Page 50 - RusRPTMay19

5.3 FDI
Russia -FDI 2012 2013 2014 2015 2016 2017 Mar-2018
Foreign direct investment (BoP) (USD mn)
50,588 69,219 22,031 6,854 32,539 27,886 7,044
Foreign direct investment: % of GDP (BoP)
2.29 3.11 1.05 2.09 2.28 1.85 1.80
Foreign portfolio investment (USD mn)
19,312 748 -23,203 -12,872 3,020 9,330 3,728
source: CEIC
Foreign direct investment (FDI) in Russia almost doubled to US $11.5bn in January–March from $6.4bn in the same period of 2018, as seen by PRIME in the central bank’s materials on Tuesday. However, almost al Russia’s FDI at the moment is the reinvestment of profits by foreign companies already operating in Russia.
Foreign Direct Investment (FDI) in the share capital of Russian non- financial sector companies in 2018 declined by $6.5bn (outflow of $22.4bn versus inflow of $15.9bn), which makes the lowest indicator since 1997, according to the data of the Central Bank of Russia (CBR) cited by the RBC business daily.
The inflow of $15.9bn in the capital of Russian companies was 2.5-fold below the average over the past ten years, the CBR estimated. Both 2017 and 2016 saw an inflow of $18.2bn and $9.7bn, respectively.
Analysts surveyed by RBC believe that sanctions introduced in April 2018 are to blame for the outflow, while noting, however, that CBR methodology does not allow to distinguish Russian offshore capital from actual foreign investors.
As reported by bne IntelliNews, while 2018 did not see a single equity offering, the market is slowly coming back to life with a number of deals already announced in 2019, with both market leaders such as Polyus Gold and Cherkizovo, and smaller players such as rail operator RusTransCom planning to raise equity.
Flows of direct investment to and from Russia’s non-bank corporate sector have been smaller over the past five years than earlier. This concerns inbound FDI to Russia especially, even though they rose temporarily due to two individual relatively massive investment operations in the period (the ownership restructuring of the TNK-BP joint venture between the Russian state oil giant Rosneft and BP in 2013, and the sale of a large stake in Rosneft to foreign investors in 2016).
FDI flows into Russia’s corporate sector over the past decade have almost continuously been smaller than FDI outflows from the Russian corporate sector.
As in previous years, most 2018 FDI inflows to Russia’s corporate sector were reinvested profits. Intragroup credit between parent and subsidiary companies became a popular practice a decade ago to bring capital into Russia but that has shifted in recent years to a slight drain of capital out of the country.
50 RUSSIA Country Report May 2019 www.intellinews.com