Page 63 - RusRPTJul20

5.3​ FDI
The net inflow of foreign direct investment into Russia last year was $32bn​, a huge jump from the previous year’s exceptionally weak numbers.
Last year saw also new equity investment instead of just reinvested profits. In contrast, the net outward FDI flow from Russia shrank last year to $23bn.
UNCTAD’s latest ​World Investment Report​ expects FDI flows, both globally and in the specific case of Russia, to contract by 30–40% this year due to the corona pandemic.
The stock of FDI in Russia at the end of last year amounted to around $590bn (35% of GDP). Broken down by branch, the most investment (23%) went to mineral extraction industries (includes oil & gas), manufacturing (20%), finance (17%) and trade (15%). The stock of Russian FDI abroad amounted to nearly $410bn.
While FDI is often considered an important indicator of the degree to, which a country is integrated with the global economy, phantom investment flows may blur the picture. Phantom investment refers to flows that are conducted via third countries for such purposes as tax planning.
According to ​a working paper​ published by the IMF last year, phantom investments could account for as much as 40% of global FDI flows. In the article, it is estimated that in Russia’s case about a quarter of FDI inflows to Russia are actually of domestic origin. Only in China the share of FDI inflows with domestic origin is slightly larger. UNCTAD’s 2017 estimate found that Russia’s main providers of FDI (with third-country effects removed) were the US, UK and Germany.
The volume of net direct investment by German companies in the Russian economy in 1Q20 amounted to €1.8bn​, according to the German-Russian Chamber of Commerce.
According to the statement, the volume of German investments in the Russian economy was approximately at the level of the same period last year — €1.9bn — despite the coronavirus pandemic.
Chairman of the German-Russian Chamber of Commerce Matthias Schepp noted that the fact that the German economy is still actively investing in the Russian market, despite measures to combat coronavirus in Germany, Russia, and around the world, shows that the Russian market remains attractive despite political tensions, sanctions, and global trade conflicts. He added that first of all, medium-sized family enterprises are investing in the Russian economy.
The chamber noted that in 2018 the volume of net direct investments of German companies amounted to €3.3bn, and in 2019 it fell to €2.1bn.
63​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com