FDI inflow and related issues in Russia

50 %
50 %
Information about FDI inflow and related issues in Russia
Business & Mgmt

Published on April 7, 2009

Author: sam_tandon

Source: slideshare.net

Description

This presentation talks about the FDI inflow in Russia and the related political and social issues having an impact on the FDI.
I appreciate you leave a comment on the slideshow. You are free to use to use the information as long as you mention the source although I would not be able to share the originals with you since it is not under my ownership alone.

Group 11 Indranil Sapre | Jaikrishnan | Sameer Tandon Saumya Gopi | Sumit Agarwal | Surabhi Srivastava

Russia experiencing unprecedented capital flight 1996 $22.3 billion left the country – illegally that is! $2.2 billion inflow Investment from FDI higher in smaller nations e.g. Hungary Complex tax code - ever-changing and randomly enforced Weak and untested property and contract safeguards Endless regulations Playing field made uneven by trading and tax favors - Russian government to Russian companies

Russia experiencing unprecedented capital flight

1996

$22.3 billion left the country – illegally that is!

$2.2 billion inflow

Investment from FDI higher in smaller nations e.g. Hungary

Complex tax code - ever-changing and randomly enforced

Weak and untested property and contract safeguards

Endless regulations

Playing field made uneven by trading and tax favors - Russian government to Russian companies

Russia favor local companies companies sold for a fraction of their market value to local banks FDI’s not given an opportunity to bid privatization of several large-scale companies has seen the majority of stock sold - incumbent managers and employees for a fraction of the price

Russia favor local companies

companies sold for a fraction of their market value to local banks

FDI’s not given an opportunity to bid

privatization of several large-scale companies has seen the majority of stock sold - incumbent managers and employees for a fraction of the price

Largest oil and gas reserves Production dropped: 569 million tons(1988) - 305 million tons(1996) Issues: leaking pipelines aging oil wells lack of new drilling conflict between the various states of the former Soviet Union

Largest oil and gas reserves

Production dropped: 569 million tons(1988) - 305 million tons(1996)

Issues:

leaking pipelines

aging oil wells

lack of new drilling

conflict between the various states of the former Soviet Union

Boris Yeltsin in November 1997 opened FDI in oil and gas industry allowed foreign investors to buy 100 percent of Russian oil companies Royal Dutch Shell had teamed up with RAO Gazprom to bid for Rosneft BP purchased 10% stake in Sidanco

Boris Yeltsin in November 1997 opened FDI in oil and gas industry

allowed foreign investors to buy 100 percent of Russian oil companies

Royal Dutch Shell had teamed up with RAO Gazprom to bid for Rosneft

BP purchased 10% stake in Sidanco

Stronger legal and tax guarantees Sign internationally recognizable production sharing agreements Ownership of natural resources with the state but allow foreign developers a defined share of future revenues Not passed as of 1997

Stronger legal and tax guarantees

Sign internationally recognizable production sharing agreements

Ownership of natural resources with the state but allow foreign developers a defined share of future revenues

Not passed as of 1997

 

EU is the largest investor in Russia Russia’s nominal GDP over USD 1 trillion in 2006 During the period 2000-2006, growth due to gradual increase in utilization of existing industrial capacity FDI’s were of fundamental importance for making resumption of growth in Russia Estimated FDI figure’s $56-62 billion in 2009 $60-67 billion in 2010 $65-73 billion in 2011

EU is the largest investor in Russia

Russia’s nominal GDP over USD 1 trillion in 2006

During the period 2000-2006, growth due to gradual increase in utilization of existing industrial capacity

FDI’s were of fundamental importance for making resumption of growth in Russia

Estimated FDI figure’s

$56-62 billion in 2009

$60-67 billion in 2010

$65-73 billion in 2011

 

 

Significant progress in liberalization of electricity sectors Natural gas sector remains mostly unreformed In July 2007, Govt. submitted “ On the Rules of Foreign Investments in Enterprises Having Strategic Importance for the National Security of the Russian Federation” to Duma Two sectors identified – strategic and subsoil Legislation Business climate Legal framework not stable – deterrent to investments Russia ranks 106 th of 178 countries in “Doing Business 2008” Russia performed worst in licensing requirements, dealing with workers and trading across borders

Significant progress in liberalization of electricity sectors

Natural gas sector remains mostly unreformed

In July 2007, Govt. submitted “ On the Rules of Foreign Investments in Enterprises Having Strategic Importance for the National Security of the Russian Federation” to Duma

Two sectors identified – strategic and subsoil

Legislation

Business climate

Legal framework not stable – deterrent to investments

Russia ranks 106 th of 178 countries in “Doing Business 2008”

Russia performed worst in licensing requirements, dealing with workers and trading across borders

World’s largest natural gas company which controls 16% of world’s natural gas reserves Revenues of USD 75.8 billion in 2007 Contributed 64% of total exports from Russia in 2007 A public stock company listed on stock exchange in 1994 Government of Russia holds 50.01% stakes Europe Union is dependent on Gazprom for its gas supplies Gazprom has been under scan for its political connnections Was expected to become $1 trillion company and largest corporation in world by 2010 before financial meltdown

World’s largest natural gas company which controls 16% of world’s natural gas reserves

Revenues of USD 75.8 billion in 2007

Contributed 64% of total exports from Russia in 2007

A public stock company listed on stock exchange in 1994

Government of Russia holds 50.01% stakes

Europe Union is dependent on Gazprom for its gas supplies

Gazprom has been under scan for its political connnections

Was expected to become $1 trillion company and largest corporation in world by 2010 before financial meltdown

The current Russian President was Gazprom's chairman. He replaced the president who became prime minister, replacing the existing prime minister who became Gazprom's chairman

The current Russian President was Gazprom's chairman. He replaced the president who became prime minister, replacing the existing prime minister who became Gazprom's chairman

Viktor Zubkov Current Chairman of Gazprom Former Prime Minister of Russia Valdimir Putin Shareholder in Gazprom Former President of Russia Current Prime Minister of Russia Viktor Chernomyrdin Former Chairman of Gazprom First Prime Minister of Russia Dmitry Medvedev Former Chairman of Gazprom Current President of Russia

Viktor Zubkov Valdimir Putin Dmitry Medvedev

 

The Good Re-centralized a chaotic regime GDP grew by 70%, industrial growth by 75 %, investments have increased by 125% Controlling stake in Gazprom , Rosneft went public local and international investment Setup of the Stabilization fund Real incomes have doubled and poverty has halved Removed legislative and policy hurdles changing international opinion Created opportunities for investment in Oil, Gas, Power generation, distribution and food. The Bad Authoritarian culture High inflation Commodities-based economy High dependence on food imports Growing gap between rich and poor Not enough local investment Only 1 mn of the total 140 mn involved in stock trading 70% russians have no savings 26% keep their savings in cash Trade embargoes on countries that do not fall in line (Ukraine, Estonia, Georgia)

The Good

Re-centralized a chaotic regime

GDP grew by 70%, industrial growth by 75 %, investments have increased by 125%

Controlling stake in Gazprom , Rosneft went public local and international investment

Setup of the Stabilization fund

Real incomes have doubled and poverty has halved

Removed legislative and policy hurdles changing international opinion

Created opportunities for investment in Oil, Gas, Power generation, distribution and food.

The Bad

Authoritarian culture

High inflation

Commodities-based economy

High dependence on food imports

Growing gap between rich and poor

Not enough local investment

Only 1 mn of the total 140 mn involved in stock trading

70% russians have no savings

26% keep their savings in cash

Trade embargoes on countries that do not fall in line (Ukraine, Estonia, Georgia)

How is Russia is using its oil muscle?

How is Russia is using its oil muscle?

Russia has positioned itself as an important alternative supplier to the increasingly unstable Middle East Oil and gas generate 70% of the countries income Russia is using oil as a major tool of its foreign policy “ Booming sales of oil and gas are driving Russia's economy to new levels, and Moscow is eager to prove that its humiliating years of post-communist uncertainty are over.”

Russia has positioned itself as an important alternative supplier to the increasingly unstable Middle East

Oil and gas generate 70% of the countries income

Russia is using oil as a major tool of its foreign policy

“ Booming sales of oil and gas are driving Russia's economy to new levels, and Moscow is eager to prove that its humiliating years of post-communist uncertainty are over.”

Instances of forcing private companies to hand over projects to Gazprom Instances of cutting supply to neighboring countries ANOTHER SIDE OF THE STORY Oil is slippery path to power Short term strategy of Putin Oil companies in Russia using outdated technology Oil prices are falling

Instances of forcing private companies to hand over projects to Gazprom

Instances of cutting supply to neighboring countries

ANOTHER SIDE OF THE STORY

Oil is slippery path to power

Short term strategy of Putin

Oil companies in Russia using outdated technology

Oil prices are falling

 

GDP FACTORS 2003 2004 2005 2006 2007 2008Q1-3 GDP Growth % 7.3 7.2 6.4 7.4 8.1 8 Industrial Production Growth y-o-y 8.9 8 5.1 6.3 6.3 5.4 Fixed Capital Investment growth 12.5 13.7 10.9 16.7 21.1 13.1 Federal Government balance 1.7 4.3 7.5 7.4 5.5 8.1 inflation ( CPI) % Change 12 11.7 10.9 9 11.9 11.6 Current Account Billion USD 35.4 58.6 84.2 95.6 76.6 91.2 Unemployment % 8.6 8.2 7.6 7.2 6.1 5.3 Reserves Including gold in (billion USD) 76.9 124.5 182.2 303.7 478.8 475

GDP 2003 2004 2005 2006 2007 2008 2008 ( Q1 -3 ) Total GDP GROWTH 7.3 7.2 6.4 7.4 8.1 8.5 7.5 Tradable 8.9 6.3 3.5 2.6 4.6 5.2 3.4 Agriculture, Forestry 5.5 3 1.1 3.6 3.1 3.2 3.2 Extraction industries 10.8 7.9 0.5 1.6 0.3 1.5 -1 Manufacturing 9.5 6.7 6 2.9 7.4 7.6 5.6 Nontradable sectors 7.2 7.3 7.3 9.8 9.8 9.9 9.1 Electricity,gas,water,prod. And distribution 1.6 2 1.2 4.7 -1.9 5.3 1.7 Construction 13 10.3 10.5 11.6 16.4 28.3 18.7 Wholesale and Retail 13.2 9.2 9.4 14.6 12.9 11.9 11.7 Financial Services 9.6 9.9 11.9 10.3 11.4 9.7 9.7 Transport Sector and community 7.2 10.9 6.2 9.6 7.7 9.8 9.4

 

 

 

SECTORAL INVESTMENT 2005 2006 2007 2008 Tradable Sector Total 77.7 53.5 65.7 37.4 Agriculture, Hunting, Forestry 0.9 1.4 0.8 1.7 Extraction Industry 30.7 33.1 50.1 22.6 Manufacturing 46.1 19 14.8 13.1 Non-tradable Sector Total 22.3 46.5 34.3 62.6 Electricity,gas,water production & dist 1.1 0.4 0.5 33.9 Construction 0.9 2 3.2 5.3 Retail & wholsale trade 5.9 6.1 11.7 8 Hotels & Restaurant 0.2 0.2 0.2 n/a Transport & Communication 1.9 2.8 2.1 1.5 Finance 4.5 11 4 1.3 Real Estate and Leasing 7.1 23.5 11.8 11.9 Provision of other public utilities 0.6 0.4 0.5 0.5 FDI and DEBT FLOWS 2005 2006 2007 2008 FDI Inflows 13.1 13.7 27.8 11.1 External Debt Stock 257.2 310.6 463.5 527.1 External debt flows 43.7 53.4 152.9 63.6 Total capital flows 57.7 67.1 180.7 74.7 Share of Debt flow as % of total Capital Flow 77.00% 79.60% 84.60% 85.20%

Add a comment

Related presentations

Canvas Prints at Affordable Prices make you smile.Visit http://www.shopcanvasprint...

30 Días en Bici en Gijón organiza un recorrido por los comercios históricos de la ...

Con el fin de conocer mejor el rol que juega internet en el proceso de compra en E...

With three established projects across the country and seven more in the pipeline,...

Retailing is not a rocket science, neither it's walk-in-the-park. In this presenta...

What is research??

What is research??

April 2, 2014

Explanatory definitions of research in depth...

Related pages

Diagnostics of FDI inflow in Russia: theoretical and ...

Diagnostics of FDI inflow in Russia: ... influx of foreign direct investment in Russia ... of the Russian economy, especially those related to ...
Read more

Foreign direct investment, net inflows (BoP, current US ...

Foreign direct investment refers to direct investment equity flows in the ... Russian Federation ... Foreign direct investment, net inflows (BoP, current ...
Read more

Top FDI sectors and regions - EY - Global

Top FDI sectors and regions. ... Automotive has been the key sector attracting FDI in Russia over the last five years, ... Related content.
Read more

FOREIGN DIRECT INVESTMENT - NET INFLOWS (% OF GDP) IN RUSSIA

foreign direct investment; net inflows ... an historical data chart and related indicators for ... in russia foreign direct investment; net inflows ...
Read more

Russia in world's top 3 recipients of foreign investment ...

Foreign direct investment (FDI) in Russia reached a record $94 billion in 2013, ... or 52 percent of the global inflow. ...
Read more

Russia attractiveness survey 2013 - EY - Russia

Russia, attractiveness, survey ... Russia’s key FDI magnets Moscow and St. Petersburg became the hot spots ... legislative and administrative issues.
Read more

Foreign direct investment - European Commission | Choose ...

Foreign direct investment ... (QREA, Volume 12, Issue 2, June 2013) ... For more papers on FDI and related topics go to ECFIN publications.
Read more