UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT
FDI in brief*: Russian Federation
Inward FDI is still small in relation to the size of the economy; United States is the largest investor in the Russian Federation
*Complete tables are presented in the Country Profile: Russian Federation, World Investment Directory online, CEE( hyperlink )
Following substantial increases during 1995-1997, FDI flows to the Russian Federation leveled off at about US$ 2.8 billion on average during the
following four years (figure 1). Given the size of the Russian economy, and compared with the volume of flows to other countries in Central and
Eastern Europe (CEE) such as Poland or the Czech Republic, this level is relatively low, suggesting that FDI in the country is still at an early stage.
Inward FDI stock in 2002 nearly doubled over the past four years (figure 2).
On the other hand, the Russian Federation is by far the leading investor country in the CEE region, accounting on average for more than 75% of the
regional annual outflows. FDI outflows were much lower than inflows in 1993. They grew substantially over the years so much so that in 2000 and
2001, the Russian Federation was a net investor, with, respectively, US$ 3.2 and US$ 2.6 billion invested abroad.
About 70% of FDI flows originate in developed countries. The United States is the main investment partner to date, in spite of a decline in flows
from this country in 2001 and 2002. In 2002, it held over 20% of the Russian FDI stock (table 1). Interestingly, Cyprus is also a very significant
partner, with almost 20% share in the FDI stock in 2002.
The sectoral breakdown of FDI inflows fluctuated substantially. The tertiary sector registered substantial increases in FDI flows during 1998-2000,
reflecting significant investment in the transport and telecommunications industries. By 2001, the tertiary sector received about 50% of total FDI
inflows. The secondary sector – where the food industry is a prominent FDI recipient - lost its share compared to 1998, but still receives about 30%
of total FDI. Finally, the ups and downs of the primary sector reflect the erratic FDI flows in the petroleum sector (which fell by 70% in 2000 to US$
400 million). Altogether transport and communications, mining and food account for about half of total FDI stock in the Russian Federation (table 2).
Interestingly, the large stock of FDI held abroad by Russian companies is in the business activities sector (which may include other industries not
clearly defined).
The relative modest importance of inward FDI in the Russian economy is reflected in the low level of its FDI flows as a percentage of gross fixed
capital formation, which stands at 6% during 1996-2001, one of the lowest of the region (together with those of Bosnia Herzegovina or Slovenia for
instance). Conversely, its prominence as an investor is reflected in its relatively high ratios of FDI flows to gross fixed capital formation and FDI
stock to GDP, clearly the highest ones of the region (figures 5 and 6).
The largest TNC affiliates are concentrated in industries such as electronic equipment, beverages and tobacco in the industrial sector, and
telecommunications and distributive trade in the tertiary sector. The largest one is Technip CIS ZAO (France). The largest home-based TNC is
Gazprom JSCO in the petroleum and natural gas industry (table 3).
Figure 1. FDI flows, 1993-2001
Figure 2. FDI stock, 1994, 1998, 2001 and 2002
(Millions of dollars)
(Millions of dollars)
6 000
25 000
Inward FDI stock
FDI inflows
5 000
FDI outflows
Outward FDI stock
20 000
4 000
15 000
3 000
10 000
2 000
5 000
1 000
0
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
1994
1998
2001
2002
Figure 3. FDI inflows by region, 1998-2002
Figure 4. FDI inflows by industry, 1998-2002
(Millions of dollars)
(Millions of dollars)
3000
4 000
Primary
3 500
2500
Secondary
3 000
2000
2 500
Developed countries
2 000
Developing economies
1500
1 500
Central and Eastern
Europe
1000
Tertiary
1 000
500
500
0
0
1998
1999
2000
2001
2002
1998
1999
2000
2001
2002
FDI in brief: Russian Federation (continued)
Table 1. The top three investment partners in terms of FDI stock, 1998 and 2002
(Shares in total)
Year
1998
2002
Inward FDI stock
Outward FDI stock
United States (27%), Cyprus (25%), United Kingdom (7%)
United States (21%), Cyprus (19%), Netherlands (12%)
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Table 2. The three most important industriesa in terms of FDI stock, 1998 and 2002
(Shares in total)
Year
1998
Inward FDI stock
Transportb (21%), foodc (20%), trade (12%)
Transportb (25%), miningd (16%), foodc (15%)
Outward FDI stock
Business activities (98%), transport b (1%), chemicalse (0.3%) f
2002
..
a At the 2-digit level of the ISIC classification. b Refers to transport, storage and communications.
c Refers to food, beverages and tobacco. d Refers to mining, quarrying and petroleum.
e Refers to chemicals and chemical products. f Data refer to 2000.
Figure 5. FDI flows as a percentage of gross fixed capital
formation, 1993-2001
Figure 6. FDI stock as a percentage of gross domestic
product, 1993-2000
(Per cent)
(Per cent)
8
14
FDI inflows
12
Inward FDI stock
7
FDI outflows
Outward FDI stock
6
10
5
8
4
6
3
4
2
2
1
0
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
1993
1994
1995
1996
1997
1998
1999
2000
FDI in brief: Russian Federation (concluded)
Table 3. Largest three home-based TNCs, largest three affiliates of foreign TNCs in the host economy
Company
Economy
Industry
Sales
A. Industrial
a) Largest home-based TNCs, 2001 (Millions of dollars)
Gazprom JSC
Russian Federation
Lukoil JSC
Russian Federation
Yukos Oil Corporation
Russian Federation
Petroleum and natural gas
Petroleum and natural gas
Petroleum and natural gas
17 713.3
14 892.0
9 811.8
b) Largest affiliates of foreign TNCs in the host economy, 1999 (Millions of rubles)
Technip CIS ZAO
France
Electronic equipment
BAT Saratov Tobacco Factory OAO
United Kingdom
Tobacco
Bavaria Brewery OAO
Netherlands
Beverages
22 348
21 053
17 180
B. Tertiary
a) Largest home-based TNCs, 2001 (Millions of dollars)
Far Eastern Shipping Co.
Russian Federation
Novoship Co.
Russian Federation
Primorsk Shipping Corporation
Russian Federation
Transport
Transport
Transport
318.0
392.1
145.7
b) Largest affiliates of foreign TNCs in the host economy, 1999 (Millions of rubles)
AWT International ZAO
Germany
Distributive trade
Mobile TeleSystems
Germany
Telecommunications
Vimpel-Communications
Norway
Telecommunications
C. Finance and insurance
21 625
8 807
5 560
Assets
a) Largest home-based TNCs, 2001
Alfa Bank
National Reserve Bank
Vneshekonombank
Russian Federation
Russian Federation
Russian Federation
Banking
Banking
Banking
b) Largest affiliates of foreign TNCs in the host economy, 1999 (Millions of rubles)
ABN AMRO Bank AO
Netherlands
Banking
Banca Cassa di Risparmio di Torino SpA
Italy
Banking
Banco Bilbao Vizcaya
Spain
Banking
Sources : Dun and Bradstreet Ltd., Who Owns Whom , CD-ROM, United Kingdom, April 2001. The Europa
World Yearbook 2000, The Russian Federation , vol. II, 41 edition (London Europa Publications Ltd., 2000),
pp. 3049-3088; and Foreign Investment Promotion Center, Investments in Russian economy , January 1999
(http://www.fipc.ru/fipc/reviews/events.html).
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