Page 21 - bne Magazine February 2023

bne February 2023 Companies & Markets I 21
bne:Deal
Mutual FDI in Eurasia has been dominated by Russia, but war and sanctions make the outlook uncertain
Ben Aris in Berlin
The mutual Foreign Direct Investment (FDI) stock
in the Commonwealth of Independent States (CIS) countries grew fast until Russia went into recession in 2012, when its GDP growth sank to zero. However, it started to recover after the recession ended in 2016. As of the first half of 2022 the mutual FDI was on track to slightly exceed that of 2021, but the outlook is now in doubt after the war in Ukraine began in February, according to research released by the Eurasia Development Bank (EDB) in December.
The mutual FDI stock in Eurasia (CIS countries and Georgia) totalled $44.6bn by mid-2022, of which Russian investors accounted for approximately 80%. Kazakhstan imported the largest amount of investments, $10.8bn or 24.3% of
the total.
The mutual FDI stock in the narrower member of the Russia- lead Eurasian Economic Union (EUU) countries amounted to $24.5bn in first half of 2022. Investors in EEU countries are mostly interested in greenfield projects (up 1.6 times over the last six years) and private investment dominates (56%), according to the EDB.
Mutual FDI stock in CIS and EAEU countries, US $ billions
In the early years after the collapse of the Soviet Union eastern Europe was hoping western investors would remake their economies. Three decade on and increasingly FDI has become a regional phenomenon. / bne IntelliNews
Two periods of growth
Mutual FDI in Eurasia has seen two periods of significant growth. The first was between 2008-2012, when it increased from $35.8bn to $54.8bn. The second period was between 2016-2020, during which the FDI stock rose from $36.4bn to $44.9bn. However, by the end of 2021, the mutual FDI stock had declined to $44.3bn. As of mid-2022, the mutual FDI in the Eurasian Economic Union (EAEU) countries was estimated at $24.5bn, according to the EDB.
Russia is by far the largest investor in the CIS, with its FDI accounting for 79.2% of total CIS mutual investment by mid-2022. For decades Russia has been a net exporter of capital as its business invest in the “near abroad”, as Russian investors have dubbed the countries of the Former Soviet Union (FSU).
Kazakhstan and Azerbaijan come in second and third, with shares of 9.5% and 8.4% respectively. Azerbaijan
is particularly active in the region, with its outward FDI amounting to 6.7% of the country's GDP. This indicates that Azerbaijani companies have increased their investment capacity and are now expanding into other CIS markets.
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