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Lecture notes, cheat sheets
Investments. Prospects for investment activity (lecture notes)
Directory / Lecture notes, cheat sheets Table of contents (expand) LECTURE No. 9. Prospects for investment activity Insufficient inflow of foreign direct investment makes it necessary to look for new organizational forms of joint business activities. The most attractive for foreign investors are free economic zones, where the number of enterprises with foreign capital has reached 18%. An increase in investment activity is possible, but with close cooperation between federal and territorial authorities. This allows you to minimize investment risks and effectively invest savings and private investments. The real way to improve investment activity is to provide enterprises with greater independence, including the issues of attracting foreign capital. The tasks of the administrative bodies of the region are to maintain the main life support systems. Thus, the strategic goals and priority areas of joint business activities are as follows: 1) development and improvement of export potential, increasing the level of competitiveness; 2) creation of a mechanism for regional promotion of exports, primarily through tax incentives for exporters and long-term soft loans issued for the development of export industries, as well as the creation of collateral and insurance funds that protect against all risks; 3) rationalization of imports in order to change the structure of the economy and improve the main industries, aimed at strengthening the export base; 4) exemption from taxes on an irrevocable basis, on the terms of a commercial loan, or abolition completely. All this is aimed at achieving one goal: to create favorable conditions for the successful development of joint business activities and for the more efficient use of foreign investment in the interests of the economy. The main difficulty of economic reforms lies in the insufficient capacity of domestic public savings and the impossibility to fully fill the gap in capital investment to overcome the economic downturn by private investors. Due to the high risk, investments in the real sector are not attractive for all subjects: both for bank capital, and for domestic and foreign investors, as well as for the population. Future investors are trying to invest in more profitable and reliable financial assets. High inflation has resulted in a rate of interest far exceeding the potential profitability of many industrial projects. This made medium- and even more so long-term loans inaccessible. The main weakness of the state investment policy is the insecurity of budget expenditures for investment purposes. These expenses were financed until recently on a residual basis. And the consequence of this was the growing from year to year accounts payable in the investment sector and a constant decrease in the volume of actually carried out investments in production. The experience of recent years shows that there are objective prerequisites for breaking the investment impasse. In combination with the control of the money supply, inflation can be significantly reduced. As a result, the interest rate will go down, the refinancing rate of the Central Bank will fall, and the yield of GKOs will decrease. But in order to take advantage of the improvement in the investment climate, a momentum is needed to set the investment mechanism in motion. As such, we have a development budget, which has become an integral and organic part of the federal budget. With the proper organization of development budget management, the mobilization of funds from private investors to finance priority projects in the real sector of the economy increases tenfold. The development budget concentrates only a part of the resources allocated by the state for investment purposes. Financial resources for the fulfillment by the state of its obligations of a social nature are directed to the construction of facilities, ensuring the safety of the functioning of technically complex systems (such as power plants, river routes), as well as the construction of expensive facilities - are provided through the current budget. Funds attracted to the development budget in the form of loans are directed to goals, the achievement of which is capable of generating income, which makes it possible to pay off loans. To do this, incoming funds must be placed on an urgent and returnable basis. To ensure the highest efficiency in the use of development budget funds, the selection of funded projects is carried out at the same time. With such an economic situation in the country, the priority can only be a sharp increase in funds for economic growth. Only such an approach allows to end the crisis in the shortest possible time. When studying the world experience in organizing the financing of investment projects, it can be seen that high reliability of investment and efficiency are achieved if the principle of project financing is used. A prerequisite is the investment of a certain part of their own financial resources. But in projects for which resources are allocated from the development budget, the investor’s personal funds must be at least 20%. In such conditions, financial support from the state can be up to 40%, which corresponds to world practice. At the same time, it is proposed to use the provision of tied loans, when the state does not transfer budget money to the borrower’s accounts, but pays for goods and services necessary for the implementation of the project on the terms of choice among suppliers. At the same time, the state can, at the expense of the development budget, provide a commercial bank with guarantees for financing this project in the amount of up to 40% of the loan. There is a limitation of the guarantee provided, which is determined by the need for the bank's responsibility for choosing the client and checking the economic efficiency of the project. The high level of guarantee protection results in fewer guarantees being provided. Development budget revenues are proposed to be formed from sources of financing the budget deficit, as well as targeted investment loans from the World Bank and loans issued in accordance with the concluded intergovernmental agreements. It should be noted that the simple formation of the development budget as a set of articles in the federal budget does not solve the problem. A special mechanism for its implementation is being introduced, which does not depend on the current progress in the execution of the federal budget. If this is not done, then there will be no acceleration of economic growth due to current problems. This mechanism is the fixing in the budget legislation for the development budget of the relevant sources. The economic crisis has many long-term and short-term factors that predetermine its deepening. But among them there is one that from time to time is inherent in the economies of different countries of all economic systems. It is associated with the state of the investment process in the country's economy. Ultimately, it determines the possibilities for economic development, as well as the state of the structure of the economy. Therefore, while ensuring an efficient economy, there is always the problem of finding appropriate mechanisms, sources that make it possible to achieve the necessary results. To overcome the crisis, the development and implementation of an effective state investment policy is required. This is necessary primarily because investments and related structural shifts in the economy play a major role in shaping macroeconomic proportions. The difficulty of regulating investment activity lies in the fact that it covers diverse areas of economic life. This is the sphere of scientific and technological progress, and state management of the economy, financial and banking activities, commercial settlement of enterprises, pricing, etc. Often the problem of investment is reduced to the methods of distribution of capital investment resources. The investment process, which reflects the reproduction of production assets, includes the formation of the accumulated part of the national income, the distribution and financing of capital investments, and the use of fixed assets. Considering the national economy, we can say that the sources of investment are the compensation fund, in the form of depreciation deductions, and the accumulation fund, which acts as part of the national income. At enterprises and associations, as well as in other economic entities, it is carried out at the expense of the investor's own financial resources, borrowed financial resources of investors, attracted financial resources of investors, as well as budget investment allocations. With these budget loans, the share of loans to the private sector is constantly increasing. It must be said that the financial infrastructure of the market provides savings and converts their effective investments. This is especially true in the current period of development and formation of market structures, the search for market forms of management, forms of implementation of the investment process. As a rule, investment and commercial banks, investment and pension funds, and insurance companies act as institutional investors. With the help of this system, the savings of the population are formed into investments. The credit and financial sphere provides funds for investments at the disposal of enterprises and other economic entities. There is a movement of funds from where there is an excess of them, to where they are lacking in them, as well as from industries with low profitability to investments in industries with greater profitability. Unilateral inflationary policies led to devastating hyperinflation, rapidly rising prices, and the depreciation of money. The fall in the gross domestic product along with the reduction and deterioration of the structure of foreign trade turnover with the worsening balance of payments deficit speaks for itself. The accumulation and consumption funds are being eaten up by non-payments and inflation. This paralyzes economic development and the reproductive process. The inflow of external capital for the structural and qualitative renewal of production remains scanty, while the outflow from the internal turnover, as well as the transfer of commodity resources and financial resources to the sphere of shadow circulation, has acquired unjustified proportions. Almost stopped investment and innovation processes in the manufacturing sector. At different stages of the circulation of fixed assets, it is necessary to reduce economic management into a single mechanism by a continuous investment process. This is understood as the transformation of investment into - the growth of national income. In the field of investment management, both final and intermediate goals are formed. To do this: 1) determine the criteria for choosing the main directions of capital investments; 2) determine the conditions under which the opportunities for expanded reproduction are provided for all participants in the investment process; 3) formulate the principles and terms of financing at different stages of the investment process, including the formation of investment resources. The effect of the technical re-equipment of enterprises through leasing will be expressed in the growth of their profits and, accordingly, the payment of taxes to the budget, which more than compensates for the benefits to investors. Given the role of leasing machinery and equipment in improving scientific and technological development, the state needs to support organizations that carry out leasing operations. Now all efforts are aimed at creating conditions for the development of investment activity of enterprises, since the size of the profit received by enterprises is many times higher than their capital costs. There is still a lot to be done in creating favorable conditions for intensifying investment activity in the country's economy: to stabilize the financial system, to reduce inflation to an acceptable level, since in the conditions of non-payments and uncontrolled price growth, investment activity is speculative. It is aimed primarily at maintaining the existing situation, and not at creating economic conditions for the growth of production, updating the range and improving the quality of goods and services. Author: Maltseva Yu.N. << Back: Interaction between banks and enterprises >> Forward: Investment activity of the enterprise
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