12.01.07

Russia achieved an all-time record in direct foreign investment (DFI) in 2006, according to data reported by the United Nations Conference on Trade and Development (UNСTAD). The report indicates that DFI grew 94.6% over the 2005 total, reaching $28.4 billion.

The Central Bank of Russia is even more optimistic, announcing yesterday that preliminary estimates for 2006 figure for foreign investment in Russian assets at $31 billion, ensuring a nearly 250% growth in DFI. The only places exhibiting more rapid growth in foreign investment are Kazakhstan, Poland, and Thailand. For comparison, the DFI growth rates in Central and Eastern European countries average 56%, while the US shows a rate of 78%.

Russia takes third place among developing economies in terms of total funds invested by foreigners, behind only China ($70 billion) and Singapore ($31 billion).

Interest in Russia is growing, as even more companies realize that they need to work here and simply cannot ignore the Russian market. Russia has a long way to go yet to join the ranks of the global leaders, however; for example, foreign investors put $177.3 billion into the US economy last year and invested $169.8 billion in the UK economy.

Last year was the first time that foreign investment in the oil and gas sector began to decline. Until now, the lion’s share of direct foreign investment (80-90%) had gone to the heating and power industry (primarily in the Sakhalin-1 and Sakhalin-2 projects). However, foreign investors readily bought up assets in the banking sector and the chemical and timber industries in addition to investing in development.

The influx of direct foreign investment is an important indicator of the business climate and outlook for the national economy. Progressive industrial and managerial technologies are coming into the developing country along with these funds.

Source: From material from the newpaper "Vedomosti"