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ПРЯМЫЕ ИНОСТРАННЫЕ ИНВЕСТИЦИИ В РОССИИ
FOREIGN DIRECT INVESTMENTS IN RUSSIA
Ткачева Е.С., Домницкая Е.Е., факультет экономики 541 гр., ЮРИУ РАНХиГС
Tkacheva E.S., Domnitskaya E.E., economic faculty 541 group., South-Russian Institute of the Presidential Academy of National Economy and Public Administration
The article contains a description of the investment climate in Russia from the point of attracting foreign direct investments. It represents the dynamics offoreign investments inflows, their sectorial composition and geographic polarization, the main elements of the national investment policy. The issues of comparative assessment of the Russian investment climate with other countries and its key features are also included in the article.
Key words: foreign direct investments, investment climate, potential of growth, directions of investment, offshore centres, regulation of FDI, criteria of attractiveness.
В статье представлена характеристика инвестиционного климата России с точки зрения привлечения прямых иностранных инвестиций. Рассмотрена динамика притока иностранных инвестиций, их отраслевое и географическое распределение, определены основные элементы отечественной инвестиционной политики. Проведена сравнительная оценка инвестицион-
ного климата России с другими странами, а также указаны его ключевые особенности.
Ключевые слова: прямые иностранные инвестиции, инвестиционный климат, потенциал роста, направления инвестирования, оффшорные центры, регулирование ПИИ, критерии привлекательности.
Nowadays foreign investments play one of the main roles in the direction of global development. Every country tries to attract foreign capital and obtain direct and indirect advantages from foreign investment. Attracting foreign investment is a strategic challenge for Russia.
Foreign direct investments (FDI) have very specific characteristics in Russia. This specificity is part of the complex relationship that the Russian economy has maintained since the beginning of its transition (over 20 years ago) with international capital transfers.
Russia was first marked, in the 1990s, by the collapse of domestic investment and a massive flight of capital, combined with a very low capacity to attract incoming FDIs. Starting in the 2000s, the dynamic changed directions: domestic investment recovered its growth, accompanied by a return of foreign capital inflows; but this trend reversal was not observed regarding flights of capital, which are still considerable today. These contrasting developments are not the only paradox when it comes to the Russian economy.
During the period spanning 1992-1998, incoming FDI in Russia did not exceed $1.4 billion a year.
Figure 1. Inflowing FDIs in the Russian Federation, 1992-2011 (billion of US dollars)
Source: Central Bank of Russia, 2012 The rapid growth of FDIs after the August 1998 market crash was spectacular. Thanks to the economic recovery that began in 1999, they started to flow in, making Russia one of the leading destinations worldwide during the mid-2000s. However, the 2008-2009 crisis put a halt to this trend [1, 124]. Since then, growth has resumed, but pre-crisis levels have not been reached. On the international level, Russia is favorably positioned. Its rank as a destination for FDIs is considerably improving, placing it in the top 10 worldwide since 2007. Russia is now the leading destination for FDIs in Eastern Europe [2, 130].
The breakdown of FDI by sector has considerably changed over the last decade.
Figure 2. Breakdown of incoming FDIs in Russia by sector, 2010-2012
Millions of dollars % of the total
Total during the period spanning 2010-first quarter 2012 112,256 100
Wholesale and retail trade 25,935 23
Banks and insurance 20,675 18
Mining 9,541 8
Manufacturing industry: metallurgy and steel 9,081 8
Real estate 5,826 5
Information and communication 5,254 5
Electricity, gas, steam and air 4,147 4
Scientific, technical and professional activities 3,789 3
Manufacturing industry: other types of transportation equipment 2,252 2
Chemistry and chemical products 2,071 2
Computers, electronic and optical products 889 1
Transportation and storage 838 1
Manufacturing industry: mechanical engineering 669 1
Source: Central Bank of Russia, 2012
It would be unwise to conclude that the only sector that is attractive in Russia is the raw materials industry. On the contrary, FDI have gradually turned toward new activities, such as services. During the last three years, the predominance of trade has asserted itself, driven by the growth of international retail distribution groups (Auchan, Ikea, Metro and REWE in particular). Financial activities are at almost the same level and this trend should be confirmed in the future. International banking groups are trying to position themselves to get a share of the pie, believing in the sector's gradual opening up in the framework of Russia's membership in the World Trade Organization. Other sectors attracting a significant proportion of incoming FDI are real estate, information and communications, construction and the electricity and gas sectors.
High added-value industries - mechanical engineering, information technology, healthcare - are for the moment absent from the list of priority sectors for FDI, but transportation equipment should undergo rapid growth following the change in government policy [3, 91]. The agreement concluded in 2012 between Renault-Nissan and AvtoVAz illustrates this change in attitude. Another example
is the Kaluga region, which succeeded in creating a car cluster around Volkswagen, PSA and Mitsubishi.
Given this new diversification, mining activities now only represent the fourth largest category of incoming FDI, on a par with metallurgy and the steel industry. The October 2012 agreement between Rosneft and BP, which put an end to several years of difficult relations between the British company and the Russian government on the subject of its Russian subsidiary TNK-BP, may be an indication that this period of political tension is coming to a close.
Analysis of flows by region shows a strong geographic concentration of FDI: the city of Moscow and its immediate region represent 44% of the country's incoming FDI. More generally, two thirds of non-financial FDI are concentrated in only eight of the Russian Federation's "subjects": in decreasing order, Moscow, the Moscow and Sakhalin regions, the city of Saint Petersburg and the regions of Kaluga, Chelyabinsk, Arkhangelsk and Leningrad.
The geographic origin of FDI in Russia shows countries that are surprising in principle: out of the six largest foreign direct investors in Russia, five are offshore sites. They are Cyprus, the British Virgin Islands, Bermuda, the Bahamas and Luxembourg. These countries accounted for 58% of incoming FDI in Russia in 2011. By comparison, the combined holdings of Germany, Holland, Sweden, France, Ireland, Great Britain, Austria, Finland and the United States only represented 32% of the total. This strange dystrophy is explained when we examine Russia's outgoing FDI: we find the same offshore sites as for the incoming FDIs. This indicates that the capital flows are for the most part achieved through companies of Russian origin: having sheltered their holdings abroad, they reinvest part of them in their country of origin. Russian investors therefore make over half of Russia's incoming FDI [4, 67].
FDI are covered by regulatory texts that have been adopted during the last 20 years. These texts guarantee equal treatment between foreign and domestic investors in terms of obligations and protection of their rights and interests. If a for-
Электронный вестник Ростовского социально-экономического института. Выпуск № 4 (октябрь - декабрь) 2014
eign investor holds more than 25% of the capital in a Russian company, the law protects this investor from unfavorable legislative changes (in particular: customs duties, federal taxes and contributions to extra-budgetary funds, legislative amendments and the introduction of FDI restrictions) that would occur during the first seven years of return on investment.
Since the law of 2008 was passed, foreign investments in "strategic companies" have been subject to restrictions. These companies are found in the following areas: the mining industry (on lands said to have "federal importance"), the aerospace industry, services provided by a natural monopoly, fishing, hydrometeorological and geothermal activities, activities linked to the use of nuclear and radioactive materials, cryptology and activities related to the military-industrial complex. Foreign firms cannot acquire a majority share of capital in strategic companies nor can they participate in their boards of directors.
For improving invest climate there are 24 special economic zones (SEZ) in Russian Federation. They are territories in which investors benefit from tax advantages: exemptions from customs duties, accelerated investment amortization. For example, the Kaliningrad SEZ offers a special regime, with no taxes at all on property and profits during the first six years of operation. The Skolkovo innovation center also benefits from a special social and tax regime: for companies investing in technical and scientific activities, social contributions are reduced; during a company's first 10 years of operation, taxes on profits and property as well as the value-added tax are set at zero until the company's revenue reaches 300 million rubles (€7.3 million) [5, 118].
In 2010, the OECD proposed an evaluation of FDI regulations that covered four criteria: the share of capital that a foreign entity can acquire in a national entity; the administrative authorizations required to conduct an FDI transaction; the hiring of foreign personnel; other restrictions - land ownership, access to financing and other requirements.
The index places Russia in 44th position out of the 46 countries that were evaluated: only China and Iceland have more restrictive FDI legislation. The clearly shows the restrictive nature of FDI legislation in the raw materials sector.
But not only legislation influences on investors decision to invest or not in a given country. The "investment climate" is a complex concept that contains institutional and economic conditions that influence the decision to invest.
On this scale, Russia is generally poorly ranked compared to countries with a similar GDP level: publications by the World Economic Forum, and Transparency International respectively rank it at 67th place out of 144 countries, alongside Sri Lanka and Iran (World Economic Forum, 2012), at 112th out of 185 countries and 143rd out of 182 countries, on the same level as Nigeria and Timor (Transparency International, 2012). Russian authorities recognize that it is necessary to improve the investment climate, but significant results have yet to be achieved in this area [6,].
However, major indexes are very general by nature. A foreign company setting up business in Russia would be mistaken in thinking that these indexes are sufficient to form an opinion regarding the viability of its project. The requirements of each investment project are specific and rankings do not take this into account. Since 2010, the growth of Russia's economy has resumed less than before the crisis, but very much above that of Western Europe. Russia has risen in the world ranking of investment outlooks and appears more attractive for investors.
As for FDI, Russia presents a paradox: considered to be largely corrupt by the business community, and not very reliable for property rights or the rule of law, it nevertheless ranks as one of investors' favorite destinations. This paradox may be explained by the following elements which appeal to foreign companies: a large consumer market, an active population with one of the highest education levels and natural resources that are unmatched in the world. No matter what risks involved are, investing in Russia is now a priority for large foreign companies.
Список литературы:
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2. Kalotay K. Will Foreign Direct Investment Take Off in the Russian Federation? // Journal of World Investment & Trade. 2012. № 2. Р. 119-138.
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4. Vercueil J. Foreign direct investments in Russia // Economics. 2013. № 3. P. 61-72.
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