Page 49 - RUSRptSept18

Asian countries showed strong interest in the Russian economy: China became the leader by the number of foreign direct investment (FDI) projects for the first time, with Japan and South Korea also among Russia’s top 10 investors.
Manufacturing was the sector boasting the largest number of FDI projects, says EY. By excluding portfolio investments and M&A, EY claims that its survey reflects real investments in manufacturing and services by foreign companies across Europe.
The regions are becoming increasingly attractive to investors lead by rising FDI flows channelled into Tatarstan, Bashkortostan, Primorsky Krai, Lipetsk and Belgorod oblasts.
Of the total 238 FDI projects, this represents 16% growth in the number of projects y/y, a striking improvement compared with only 2% growth in 2016, according to EY’s latest European Attractiveness Survey - Russia.
Like in 2016, foreign investors focused on the construction of new manufacturing facilities in Russia (202 projects), rather than business expansion (36 projects).
Alexander Ivlev, EY Country Managing Partner for Russia, commented: "The manufacturing industry once again proved to be the most attractive industry for FDI in the Russian economy, gaining 127 new projects, or 18 more than the year before. Last year, the number of projects in the power industry grew by more than 50%, from 15 in 2016 to 26 in 2017. The number of projects in the finance and business services sector more than doubled, from four to 10 in 2017. The transport and communications sector remained almost the same with 31 projects in 2017. Agriculture slowed somewhat with 38 projects in 2017 against 41 projects in 2016."
The unquestionable leader among all manufacturing industries is pharmaceuticals with 35 projects. The machinery and equipment sector is number two with 21 projects. In addition, foreign investors heavily invested in the chemical and plastic products sector (19 projects). Mineral reserves and metals saw positive growth in 2017 with the number of projects having increased by four and three, respectively. The digital technologies sector grew to seven projects against only one in 2016. The electrical equipment sector halved with seven FDI projects vs. 2016.
"Last year saw a remarkable trend – strengthening interest of Asian countries in the Russian economy and their growing presence, which more than doubled in 2017 – from just 30 projects in 2016 to 76 last year. China took the lead for the first time, boosting the number of its FDI projects by more than three and a half times, from nine in 2016 to 32 in 2017. This is the largest number of projects financed by Chinese investors since the launch of the survey,” Ivlev said.
South Korea, with 12 projects, became one of Russia’s top 10 investors in 2017, for the first time since the launch of the survey. This compares with only two in 2016. Japanese investors kept up with the upward trend, financing 17 projects last year versus 12 in 2016.
While Asian investors are on the move, western investors were in retreat in Russia in 2017. Germany, which had ranked first by the number of new projects in 2015 and 2016, lost the lead, funding only 28 projects last year versus 43 in 2016. France followed suit, reducing the number of its new projects from 20 to 11 over last year.
Italy is the exception, as the only European country to increase the number f FDI projects in 2017, with 17 new projects in Russia, on par with the Japanese.
49 RUSSIA Country Report September 2018 www.intellinews.com