General commercial operations on ensuring the market’s functioning
Finance, credit, insurance, pension provision
Source: Goskomstat of Russia
In 2000, FDI mainly were forwarded in transport (21.4% of the overall volume of FDI), the food-processing sector (18.5%), trade and publi catering (18.9%), and fuel setor (10%), machine building, and metal processing (4.4%).
A significant part of investment in the industrial sector comprises credits from interntional financial institutions. Traditionally, the major part of suh investments was forwarded to the industries orienting to the domestic consumer market and ensuring the access to natural resources. As far as the volume of attracted investment is concerned, among the basic sectors the leaders still were the food-processing and fuel industries, and metallurgy, with their aggregate share accounted for 74% (37.8%, 3.2%, and 13.1%, respectively) of te total amount of foreign investments in the industrial sector.
The focus of foreigncompanies investing to Russia on the local market is proved by a low proportion of export in the overll volume of goods and services they delivered. At present the foreign companies’ daughter firms export on average not more than 12% of the total volume of goods and services.
In 2000, the structure of foreign investment in the industrial sector did not differ from the structure of their total volume and was characterized with the contraction in the proportion of FDI against the growth in other investments. Thus, given that in 1999 the proportion of direct investment in industrial sector in their overall volume in this sector was 53.4%, while portfolio- 0.5%, and others- 46.1%, in 2000 the proportion of the former slid to 39.4%, while the proportions of portfolio and other investments grew up to 1.5% and 59.1%, respectively.
In terms of territories, in 2000 the main characteristics of foreign investments appeared the decline in differentiation between Russian regions by their volumes of foreign capital inflow.
In order to support Russian companies, the formation of investment funds will be continued in 2001. Thus, for example in Nizhny Novgorod the US company SEF supported by EBRD intends to create an investment fund to finance small - and medium-size businesses ( in a form of credits or by contributing to their authorized capital). The volume of investment planned to be forwarded to support national enterprises is estimated at the level of USD 30 to 35 mln.
The authorities of the North - West supra-region plan to establish in 2001 a Commission for Protection of Investors’ Rights. One of the major functions of the Commission should be preventing crisis situation at enterprises, for the recent practice has shown that potential investors are stopped by an insufficiently efficient management, especially at the enterprises whose control block is owned by the state.
In 2000 Russia receive investments from 108 countries ( in 1999-96 countries), with the US being an undisputable leader (14.5% of the total volume of foreign investment received over 2000), followed by Germany(13.4%) and, consequently by UK, Netherlands, Switzerland, and France.
While considering the overall volume of accumulated foreign investment, according to results of 2000, it is US, Germany, Cyprus, France and UK that were the leaders with their proportion in the respective total volume accounted for 73.1% (in 1999- 80.7%). This top five exporters of capital to Russia also hold 63.9% of direct investment, 48.4% of portfolio, and 76.1% of other ones. Their respective indices of 1999 were: 72.%, 49.5%, and 88%, respectively.
Accumulated, as of end 2000
Invested over 2000
Main spheres of investment
Including: industrial sector
transport and communication
Finance, credit, insurance, pension provision
including: machine uilding and non-ferrous metallurgy
finance, credit, insurance, pension provision
Source: Goskomstat of RF
The structure of investment that the largest countries-investors accumulated by late 2000 is dominated by ‘other’ investments formed mostly at the expense of credits. Thus, the proportional weight of this kind of investment received from Germany accounted for 80% of the overall volume of German investment accumulated in Russian economy, while the respective indices for France, UK, and Italy were 92.2%, 55.3%, and 90.8%, respectively, providing that the proportion of ‘other’ investment in the overall volume of investment accumulated by late 2000 accounted for 48.0%.
In late January 2001, Barings Vostok Capital Partners announced the establishment of the first since 1998 fund for direct investment for Russia, Ukraine, and CIS countries with the starting capital of over USD 100 mln. The fund will be investing in the oil and gas sector, telecommunication, forestry, output of consumer goods, and information technologies.
The inflow of the PSA- based foreign investments in the national mineral sector still remains low. Despite the enactment of the federal Law “On production sharing agreements” yet in 1996, by now there have been only four such agreements concluded: Sakhalin-1, and 2 ( in Sakhalin Oblast), Kharyaginskoye (Nenetsky AO) and Samotlorskoye (Khanty-Mansy AO). The subject of all of them became hydrocarbon deposits. De-facto in 2000 only the first three of the a.m. four agreements were operating: notably, they were concluded prior to the enactment of the respective Law on PSA. The attraction of investment by the concluded PSA=s proceeds at a very slow pace compared with projected timing and volumes, while negotiations on conclusion of new agreements drag on very slowly.
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