinostrannyh-kompanij-v-rossii

25. Ospanov M.T., &Mukhambetov G.I. (1997). Foreign capital and investments: questions of theory practice of attracting and using. Almaty:FAXINform.

26. Dyusegaliyeva S.B. (2014) Investment activity in Kazakhstan: stages and ways of installation. Bulletin of the University “Turan”, 2(62),16-22.

27. Investing in a sustainable recovery. UNCTAD, (2021), [updated June 05,2021; cited January 19,2022] Avaliable at:https://unctad.org/system/files/officialdocument/wir2021_en.pdf

28. Kostin K.B., Khomchenko E.A., Burmistrov A.N., &Melikova E.F. (2021) Foreign Direct Investments and Transnational Corporations as Potential Factors in the Economic Growth of States. Journal of International Economic Affairs, 11(4), 633–664. https://doi.org/10.18334/eo.11.4.113677

29. Kastratović, R. (2019). Impact of foreign direct investment on greenhouse gas emissions in agriculture of developing countries. Australian Journal of Agricultural and Resource Economics, 63(3), 620–642. https://doi.org/10.1111/1467-8489.12309

30. Van Treeck, K., &Wacker, K. M. (2020). Financial globalisation and the labour share in developing countries: The type of capital matters. World Economy, 43(9), 2343–2374. https://doi.org/10.1111/twec.12946