Fdi in Russia Issues and Perspectives

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TREASURY

F DI in Russia
Issues and Perspectives
Vinay Kumar The wave of Foreign Direct Investment in Russia started during 1990s, when the Law on Joint Ventures with firms from capitalist countries was passed. Initially, there was not much foreign investment. Later, in the year 2003, Russia attracted huge FDI and was placed third in FDI projects in the world, beating both China and the US. This article primarily focuses on FDI in Russia and also discusses some relevant issues.

F

oreign Direct Investment is seen growing faster than world GDP and is becoming a key factor of foreign investment. There has been a oneway flow of FDI between the developed and developing economies, and a two-way flow of FDI between the developed economies. Russian Finance Minister Alexei Kudrin’s handling of the country’s oil windfall was the mere indication for those who thought that Russia was able to pursue sensible fiscal. He has managed the petroroubles prudently and the contribution he has made to Russia’s economic stability is impressive.

Industrial countries like the US, the UK, Japan, Italy, Russia, and Germany have long dominated the FDI flows and totaled to 94% of outflows and over 70% of inflows in 2001. During the period of 1990-2000, the inflows in developing countries grew by an average of 23% per year. Later in 2001, these inflows declined to 13% (US$215 bn) affecting inflows into Brazil, Argentina, and Hong Kong Special Administrative Region (SAR). Putting these three economies apart, the FDI inflows into developing countries rose by about 18%. An average US$225 bn were the FDI inflows into the developing countries in the period 1998-2001, and during the same period, the portfolio investment and other investment inflows to these countries were much lower with an aggregate of US$22 bn a year. FDI flows grew strongly during 1990s, at rates well above the growth…...

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