Fdi in russia

1. FDI IN RUSSIA
Report in 2010
GROUP:
Vu Khanh Linh
Tran Thi Ly Ly
Nguyen Dieu Thu
Le Thi Thu Trang

2. Content
I. Introduction
II. Pattern of FDI in Russia
III. Determinant of FDI in Russia
IV. Conclusion
V. Preferences

3. I. Introduction
• Foreign direct investment (FDI)
• FDI provides a package of financial capital,
technology, managerial skills, information, and
goods and services that can make an economy
more competitive in the world marketplace,
promoting growth and reducing poverty.

4. About Russia
Facts
•Full name: Russian Federation
•Population: 142.8 million (2011)
•Capital: Moscow
•Area: 17 million km 2
•Major language: Russian
•Main exports: Oil and oil
products, natural gas, wood and
wood products, metals,
chemicals, weapons and military
equipment

5. RUSSIA ECONOMY
The collapse of the Soviet Union:
A globally-isolated economya market-based economy
A centrally-planned economya globally-integrated eco
Economic reforms in the 1990s
privatized most industry
notable exceptions in the energy, defense-related sectors
In 2009
1 natural gas
Russia is now the largest
non-EU economy in Europe and 2 oil
one of the 10 largest economies 3 steel
in the world. primary aluminum
less competitive heavy industries remain dependent
on the Russian domestic market

6. RUSSIA AS AN ATTRACTIVE NATION

7. RUSSIA AS AN ATTRACTIVE NATION
1. Dynamic Economic Growth
2. One of the Largest Consumer Markets
3. World-Renowned Human Capital
4. Vast Natural Resources
5. Unique Geographic Position
6. Technologically Advanced Economy
7. Attractive Taxation System

8. II. Pattern of FDI in Russia
1. RUSSIA – AN ATTRACTIVE DESTINATION OF FDI IN EUROPE
Russia
among
European
countries

9. II. Pattern of FDI in Russia
1. RUSSIA – AN ATTRACTIVE DESTINATION OF FDI IN EUROPE
Top cities
for FDI in
Europe

10. II. Pattern of FDI in Russia
1. RUSSIA – AN ATTRACTIVE DESTINATION OF FDI IN EUROPE
FDI inflows in the Russian Federation from 1996 to 2010

11. II. Pattern of FDI in Russia
2. FDI DISTRIBUTION IN THE ECONOMY
2.1. FDI distribution by economic activities
2.2. FDI distribution by investors
2.3. FDI distribution by regions

12. 2.1 FDI distribution by economic activities
Russia’s great potential in
various economic activities.

13. 2.2 FDI distribution by investors
Table 4: Total Foreign Investment in the Russian Federation by main
country – main investors in 2010
Million of Percentage
Total foreign USD of total
investment into
Total investments 114746 100
Russia by main
countries of which by countries:
United Kingdom 40770 35.5
Netherlands 10696 9.3
Germany 10435 9.1
Cyprus 9003 7.8
China 7631 6.7
Luxembourg 5374 4.7
Switzerland 4679 4.1
France 3702 3.2
Ireland 2557 2.2
Virginian Islands (UK) 2383 2.1
Source: Federal State Statistics Service, 2012, table 24.11

14. 2.2 FDI distribution by investors
Changes in the FDI into
Russia by investors
2010 - 2011

15. 2.3. FDI distribution by region since 2007
62% of the FDI concentrated in four regions:
2. Moscow (44.2%)
3. Moscow Oblast (9.8%)
4. St. Petersburg (5.3%)
5. Leningrad Oblast (2.7%).
6. Other regions (<2.5%)

16. III. Determinants of FDI
Brock (1998) market size and the crime situation
FDI
1 education of the labour force only influenced FDI decisions
determinants
(1993-1995) for the Moscow and St. Petersburg regions.

17. III. Determinants of FDI
Broadman & market size, the extent of infrastructure development
Recanatini and prevailing policy frameworks
(2001)
2 Their model excellently capture cross-regional variation in
determinants
of FDI inflows FDI flows from 1995-1998, loses its explanatory power
(1995-1999) after the 1998 crisis.

18. III. Determinants of FDI
3 Iwasaki and resource endowments, market factors, degree of
Suganuma
industrialization and infrastructure factors
(2005)
FDI inflow business climate and regionally favorable FDI measures
(1996-2003). may affect investment.

19. III. Determinants of FDI
4
Ledyaeva and Linden (2006)
the determinants of the number of foreign firms
registered in 2002.
Gross products of host regions
and source countries,
agglomeration effect, Moscow city
advantages, cultural closeness
and an abundance of skilled labor
The distance between host regions
and source countries is negatively
related to the dependent variable

20. III. Determinants of FDI
Svetlana Ledyaeva
(2007) Market size, the presence of big cities and sea
the determinants and ports, oil and gas resources and political and
5 spatial relationships of legislative risks
FDI inflows into
Russian regions more suitable in accordance with the situation in
during transition recent years
(1996-2005)

21. The determinants and spatial relationships of FDI inflows into Russian
regions during 1996-2005 by Svetlana Ledyaeva (2007)
----------------------------------------------------------
1. Leading determinants
in this analysis include:
 Big market size
(population, various
markets in the economy)

22. The determinants and spatial relationships of FDI inflows into Russian
regions during 1996-2005 by Svetlana Ledyaeva (2007)
----------------------------------------------------------
 Big city advantages:
• Abundant resources (Sakhalin has oil
and gas, Magadan has gold and coal and
Khabarovsk has big gold and forest
resources…)
• Skilled labour force (in Moscow,
Leningrad and St. Petersburg)
• Transportation infrastructure (sea ports
in Primorskii, Sakhalin and Krasnodar)

23. The determinants and spatial relationships of FDI inflows into Russian
regions during 1996-2005 by Svetlana Ledyaeva (2007)
----------------------------------------------------------
 The intensive development of oil
and gas minefields in Sakhalin region
has been largely funded under
production sharing agreements
(PSA) in recent years
=> The Sakhalin and Tyumen
regions are the most strategically
promising oil and gas regions in
Russia
Their attractiveness to foreign
investors has gained along with rising
world oil and gas prices

24. The determinants and spatial relationships of FDI inflows into Russian
regions during 1996-2005 by Svetlana Ledyaeva (2007)
----------------------------------------------------------
2. Other determinants:
 Vertical FDI
strategies in
resources
industries and the
fast development
of export-oriented
fuel industry

25. The determinants and spatial relationships of FDI inflows into Russian
regions during 1996-2005 by Svetlana Ledyaeva (2007)
----------------------------------------------------------
 A flexibly developing legal framework:
 “Foreign Investment Law” in 1991
 Elaborate framework in 1999
 “Labor code” in 2002
 “Capital Flow” in 2006 …
Russia owns one of the lowest tax rates in Europe

26. The determinants and spatial relationships of FDIFDI inflows into
The determinants and spatial relationships of inflows into Russian
regions during 1996-2005 by Svetlana Ledyaeva (2007)
Russian regions during 1996-2005 by Svetlana Ledyaeva (2007)
----------------------------------------------------------
----------------------------------------------------------
3. Some policy implications:
 Export tariff policies
 Import tariff policies

27. IV. Conclusion
•Russia is now the largest non-EU economy in Europe and one of the
10 largest economies in the world.
•Main exports: Oil and oil products, natural gas, wood and wood
products, metals, chemicals, weapons and military equipment
•Russia is an attractive nation - the 4th favorable destination of FDI in
Europe. Moscow was the 7th out of 10 European cities attracting FDI
(2010)
•Russia has great potential in various economic activities. Industry - the
strong point of Russia’s economy
•Determinants of FDI

28. IV. Preference
• Ernst & Young’s (2011), “Ernst & Young’s European attractiveness
survey, FDI in Europe”.
• Federal State Statistics Service, Investment, April 6, 2012
• The World Bank, world development indicators, foreign direct
investment, net inflows, April 6,2012
• Luscio Vinhas de Souza (2008), “ECFIN Country focus, foreign
investment in Russia”, volume 5, issue 1.
• Tullio Buccllato and Francesco Santangelo (2009), “FDI distribution
in the Russian Federation: Do spatial effects matter?”, appendix
table 2.
• Svetlana Ledyaeva, BOFIT Discussion Papers (15 / 2007) “Spatial
econometric analysis of determinants and strategies of FDI in
Russian regions in pre- and post-1998 financial crisis periods”

29. Thank you for your
attention !
GROUP:
Vu Khanh Linh
Tran Thi Ly Ly
Nguyen Dieu Thu
Le Thi Thu Trang