Foreign Direct Investment

Kommersant reports:

According to the UN Conference on Trade and Development, in 2015 Foreign Direct Investment [FDI] increased by 40% (up to $1.76 trillion) worldwide, and close to the pre-crisis figure of 2007 ($1.9 trillion). Inflows to developed countries increased by 46% (to $962.5 billion), in developing [countries] by 9% (to $764.7 billion).

At the same time, Russia’s share in the global flow of FDI has fallen to its lowest value since 2001 – 0.6%.

As a result, the country has dropped from the top 20 recipients of investment, but remains on the list of the world’s 20 biggest investors ($26.5 billion).

According to research by the consulting firm A.T. Kearney, among the most reliable countries for investments is the US (2.02 of a maximum 3 points), China (1.82 points), and Canada (1.80 points).

In turn, Russia fell into the last rating in 2013 (11th place). More than 50% of respondents… said that the volume of direct investments could increase in the event of the settlement of the conflict in Ukraine, the lifting of sanctions, and easing of geopolitical tensions.

In April 2014, the Polish company LPP SA, which owns the brands Reserved, Cropp, and House, announced the reduction of investments in Russia due to the significant weakening of the ruble. At the beginning of the year, potential investments were estimated at $130 million.

In the first quarter of 2014, Morgan Stanley reduced its investments in Russia by 30% to $27 million. In particular, the US investment bank completely left the retail group X5.

In July 2014, the European Bank for Reconstruction and Development halted new investment in Russia, and in September the US investment group Blackstone left the country.

In September 2015 against the backdrop of falling oil prices,Total SA reported a decrease in investment by 15% to $20 billion in 2016. In January of this year, [state-controlled oil company] Zarubezhneft purchased from the French company 20% of the Kharyaginskoye project.

What is left out of Kommersant’s explanation is one crucial point: FDI is merely a number quantifying how much money is brought into a country from outside. But it does not indicate who is doing the investing. So, for example, a company that is registered in Cyprus which invests money in Russia is counted as FDI, even though Russians are the beneficial owners. This skews the statistics and does not give an accurate assessment of what is really taking place.

One thought on “Foreign Direct Investment

  1. Pingback: Russia’s Economy: A Primer – Nina Jobe

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