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International economic activity of Ukraine

Topic 1. Main features of foreign economic activity of Ukraine

1. International economy and international economic activity

2. Principles, subjects, and types of foreign economic activity

3. Stages of development of the foreign economic activity of Ukraine

4. Regulation of foreign economic activity in Ukraine

5. Main indicators of the country's economic development

1. International economy and international economic activity

The purpose of discipline is to form knowledge of objective laws, the actual processes and specific features of international
economic activity of Ukraine, as well as practical skills for the implementation of commercial, investment and financial transactions
in the international sphere. Task of the discipline is to study of the theoretical foundations of international economic activity, learning
the basic forms of international trade and investment cooperation in Ukraine, their features at this stage; increasing knowledge of
the nature and objectives of the regulation of international economic activity of Ukraine; The mechanisms of cooperation in the
development of modern integration processes and the participation of Ukraine; acquisition of skills to carry out foreign trade
operations.

Foreign economic activity is considered today as an important sector of the national economy has a
significant impact on the economic development of the country. Currently, there is virtually no industry,
which directly or indirectly would not have contacts with external markets. In these conditions the issues of
efficiency of foreign economic activity are becoming increasingly important.

Foreign economic activity is an activity of economic entities of Ukraine and of foreign economic
entities, established on the basis of mutual relations between them, which is conducted both on
the territory of Ukraine and abroad. The forms of foreign economic activity comprise mainly of
trade (export, import), crediting, scientific and technical cooperation, establishment of joint
companies, realization of projects on a compensatory basis, barter and rental transactions etc.

Pursuant  to  the  legislation of Ukraine, all  subjects of  foreign economic activity are equally
entitled to conduct any kind of foreign economic activity, not directly prohibited by the laws of
Ukraine, regardless of forms of ownership and other features. It shall be prohibited to conduct
foreign economic activity which is connected with:
 exporting  from  the  territory  of  Ukraine,  objects  which  represent national, historical,
archeological and cultural value of the Ukrainian nation;
 importing and transporting any goods which could harm social morality, health, or constitute a
menace to a population, fauna or plants;
 importing goods and services which promote war, racism and ideas of racial discrimination;
 exporting  and  importing  goods,  conducted  with  infringements  of intellectual property rights;
 other kinds of activity prohibited pursuant to international agreements or the legislation of
Ukraine.

Depending on the economic or political situation in Ukraine, economic  entities which conduct
foreign economic activity may be subject to limitations in the form of imposed quotas or licenses on
certain kinds of foreign economic activity.
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Quotas are quantitative and a nontariff means of limiting the export and import of goods by 
imposing a certain quantity or amount during a certain period of time. Export quotas are imposed
either by international agreements, which determine a share of every country in the overall export
of certain goods, or by a separate state for limiting export of deficit goods on a national market.
Import quotas are imposed by the state in order to protect local commodity producers, maintain
balance of  trade on  internal market, and, moreover,  in order to respond to discriminatory trade
policies of other countries.

Licensing  regulates  foreign  economic  activity  by  prohibiting  export-import transactions in

certain quantities for a certain period of time without obtaining  a  special  permit  (license).
Licenses  for  conducting  export-import transactions are issued by the Ministry of Economic
Development and Trade of Ukraine.

Assuming to carry out foreign trade transactions, the exporter needs to familiarize himself with a number of
documents regulating foreign economic activity.
Requirements of customs, tax and civil legislation, legislation on currency regulation and currency control, etc.,
have a significant impact on foreign trade transactions.

2. Priciples, subjects and types of foreign economic activity

Natural person (individual) In jurisprudence, a natural person is a person (in legal meaning, i.e., one who has its
own legal personality) that is an individual human being, as opposed to a legal person, which may be a private
(i.e., business entity or non-governmental organization) or public (i.e., government) organization. Historically, a
human being was not necessarily a natural person in some jurisdictions where slavery existed (subject of a
property right) rather than a person.

A legal entity is any company or organization that has legal rights and responsibilities,
including tax filings. It is a business that can enter into contracts either as a vendor or a
supplier and can sue or be sued in a court of law.
Legal entities are structured in a way that allows for a greater degree of protection for
strictly personal assets from lawsuits and regulatory penalties. Each type of entity
provides a different set of protections and tax burdens.
A legal entity can enter into contracts and assume the obligations of those contracts,
can borrow and pay debts, can file suits and be named by other parties in suits, and can
be held to account for the results of those lawsuits.
Every legal entity is issued a Legal Entity Identifier (LEI) – a 20-character code that
serves as a reference to connect a company with financial information. LEIs are still
not fully standardized, despite the globalized economic world in which we live, due to
the laws and regulations that govern legal entities fluctuating drastically across
jurisdictions.
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Read The Law of Ukraine on Foreign Economic Activity:

Article 2. Principles of foreign economic activity

Article 3. Economic entities engaged in foreign

economic activity

Article 4. Foreign economic activity categories

(https://wipolex-res.wipo.int/edocs/lexdocs/laws/en/ua/ua077en.pdf або тут українською:

https://zakon.rada.gov.ua/laws/show/959-12#Text)

3. Stages of development of foreign economic activity of Ukraine

In its economic history, Ukraine has evolved first from an agricultural to an industrialized, and then to a service-
oriented country. Major industries include coal, electric power, machinery, chemicals, food processing, woodworking,
and tourism. The industrialization of Ukraine started in 1930s when it was a part of the Soviet Union. Having inherited
a huge industrial potential from the USSR, Ukraine, as an independent country, has lost part of its industrial capacity
due to ongoing inner political and economic crises. Dependence on Russian energy supplies is also a problem as are
non-economic, social factors, including an under-developed institutional and social infrastructure and corruption, which
have further delayed Ukraine's transition to a fully developed industrial/service economy.

Ukraine was the second most economically powerful state of undivided U.S.S.R. after Russia.
Ukraine’s fertile black soil allows cultivation of food grains, vegetables, and sugar beets.
Heavy machineries and specialized industrial apparatus are the primary industries of
Ukraine. After its independence in 1991, Ukraine attempted privatization of its economic
activities which were resisted from within.
Ukraine being heavily dependent on Russia for its requirement of gas and oil cannot come
out of shadow economy easily. Though the government of Ukraine is attempting to come
out of Russia’s influence with various fiscal and customs procedures, it is a difficult
exercise as nearly 75% of Ukraine’s requirement of oil and gas is met by Russia. In spite of
the political tensions, Ukraine has been able to maintain a buoyant economy because of
the high price it demands for its steel in the global market.

Economic activities of Ukraine

Coal, iron ore, manganese, magnesium, mercury, nickel, titanium, graphite, kaolin and
sulfur are the natural resources of Ukraine. Food grain, sugar beets, vegetables and
sunflower seeds are the major agricultural products. Dairy products and beef processing
are other important agriculture based activities. Mining is a major primary economic activity
in Ukraine. Agriculture accounts for approximately 9% of GDP and provides employment to
nearly 25% of occupied labor force.

The industrial sector is dominated by iron and steel industry. Petroleum products, power
generation, heavy machineries, transport equipments, chemicals, and food processing are
other major manufacturing industries. This industrial or secondary sector employs about
20% of the available labor force, and contributes over 32% towards GDP.

The services sector made up of banking, tourism, real estate, education, and transport and
communication contributes nearly 59% towards GDP, and engages around 55% of the
labor force.
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Етапи розвитку ЗЕД в Україні:
1)      Радянський (1918 – 1987). Монополія зовнішньої торгівлі, валютна монополія. Розвиток низки
експортних виробництв. Зростання до середини 80-х років, криза з початку 80-х на ґрунті таких факторів:
–      відстала структура, сировинна спрямованість;
–      незадовільне використання експортного потенціалу;
–      нераціональний характер імпорту;
–      недостатнє використання нових форм ЗЕД;
–      відчуженість безпосередніх виробників від зовнішніх ринків.
2)      Перехідний від радянського (1987 – 1991) – перебудова радянської економіки, зокрема УРСР.
Ліквідація державної монополії на зовнішню торгівлю, зміна принципів управління ЗЕД.
3)      Етап незалежності (1991 – сучасність). Прийнято базові закони «Про ЗЕД», «Про підприємництво»,
«Про єдиний митний тариф», «Про режим іноземного інвестування» та ін. Збільшився обсяг суб'єктів
діяльності. Україна стала членом МВФ, Світового банку, СОТ. Наша країна має суттєві проблеми:
–      несталість внутрішньоекономічної структури;
–      суттєва енергетична залежність від Росії, Туркменістану;
–      значний зовнішній борг;
–      суперечності законодавства;
–      несталість фіскальної системи;
–      проблемний інвестиційний клімат.

Ukraine has experienced acute political, security, and economic challenges during the
past six years. Since the “Maidan” uprising in February 2014, the country has witnessed
several momentous events, including the outbreak of conflict in eastern Ukraine. From
2014 until 2019, the Government undertook key reforms, including: carrying out
significant fiscal consolidation, moving to a flexible exchange rate, reforming energy
tariffs and social assistance, enhancing the transparency of public procurement,
simplifying business regulations, stabilizing and restructuring the banking sector,
moving forward on health and pension reforms, and establishing anti-corruption
agencies.

At the same time, Ukrainians continue to feel more needs to be done to improve
governance. Lack of trust in public institutions remains a fundamental concern for most
people, and surveys reveal that many feel  that corruption remains endemic—from the
financial sector to health care—and that powerful oligarchs still dominate the economy.

Current President Volodymyr Zelenskyy was elected on April 21, 2019, in a runoff
election with former President Petro Poroshenko, winning 73 percent of the vote. On
July 21, 2019, President Zelenskyy’s Servant of the People Party won the
parliamentary elections, giving them 60 percent of the seats in the Rada. The resulting
government, which took office in August 2019, and the new government, re-appointed
in March 2020, have both committed to an ambitious and wide-ranging reform agenda.

[https://www.worldbank.org/en/country/ukraine/overview]
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4. Regulation of foreign economic activity in Ukraine
See the book ZED_Rumyancev2012.pdf chapter 2 (знати органи, що регулюють ЗЕД в Україні і Законодавство, що
регулює ЗЕД в Україні)

Read The Law of Ukraine on Foreign Economic Activity:

Article 7. Grounds of foreign economic activity

regulation

Article 8. State regulation of foreign economic

activity

Article 9. Organs of state regulation of foreign

economic activity

Article 10. Organs of local administration of

foreign economic activity

(тут українською: https://zakon.rada.gov.ua/laws/show/959-12#Text)CTIVITY

5. Main indicators of the country's economic development

Main indicators of the country's economic development The degree of
development of the national economy is measured by special indicators that give
a general idea of the economic potential of the country, and also allow one to
compare the development of individual states among themselves. The most
important indicators are:
gross domestic product (GDP);
gross national product (GNP);
national income (NI);
export; import; foreign trade turnover;
volumes of production of goods and services and some others.
These indicators are calculated according to the formulae in the international
system of national accounts (SNA). Usually the indicators in the formulas are
given in the English abbreviation as this is customary in the SNA. Gross
Domestic Product (GDP) is the monetary value of all the finished goods and
services, produced by residents in the economic space of a country during a year.
It is calculated by the following formula:
GDP = C + I + G + NE where GDP is gross domestic product; С - is consumer
expenditures; I – is internal private investment (capital investment); G -
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government expenditures, net exports (NE) are the difference between exports
(X) and imports (IM) of a country.
Imports, Exports, and GDP
Gross domestic product (GDP) is a broad measurement of a nation's overall economic activity.
Imports and exports are important components of the expenditures method of calculating GDP.
Let's take a closer look at the formula for GDP:

While all of the GDP formula's components are important in the context of an economy,
let’s look closer at (X – M), which represents exports minus imports, or net exports.

If exports exceed imports, the net exports figure would be positive, indicating that the nation has
a trade surplus. If exports are less than imports, the net exports figure would be negative,
indicating that the nation has a trade deficit.

A trade surplus contributes to economic growth. More exports mean more output from factories
and industrial facilities, as well as a greater number of people employed to keep these factories
running. The receipt of export proceeds also represents a flow of funds into the country, which
stimulates consumer spending and contributes to economic growth.
[https://www.investopedia.com/articles/investing/100813/interesting-facts-about-imports-and-exports.asp]

Gross national product (GNP) includes both the amount of value added, that is
created in a country and forms GDP, and the money earned abroad. Calculating
GNP, we take into account not only the difference between exports and imports,
but also the difference in income from money earned abroad (e.g., income from
profits on investments made abroad) and profit payments to non-residents,
transferred abroad. In this case, the GNP formula will have the following form:
GNP = GDP + NY where NY is net factor incomes (the difference in income and
expenses). Net national product (NNP) is determined by subtracting from the
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GNP the value of the means of production worn out in the production process
(depreciation charges - A): The net national product (PPP) is determined by
subtracting from the GNP the value of the means of production worn out in the
production process (depreciation charges - A): NNP = GNP – A where NNP is
net national product. If from the net national product subtract the indirect taxes,
we will receive a national income (NI): NI = NNP – TH where NI is national
income; TH is indirect taxes. Developed countries that receive a significant trade
surplus and inflows of dividends on capital invested abroad have GNP indicators
higher than GDP. Nevertheless, sometimes in highly developed countries, for
example in the US, the opposite situation takes place. This is explained by the
fact that the United States has a huge internal market, which absorbs the
prevailing number of goods and services. The high standard of living of the US
population stimulates imports, as a result of which the foreign trade balance in
the United States is negative. The size of foreign investment into the country is
also very large, and, accordingly, a significant amount is the outflow of
dividends. An important role is played also by the reasons that are in the plane of
currency relations.
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For comparison of the economic potential of different countries we propose data
on GDP for 2017 (Table 1.1). Table 1.1. GDP of some countries in 2017, billions
of US dollars (at the current exchange rate) Country GDP Country GDP Country
GDP USA 19.390 Russia 1.530 Belgium 494 China 12.010 Australia 1.380
Thailand 455 Japan 4.870 Spain 1.310 Iran 431 Germany 3.680 Mexico 1.150
Austria 416 18 Great Britain 2.620 Indonesia 1.020 UAE 377 India 2.610 Turkey
849 Nigeria 376 France 2.580 Netherlands 825 Israel 350 Brazil 2.050 Saudi
Arabia 683 South Africa 349 Italy 1.940 Switzerland 678 Ireland 333 Canada
1.650 Sweden 538 Denmark 324 Rep. Korea 1.540 Poland 524 Singapore 323
Referance: [52]
GDP can be calculated in two ways: based on the current exchange rate (called
GDP at exchange rate) and based on purchasing power parity (called GDP at
Purchasing Power Parity - PPP). If we take PPP as the basis, then the GDP will
be different. Only US GDP will remain unchanged, as the value of GDP in
international comparisons is measured in dollars.
The GDP of some countries at purchasing power parity in 2017, billions of US
dollars Country GDP Country GDP Country GDP China 23,159 Italy 2,310
Poland 1,121 USA 19,390 Turkey 2,173 Nigeria 1,118 India 9,459 Rep. Korea
2,029 Pakistan 1,056 Japan 5,428 Spain 1,773 Malaysia 930 Germany 4,170
Saudi Arabia 1,773 Argentina 920 Russia 4,007 Canada 1,769 Netherlands 916
Indonesia 3,242 Iran 1,644 Philippines 875 Brazil 3,240 Australia 1,246 South
Africa 765 Great Britain 2,914 Thailand 1,233 Colombia 714 France 2,835 Egypt
1,201 Bangladesh 687 Mexico 2,458 Taiwan 1,185 UAE 686 Referance: [53]
Absolute amounts of GDP or GNP in general characterize the economic power of
the country, but are not sufficient to determine the standard of living of the
population. China or India have rather large volumes of GDP, not least because
of the fact that a huge number of the employed people produces goods and
services, even though they have insufficient or low productivity. But if we divide
the absolute size of GDP by the number of people, the rankings in the table of
economic potentials of the countries are changing, for some of them quite
substantially. Luxembourg, Norway and the United States retain their leading
positions among the most developed countries in terms of GDP per capita.
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GDP of some countries per capita in 2017, thousand US$ (at purchasing power
parity) Country GDP Country GDP Country GDP USA 59,5 Spain 38,2
Singapore 90,5 19 China 16,6 Mexico 19,5 Belarus 18,6 Japan 42,7 Rep. Korea
39,4 Norway 70,6 Germany 50,2 Netherlands 53,6 Kuwait 69,7 France 43,6
Switzerland 61,4 Indonesia 12,4 Brazil 15,5 Sweden 51,3 Moldova 5,7 Great
Britain 43,6 Poland 29,3 Turkey 26,5 Italy 38,0 Argentina 20,7 Australia 49,9
India 7,2 Denmark 49,6 Georgia 10,6 Russia 27,9 Qatar 124,9 South Africa 13,4
Canada 48,1 Luxembourg 109,1 Ukraine 8,7 Referance: [54]
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Thus, the absolute value of GDP characterizes primarily the volume of output
and services, and its relative indicator determines the level of labor productivity,
organization and culture of production. International organizations (for example,
the World Bank, the International Monetary Fund, the World Trade
Organization), when classifying a countries according to the level of economic
development, consider the GDP per capita indicator to be the main criterion. The
higher this indicator, the higher the standard of living in the country. The most
developed countries have high values of both indicators. And the least developed
countries are characterized by low indicators on these criteria. Luxembourg, for
example, has an absolute GDP of $59,5 billion (at PPP) as of 2017, which is a bit
compared to other countries. Nevertheless, it occupies the leading positions in per
capita production. This gives grounds for classify this country as a developed
state. The most developed countries have high values by both indicators. The
"seven" of the most powerful of them stands out by the absolute size of GDP,
which exceed 1 trillion.dollars, as well as by GDP per capita - from almost 30
thousand dollars and higher. Brazil, Mexico, India, Indonesia, The Philippines
has quite large absolute volume of GDP, but significantly behind the developed
countries in relative indicators. The least developed countries are characterized
by low values for the both analyzed indicators (for example, Angola has an
absolute GDP of $116 billion, and relative - $ 5,900; Haiti, respectively, $12.4
billion, and $1200; Ethiopia - $95 billion, and $1100; Burundi - $3.6 billion, and
$ 400). A specific group are the oil-producing countries of the Persian Gulf,
which have large revenues from oil exports. The GDP per capita in these
countries is rather high. Thus, in Saudi Arabia it is $24,000, in the United Arab
Emirates - $48,500, in Qatar - $102,700. Nevertheless, unlike developed and new
industrial countries, this group of countries is characterized by an unbalanced
economic structure. The production sector (except for oil production) until
recently was poorly developed, and only now measures are being taken to
develop industrial production, first of all energy and petrochemicals. A
generalized indicator of the level of economic development at the global level is
the Gross World Product (GWP). It shows the amount of final goods and 20
services produced worldwide. It is the combined national product of all the
countries in the world.
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When analyzing the economy, it is important to know the degree of foreign
economic activity of the country. It is determined by: exports, imports, foreign
trade turnover, the degree of openness of the economy and its dependence on the
world market, the share of foreign capital in the economy of the country, the size
of the activity of residents abroad and some other indicators. Let us consider
some of these indicators. Export - sending of goods and services to another
country for sale. Statistical handbooks and economic publications usually give
data on the export of goods and services. Often, if the figures on exports are
given, it means the export of goods (unless there is a special reservation). Usually
the largest exporters are the most powerful countries in the economy.
The Exports of leading countries in 2017 (billions of USD) Country Exports
China 2,157 USA 1,576 Germany 1,401 Japan 683,3 France 541 Republic of
Korea 552 Netherlands 526 Italy 499 Great Britain 436,5 Canada 433 Referance:
[54] Import - bringing in of goods and services to the country from abroad. The
size of imports usually depends on the capacity of the domestic market, which, in
turn, is due to the country's economic might, primarily purchasing power.
Therefore, the largest volumes of imports fall on the most developed countries.
The Imports of leading countries in 2017 (billions of USD) Country Imports USA
2409 China 1841 Germany 1167 Japan 672 Great Britain 644 France 624 Hong
Kong 589 Netherlands 574 Republic of Korea 478 Italy 452 Referance: [54]. 21
In analyzing this table, it should be borne in mind that Hong Kong is part of
China, has a special status (significant autonomy is in relation to foreign
economic activity). Data on the economy of Hong Kong in international
collections of data are published separately.
Hong Kong and Singapore have large volumes of exports and imports due to the
fact that they are engaged primarily in intermediary trade - re-export and
reimport. The re-export accounts for 87% of Hong Kong's exports. The
predominant part of re-export and re-importation is formed predominantly at the
expense of China. For political (and some economic) reasons, direct trade of
developed countries with China is limited, so Hong Kong also plays the role of
intermediary.
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The difference between the monetary value of a nation's exports and imports over
a certain period is a country’s balance of trade (or net exports - NX). The balance
of trade can be positive (active) or negative (passive). Usually the government of
the country tends to a positive balance of trade, as it ensures the inflow of
currency into the country. The most favorable conditions for this are in developed
countries, whose products are highly competitive. So, the positive balance of
trade of Japan is equal to 6.1 billion dollars (2011), Germany - 210 billion
dollars. The exception is the United States, which is characterized by a large
negative balance - $ 803 billion. And this passive balance of US foreign trade is
chronic. One of the main reasons for this situation is a very capacious domestic
market, which absorbs the bulk of domestic production and a large number of
imported goods. In the group of developed countries, the passive foreign trade
balance is inherent in the United Kingdom, Spain. Passive balances have also
formed in a significant part of developing countries (in particular, India, Egypt,
Lebanon, etc.).
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With foreign trade is connected the concept of openness of the country's
economy, i.e. a degree of its participation in the international division of labor.
An open economy is a country's economy integrated into the world economy, the
world market. It is necessary to distinguish between the concepts of "freedom of
trade" and "open economy". The concept of "open economy" is broader than the
concept of "freedom of trade" as trade in goods. It also includs freedom of
movement of factors of production, information, exchange of national currencies.
Indicators of openness of the country’s economy. There is no absolute openness
of the economy in any country. The indicators, according to which one can assess
the degree of openness of the economy, are qualitative and quantitative.
Qualitative criteria include the following: a favorable investment climate of the
country; the accessibility of the domestic market for the inflow of foreign capital,
goods, technology, information, labor; the structure of the country's foreign trade
turnover. The quantitative criteria include the share of exports and imports in
GDP, giving an idea of the extent of the links between individual national
economies and the world market. Thus, the ratio of exports to GDP is defined as
the export quota (Eq). The export quota is determined in percentages and is
calculated most often by the formula: 22 Eq = (EX/GDP) x 100%, where EX -
the volume of the country's exports for a certain period; GDP - the volume of
gross domestic product produced during the relevant period (the sum of the prices
of all goods produced within the country for 1 year). The degree of openness of
the economy is generally considered acceptable if Eq = 10%. The higher is the
indicator of openness the deeper the country's participation in international
economic relations. The indicators more than 30% are considered as a high.
Traditionally, a significant degree of openness is characteristic for Western
European countries (Netherlands, Luxembourg, Sweden, Switzerland). The
highest indicators of openness (70-80%) have some developing countries, such as
the United Arab Emirates, Guyana, Qatar, Suriname, nevertheless, unlike the
developed countries, the economy of these states depends almost entirely on the
export of raw materials (oil or bauxite). The most powerful states in the world
have low levels of openness: the USA - 10%, Japan - 18%, France - 26%, Great
Britain - 22%, Italy - 28%. But this shows not a low degree of integration of these
countries into the world economy, but of large volumes of GDP and the
availability of a broad domestic market.
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The important feature in the development of the national economy is also the
indicator of import dependence (or import quota). It is calculated by the formula:
Iq = (IM/GDP) x 100% where IM - the volume of imports of the country for a
certain period This indicator is usually high in developing countries and is
moderate or low in developed countries. So, in Guyana it is 97%, Swaziland -
50%, Suriname - 54%. At the same time in France, this figure is 24%, Italy -25%,
the United States - 14%, Japan -13%.. The coefficients of openness and import-
dependence should be used in combination with other indicators of the country's
economic development. For example, the US and Japan have huge volume of
exports and imports, but in terms of openness, they are viewed as states with
limited external links. In contrast, the poorest countries that export only one type
of product (for example, coffee, cocoa, bananas), and which generally have an
underdeveloped economy, look like active participants in the international
division of labor.
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The intensity of foreign economic relations of the country is characterized not
only by the volumes of trade turnover, but also by the international movement of
factors of production, which include labor, capital and technology. The
movement of labor resources is expressed in international migrations of the able-
bodied population. Departure of the population abroad is called emigration; arival
from abroad is called immigration. The intensity of migration is determined by
the comparison of the number of migrants with the population of the country. The
coefficients of emigration (KE) and immigration (KI), of migration turnover
(KM) are calculated as follows: KE = E/P x 1000; KI = I/P x 1000; 23 KM =
(E+I)/P x 1000 where P - average annual population of country; E - number of
emigrants; I - number of immigrants. The migration rate is usually determined in
per mille (‰). The difference between the number of immigrants and emigrants
is the country's migration balance. It can be positive or negative. Migration
processes are determined by economic and political circumstances. Modern
international migration is carried out mainly under the influence of economic
factors. Industrially developed countries and countries with a dynamically
developing economy attract labor resources from those regions where the rates of
economic growth are insignificant, and the natural growth of the population is
high. A defining trend is the transfer of labor resources from developing
countries to highly developed states. Integration processes have a significant
impact on population migration, especially within the regional groupings. Thus,
between the countries of the European Union, any obstacles to the free movement
of the population have been eliminated, so the migration flows have become very
intense.
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One of the most important characteristics of the country's economy is its
participation in the international movement of capital. Today almost every state
either exports its capital, or accepts foreign capital. Developed countries
simultaneously carry out both exports and imports of capital. Capital crosses
national borders in entrepreneurial or loan form. Entrepreneurial capital is called
investments, which are divided into direct investments and portfolio investments.
Direct investments give the non-resident the right to control the enterprise in
which they invested. Usually direct investment is carried out by the formation of
subsidiaries or subsidiaries abroad by companies or banks. Portfolio investments
are investment in securities of foreign firms; the share of foreign capital in this
case is insufficient to control the firm by a nonresident. Loan capital acquires an
international character if the country receives a loan from the government of
another state, a foreign or private bank or an international financial institution,
such as the International Monetary Fund or the World Bank. The role of foreign
capital in the national economy is determined by its share in the total amount of
capital investments in the country (including the investments of residents).
Another indicator is the share of foreign investment in GDP: (DFI/GDP) x 100
where FDI - foreign direct investment of the country for a certain period GDP -
the volume of gross domestic product produced during the relevant period. The
main exporters and importers of capital, as already noted, are developed
countries. In terms of direct investment, the United States ranks first, followed by
the United Kingdom, Japan, Germany, France, the Netherlands and Canada. In
terms of importing FDI, the United States is again the first, followed by the
United 24 Kingdom, France, Germany, Canada. Japan is not among the top ten
importers of capital.
 17
Foreign economic operations of the country are reflected in its balance of
payments (BOP). It is a systematized record of all international economic
operations of the state, of all transactions made between entities in one country
and the rest of the world over a defined period of time. BOP shows the volume
and ratio of the amount of payments made by a country abroad, and the amount
of payments received from abroad for a certain amount time. Structurally, the
balance of payments consists of three parts: the current account, the capital
account and the official reserve account. The current account balances the
movement of goods and services, incomes and investments, which are earned by
residents and non-residents (but not the volume of investments themselves),
unilateral remittances (transferts), for example, transfer of part of the wages of
citizens which temporarily working abroad, to the country of destination. In other
words it measures imports and exports of goods and services, payments to
foreign holders of a country's investments and payments received from
investments abroad, transfert such as foreign aid and remittances. The capital
account consists of direct and portfolio investments and credit. Official reserves
are funds that are controlled by the state and are designed to regulate imbalances
in the balance of payments. They consist of gold, hard currency, securities. If the
outflow of currency abroad exceeds its inflow into the country, a negative
balance of payments is formed for current operations and for transactions with
capital. In this case, the government covers the deficit at the expense of official
reserves. In the event that the deficit takes place for a long time and there are not
enough reserves, the government is forced to resort to external loans, which lead
to the accumulation of an external debt. The problem of debt is very acute for
developing countries and countries with a transitional economy.
[http://dspace.oneu.edu.ua/jspui/bitstream/123456789/8357/1/Economy%20of%20foreign%20countries.pdf]

What is the 'Balance of payments' (BOP)?

The balance of payments is a statistical statement that summarises the transactions of an economy with the rest of
the world. More precisely, it records all economic transactions of an economy's residents with non-residents, where a
change of ownership occurs. In this context a resident is a person or company that is registered in a country for more
than one year.
Transactions are organised in two different accounts, the current and capital account and the financial account,
whose sum of balances in principle altogether should be zero, as for each economic transaction in the current and
capital account there should be (theoretically) an equivalent transaction in the financial account. Thus, the current and
capital account balance determines the exposure of an economy vis-à-vis the rest of the world, whereas the financial
account explains how it is financed. [https://ec.europa.eu/eurostat/web/balance-of-payments]