Foreign Direct Investment in Russia: Unfavorable Investment Climate, Uneven Distribution

Abstract

Foreign direct investment may be an important source of economic development for nations. Acceleration of mobility of capital with globalization has increased foreign direct investment flows around the world. Although being one of the largest economies in the world, Russia has not been getting expected amount of foreign direct investment. Furthermore, foreign direct investment to Russia has been concentrating in a limited number of regions, amplifying regional inequalities. Inadequate foreign direct investment performance of Russia is a result of structural imbalances and legal background. In this study, importance and development of foreign direct investment in the Russian economy are investigated. In this context, benefits and negative impacts of foreign direct investment to the Russian economy and its negative impacts on it were discussed. Factors which make the country attractive to the foreign direct investment and impede foreign investment were examined as well as the sources of and solutions to the problem of uneven regional distribution of foreign direct investment. In order for Russia to attract more foreign direct investment, a favorable investment climate must be formed with modifications at the state policy level. Strategic participatory regional planning approach must be adopted to increase FDI flows to the Russian regions.