Definition : "Direct investment refers to investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor's purpose being to have an effective voice in the management of the enterprise." [IMF Balance of Payments Manual, 4th ed, 1977, p.136]
Type of FDI: -Greenfield Investment -Mergers and Acquisition
From Firm's POV Resource Seeking ( natural or HR) Market seeking Efficiency seeking strategic-asset seeking
From Host Country's POV Improving quality of labor and infrastructure Develop local skills,tech and local learning Ensure stable & conducive overall macro and regulatory environment
About Russia GDP:1.7 Trillion $ (6 th ) GDP growth:7% Inflation:11.9% 24% increase in Foreign Trade Exchange Rate:1$=23.6 Ruble Labor Force:71.68 Million (Agr:12%,Industry:23%,Services:65% Unemployment Rate:8.5%
The Russian Federation stretches across Eurasia from Eastern Europe to the Pacific coast. Even after the collapse of the Soviet Union, Russia remains the largest country in the world in terms of territory.
Russia has great potential for attracting FDI. With 145 million consumers, a well educated and capable labor force and a wealth of natural resources, it should be the leader in Eastern Europe in terms of investment.
Russia as an Investment Destination
Foreign Direct Investment in Russia, USD billion 26.7 2006 FDI Inflow In Russia
The food industry has attracted the highest number of FDI projects - 45 projects, associated with $2.4 billion of investment in 2002-2003. However, in terms of total investment, the energy sector is by far the biggest recipient – accounting for $10 billion in 2002-2003. Other major sectors include wood products ($1 billion), consumer goods ($95 million), automotive OEM ($670 million), and metals/mining ($552 million) sectors. FDI Inflow In Russia – Sector-wise Breakup
Accumulated foreign investment $ 111 . 8 Billion FDI Inflow In Russia – Top Investors
Horrors of governance and settlements still occur as with the forcible takeover of Yugraneft Corporation, a Russian subsidiary of Norex Petroleum by TNK
ADC’s claim against contract violation by its Russian partner, Arkhangelskgeoldobycha,
July 2001 takeover of Sawyer Research Products’ facility in Vladimir by two Russian companies with the support of the local judiciary.
Risks Investors’ opinion Source : questioning of foreign investors « Russia as an object of investments », polled in 2005 г. by FIAC
FDI confidence index A.T.Kearney in 2005 China India United States United Kingdom Poland Russia Brazil Australia Germany Hong Kong Hungary Czech Republic Turkey France Japan Mexico Spain Singapore Italy Thailand Canada Dubai/UAE South Korea Central Asia Romania Maintained ranking Moved down Moved up
« If you are looking for a gold mine in the sphere of sciences and technologies, pay attention to Russia». George Schultz , Former US Secretary of State « As far as I noticed everything is not that hard and doesn’t differ from other countries » Andrew Kinghorn , Director of Internationa l Investments Knight Frank « There is much talk, particularly in the equity market, of the risks of investing in Russia, but we believe that the risks are more than counterbalanced by the opportunities, especially if you know where to find them» Steven Jennings , chairman of investment group « Renaissance Capital »