Foreign Direct Investment In Russia Research Articles

Prospects for investment development in Russia and the Muslim world

Ensuring investment attractiveness is one of the most important aspects of a country's economic activity in modern international relations. Foreign investments make it possible not only to ensure expanded social reproduction in the country, but also expand the possibilities of technological and economic development of the state.The purpose of the work is to analyze foreign direct investment in the Russian Federation in general and the Republic of Tatarstan in particular. The analysis and evaluation of statistical data revealed a reduction in the number of projects involving foreign direct investment in Russia in 2017-2020. In modern conditions, it is necessary to recognize the decline in the investment attractiveness of Russia from investors in the United States and Europe, which may lead to an even greater compression of foreign investment flows. An alternative to foreign investments from the United States of America and Europe can be foreign investments from the countries of the Muslim world. Already today, Russia has friendly relations with the countries of the Muslim world, in addition, there are entire regions with a high density of Muslim population living on the territory of the Russian Federation. Thus, the Republic of Tatarstan, which is already one of the most investment-attractive regions of the Russian Federation and occupies the 3rd place in the list of regions of the Russian Federation most in demand among foreign investors, could play an important role in increasing the number of foreign direct investment.

ПРИВЛЕЧЕНИЕ ПРЯМЫХ ИНОСТРАННЫХ ИНВЕСТИЦИЙ: ПРОБЛЕМЫ И ПЕРСПЕКТИВЫ

In modern conditions, attracting foreign direct investment in the Russian Federation plays an important role due to the fact that the right direction of investment policy will automatically allow the country to increase the volume of public production, reduce the number of unemployed, develop production, construction and services. The decline in investment negatively affects both the quality of life of the population and the competitiveness of Russian manufacturers. Nowadays, there is a significant reduction in the number of foreign investors. Given the sanctions imposed by the West and the outflow of capital from the country, the Russian government is called upon to strengthen ties with friendly countries. The article presents the main results of the study, which have a certain scientific value. The directions and vectors of investment flows of foreign direct investment in Russia are substantiated. The updated architectonics of the investment attractiveness of the economy is presented. The factors limiting the inflow of foreign direct investment to Russia are highlighted. The directions of eliminating the main causes of the weak competitiveness of the Russian economy are proposed.

Contemporary Foreign Economic Relations of Russia with the Countries of Northern Europe

Recently new problems have arisen that have complicated Russia’s foreign economic relations with foreign countries. The countries of Northern Europe were no exception. The economic situation in many countries was far from optimal. Problems with economy took place in the euro area. A significant drop in oil prices led to a slowdown in economic growth in the Russian Federation and a sharp decline of ruble exchange rate. Since 2014, various Western sanctions have emerged, followed by retaliatory sanctions from Russia. Against this background, the analysis of the dynamics of Russian economic relations with the Nordic countries is of particular interest. A sharp decline in foreign economic indicators occurred in 2015–2016. Subsequent development has shown different dynamics. On the one hand, by the end of the 2010s foreign trade with Finland and Sweden did not reach the level of 2013–2014 (primarily due to the decline in oil prices), but on the other, foreign trade indicators with Denmark and Norway were exceeded (due to Russian exports). Year 2020 brought new problems – the coronavirus pandemic and the associated restrictions on the movement of goods, services and people, as well as the rupture of production chains, which had an impact on foreign economic relations – and exacerbated the old ones: a new sharp drop in oil prices and a new depreciation of ruble. The article reveals the features of the general dynamics and commodity structure of foreign trade with each of the observed countries. The significant dependence of Russian exports, primarily on energy supplies, is considered in detail. Special attention is given to the general dynamics of foreign direct investment in Russia. The problems of modern development of Russian export and import were analyzed.

Социально-экономические последствия пандемии COVID-19 в России и странах мира: анализ антикризисных программ, влияние на позицию в международных рейтингах и перспективы восстановления

The article examines the socio-economic consequences of the COIVD-19 pandemic, such as the increase in poverty and social differentiation. Goal. To identify and analyze the socio-economic consequences of the COIVD-19 pandemic in Russia and other countries of the world, the measures taken by national governments to combat these consequences, as well as the dynamics of Russia's position in international economic rankings and the presence or absence of a connection between this dynamics and the dynamics of investment in the national economy. Objectives. Analysis of indicators of poverty and social stratification in Russia and the world in the context of the COIVD-19 pandemic; comparison of anti-crisis economic programs in the largest countries and Russia by GDP; study of the methodology of the most credible international economic rankings; comparative analysis of the dynamics of Russia's position in international economic rankings and the dynamics of capital investment and foreign direct investment in Russia. Methodology. The methods of system analysis, classification and comparison, evolutionary-institutional theory and historical approach were applied. Statistical and other data of the Federal State Statistics Service of the Russian Federation, federal executive authorities of the Russian Federation, the Eurasian Economic Commission were used, and their own calculations were carried out on the basis of these data. Results. It was revealed that in order to combat the socio-economic consequences of the COVID-19 pandemic, governments in different countries implemented comprehensive packages of measures including such as increasing health care costs, direct support for the population, maintaining employment, promoting small and medium-sized businesses, and the most affected sectors of the economy. The total volume of the anti-crisis program in Russia, calculated as a percentage of GDP, is about 2-3 times less than in the largest world economies. Conclusions. At the same time, our country is distinguished by a significantly higher level of concentration of wealth in the hands of a group of so-called «super-rich» citizens, compared to the global average and the level of Eastern European countries, even in the context of the COVID-19 pandemic. At the same time, the dynamics of the volume of capital investment and foreign direct investment, as possible sources of recovery of economic growth, significantly lags behind the dynamics of Russia's position in some international ratings.

Foreign Direct Investment in Russia (Late 1980s - Late 2010s)

Foreign direct investment in Russia in a historical aspect are discussed in the article. It is noted that theoretical studies on this issue have led to a better understanding of the economic mechanism and the behavior of various participants in the economic sphere at both the micro and macro levels, which has opened up new areas of research in the field of economics. It is stated that an understanding of why a company initiates foreign direct investment in a particular country or increases their volume, allows us to present the main motives of the management of firms to invest, rather than to export or outsource production to national firms. The purpose of this study is to identify the main trends in foreign direct investment in the Russian Federation in various historical periods. A review of economic indicators on attracted investments, reflected in the relevant economic reports of the Central Bank of the Russian Federation, as well as other documents, a periodization of direct foreign investment in the Russian Federation was made. Based on the analysis, the authors propose to consider five periods: from the late 1980s to 1999, from 2000 to 2007, from 2008 to 2013, from 2014 to 2019 and from 2020 to the present, which have their own characteristics. Attention is paid to the fact that foreign direct investment in the Russian Federation during these periods was uneven, due to serious political contradictions in the international arena.

An analysis of EU FDI inflow into Russia

This paper analyzes the trends and drivers of inward foreign direct investment in Russia between 2009 and 2019. The EU is the premier provider of FDI into Russia, even though we find that reported values overstate its role given the use of Special Purpose Entities (SPEs). Key drivers of Russian FDI flows are the price of oil and natural resource markets, macroeconomic volatility, monetary policy, sanctions and trade impediments. As FDI is highly concentrated in natural resource rich regions, we argue that a sectoral decomposition understates the importance of fossil fuel extraction. Based on this analysis as well as the literature on growth effects of FDI, we argue that Russia needs more investment into higher-value added activities.

Econometric Study of the Dynamics of Foreign Direct Investment in Russia

Foreign investment is of high importance for economic growth in Russia. The problem of enhancing investment flows makes it increasingly relevant to search for effective tools for stimulating investment activity. We attempt to identify the factors affecting the dynamics of foreign direct investment (FDI). The paper analyses the current state of foreign direct investment in the Russian economy. Using empirical data for 2001–2018, we construct an econometric model for Russia which considers such factors as inflation (the Consumer Price Index), the exchange rate and imports. The results of the model’s testing do not confirm the initial assumptions that inflation exerts a more profound effect on FDI than the exchange rate and that there is a correlation between these indicators. For Russia, the dependence of FDI on the exchange rate remains insignificant; in addition, we find a direct relationship between the indicators. According to the model, the impact of inflation (direct relationship) and the volume of imports (inverse relationship) are of greater significance. It is noteworthy that the dynamics of foreign direct investment is partially due to its fluctuations with a time lag. The model forecasts that from 2019 to 2024 Russia is expected to experience a rise in FDI net outflows. The findings indicate that in order to attract foreign direct investment, it is necessary to implement economic transformations that will improve the business environment and lead to the development of healthy competition.

Japan’s foreign direct investment in Russia: a big return from a small opportunity

ABSTRACTIn this paper, we demonstrate the trends and prospects of Japanese foreign direct investment (FDI) in European Emerging Markets (EEMs) against the background of the recent development of emerging markets in the world FDI flows and explore the specificities of the Russian market, the biggest EEM in terms of market size and inward FDI received. More specifically, we overview foreign capital flows from Japan to Russia and describe the achievements and problems of Japanese investors as related to business with Russia. We find that the Russian market seems to be a lucrative option for Japanese firms, despite limited institutional freedom afforded to outsiders and unfavorable investment conditions, including the language barrier due to the wide usage of Russian in the business field – factors that have been reflected in higher transaction costs.

External and Internal Factors of Cross-Border Capital Flows in Russia

The literature on the assessment of factors affecting cross-border capital flows is usually characterised by distinguishing of external and internal factors. The former as a rule include international indices of the global economic growth rate, interest rates and other indicators of profitability (for certain types of financial assets). The latter include domestic indices of the growth rate of the national economy, interest rates and the profitability of financial instruments, sovereign credit ratings. Since the beginning of the 21st century, cross-border capital flows in Russia have followed the same trends as capital flows in other emerging markets. A distinguishing feature of Russia was the negative impact of sanctions on the level of its financial openness. We estimated regressions, designed to evaluate the factors affecting the individual components of cross-border capital flows in Russia. Regressions for the three types of flows (liabilities of direct investment and portfolio investment liabilities, and assets) demonstrate good results. Among external factors, the dynamics of oil prices turned out to be significant, as well as the global stock index (for portfolio investment assets). Among internal factors, an increase in aggregate demand helps to attract foreign direct investment, and an increase in the yield of Russian financial assets (stocks and bonds) — to attract portfolio investments. The difference in interest rates is the determinant of all analysed capital flows. Our estimations confirmed the significance of the “round-tripping” movement of foreign direct investment in Russia.

Determinants of Foreign Direct Investment in Russia: Empirical Study

In the present paper the determinants of the inward FDI stock in the Russian economy have been estimated via panel data analysis. The results of the study have confirmed the relevance of basic gravity determinants: the GDP of Russia and the investing countries, and the distances between them. The level of per capita income in the investing country, as well as the mutual trade, has a robust positive effect on the inward FDI stock. This allows one to assert that an increase in trade in goods with countries with growing levels of wealth leads to an increase in stocks of foreign investment in the Russian economy. Changes in the exchange rate, relations with offshore financial centers, restrictions and sanctions imposed on Russia since 2014, and bilateral investment treaties do not have a significant impact on FDI accumulated in the country. The provision that trade in goods has a positive effect on the FDI stock can contribute to further study of FDI round-tripping and Russia’s involvement. The steady dependence revealed at the macroeconomic level shows that, despite the high estimates of the scale of intermediary financial investments, the FDI accumulated in the Russian economy retains the link with real economic activities. At the microeconomic level, it is provided by activities of TNCs and their long-term interest in the economy of invested enterprises, in the growth of their efficiency and competitiveness.

Modeling the process of attracting foreign investment in the Russian economy

In the paper, on the basis of an assessment of the development of the Russian economy, the sectors most in need of an investment are identified, taking into account the depreciation rate of basic production assets. Depreciation of fixed assets reflects the demand for investment in order to modernize and reconstruct production. Based on the data of the Federal State Statistics Service of Russia, a rating of economic sectors in terms of the degree of depreciation of fixed assets at the end of the year by type of economic activity for 2013-2018 is built. In addition, the paper presents a model for predicting the inflow of foreign direct investment in Russia, developed using the classical approach to estimating linear regression criteria, which is based on the least squares method (OLS). In compiling this regression model, the applied software package for econometric modeling GRETL (GNU Regression, Econometrics and Time-series Library) was used to predict the inflow of foreign investment. Forecasting the inflow of foreign investment in the Russian Federation is aimed at solving the following tasks: to determine the most competent direction of investment policy and activity using forecast estimates, as well as to assess the country’s investment attractiveness. However, a significant role in predicting this indicator is played by the determination of factors that have an impact on the future volume of foreign investment. In addition, the analysis of foreign investments, depending on the influence of various factors, can tell about those or other motives that guide foreign investors when investing their own capital.

What determines foreign direct investment in Russia?

Abstract This article focuses on the determinants of inward foreign direct investment (FDI) in Russia. The article briefly describes the historical context of foreign investment policymaking in Russia since the beginning of the economic transition to an open market economy after the dissolution of the Soviet Union. When compared to other developing countries, Russia's FDI stocks continue to lag despite a set of proactive measures undertaken by the national government. Following the literature review, the most commonly cited determinants explaining inward FDI in Russia include market size, labour productivity, trade and investment barriers, domestic exchange rate, rule of law and institutional framework. This article aims to contribute empirically to the study of determinants of inward FDI in Russia. This article uses the Pseudo-Poisson Maximum Likelihood (PPML) estimation technique, the robustness of the PPML estimation is then verified using a standard autoregressive integrated moving average (ARIMA) model with the Durbin–Watson autocorrelation test. Our benchmark results suggest the efficiency-seeking motive of FDI over a market seeking and horizontal motive as a main reason for inward FDI in Russia. The ARIMA regression indicates the absence of statistical significance of economic openness and variables of labour productivity. Overall, the market size and tax rate variables have the most positive effects on the inward FDI, while barriers to trade and sanctions have the most negative effects. The results confirm that for transitional economies, integration into the world economy, proactive local development and tax cuts for outside investors remain to be critical when it comes to attracting FDI.

The Paradox of Russian Investment: The Reasons of Declining Foreign Direct Investment in Russia, 2012~2016

이 논문은 2012∽2016년 기간에 러시아에 대한 투자 환경은 크게 개선되었지만 외국인 투자 규모는 대폭 하락한 `러시아 투자의 패러독스`를 규명하는데 있다. 2012년 세계은행이 조사한 러시아의 DB 순위는 120위인데 2016년에는 51위로 크게 상승하였다. 반면 러시아에 대한 외국인 직접투자는 2012년 505억 달러에서 2016년 190억 달러로 폭락하였다. `러시아 투자의 패러독스`가 발생한 이유는 2012∽2016년 기간에 발생한 거시경제의 변화와 러시아의 독특한 경제구조 때문이다. 2014년부터 러시아는 저유가와 우크라이나 사태에 대한 서 방의 경제 제제로 고통를 받았다. 저유가는 자원 개발에 대한 투자 매력을 상실하게 만들었으며, 서방의 경제 제재는 루블 폭락과 소비시장에 대한 투자를 위축시켰다. 이러한 이유 때문에 러시아의 투자 환경이 대폭 개선되었음에도 불구하고 외국인직접투자는 오히려 줄어든 것이다. `러시아 투자의 패러독스`는 단순한 일시적인 현상은 아니다. 외국인 입장에서는 자원 가격이 상승하고 러시아인의 소득이 높아지면 투자 환경과 상관없이 러시아에 대한 투자를 증가시킬 것 이다. 러시아에 대한 외국인투자는 투자 환경 변화에 비탄력적으로 대응하고 있다는 사실을 이 논문은 실증적으로 검증하였다.

Foreign Direct Investment in Russia: Stakeholders' Views and Perceptions

Volumes of foreign direct investments (FDI) are growing steadily, however, transition economies, such as Russia, are attracting only a minor share of FDI despite of available potentials. Risk aversion is one of the reasons influencing decision-making processes of FDI investors. This paper reviews existing objective and subjective risks, which impact decisions regarding FDI. The results of the paper are based on the extensive dialogue with stakeholders from Austria, Germany and Japan on the risks for FDI in Russia as well as on the outcomes of the discussions on barriers for trade in frames of the workshop, which brought together Russian and European stakeholders. The results show that political, regulatory, revenue, currency and operational risks within the economy of Russia are perceived by FDI investors from different sectors such as construction, financing, automotive and other industries as being the most likely and probable risks for FDI in Russia. The majority of investors perceive political risks as a greater barrier for investment in Russia. These perceptions are influenced by existing asymmetries on the market and the political decision-making dominance over business environment. Our results support existing evidence on impacts of uncertainties connected with political and regulatory risks for FDI in Russia. However, we did not find evidence that these risk perceptions were affected by creation of the Eurasian Customs Union, neither in positive nor in a negative way. The results suggest that significant progress was already done by improving investment climate in Russia but further efforts are also needed on addressing regulatory risks such as dealing with construction permits, protecting minority investors or simplifying customs regulations, as well as addressing existing market asymmetries.

Alternative assessment of volume and industry structure of foreign direct investment in Russia

The article describes the role of offshore jurisdictions in the world’s capital flows. It is noted that not only tax heavens, but also some developed countries (Netherlands, Great Britain, Switzerland) accumulate capital in significant quantities, formally being an investor. In view of this assessment of volume and sectoral structure of foreign direct investment in Russia and analysis of the results are carried out.

Diagnostics of FDI Inflow in Russia: Theoretical and Practical Issues

The article analyses the factors that influenced the dynamics of foreign direct investment in the Russian economy in 2014 and over the last decade. The author considers theoretical perspective of the factors, influencing the incoming FDI in national economy. As a key factor influencing the unprecedented influx of foreign direct investment in Russia the author examines the impact of public measures, and institutional conditions that formed the basis for the support of foreign investors. A special focus is made on the distribution of different types of foreign investments by industry of the Russian economy. On the basis of the analysis the author explains the paradox, originated in the Russian economy in the second half of the 2000s. The paradox is associated with annual FDI inflow increase despite the weak investment climate of the Russian economy. The conclusions, suggested by author make a sound basis for investors in their decision-making.

Assessing horizontal and Vertical Spillover Effects from Foreign Direct Investment in Russia

FDI is believed to be very helpful for the national economy’s development. It is expected to increase the profitability and productivity of domestic companies. The analysis of balance sheets of Russian enterprises shows that for the period2004-2012 foreign investment caused horizontal and vertical spillovers in economic sectors. But this impact is ambiguous. Econometric modeling establishes the significant positive role of backward spillover. This means that national suppliers gain benefits from international interaction and become more effective due to technological and knowledge inflow from abroad.

Foreign direct investment and governance quality in Russia

This paper studies the effect of poor governance quality on foreign direct investment in Russia. Using a survey of businesses across forty administrative districts, we find that higher frequency of using illegal payments and higher pressure from regulatory agencies, enforcement authorities, and criminals, negatively affect foreign direct investment. Our identification strategy builds on the exogenous cross-regional variation in worker strikes during 1895–1914, the period before the October Revolution. We find that moving from the average to the top governance quality across Russian regions more than doubles the FDI stock.

Foreign Direct Investment and Governance Quality in Russia

This paper studies the effect of poor governance quality on foreign direct investment in Russia. Using a survey of businesses across forty administrative districts, we find that higher frequency of using illegal payments and higher pressure from regulatory agencies, enforcement authorities, and criminals, negatively affect foreign direct investment. Our identification strategy builds on the exogenous cross-regional variation in worker strikes during 1895-1914, the period before the October Revolution. We find that moving from the average to the top governance quality across Russian regions more than doubles the FDI stock.

What About the Weather? Climate as a Determinant of Investments and Revenues of Foreign Manufacturing Companies in Russian Regions

Globalization and climate change have been among the hottest academic topics during the past couple of decades. However, in academic research the links between the two is virtually untouched. In this paper, we study the impacts of climatic factors on foreign manufacturing companies in Russia. In particular, we analyze how short-term weather affects their revenues and how average climate impacts the manufacturing foreign direct investment (FDI) distribution across Russian regions. We find quite strong evidence that higher precipitation and temperature during summer is positively associated with annual fluctuations of foreign companies' revenues. We also find that manufacturing FDI in Russia tend to accumulate to regions with milder and stable climate, i.e. to regions with warmer winter and cooler summer and less weather volatility.