Page 22 - bne Magazine February 2023

22 I Companies & Markets bne February 2023
Regional investments
In the early days of the post-Soviet era, governments and businesses were expecting a flood of western FDI to come and remake their economies, but volatility and corruption stymied direct investors’ enthusiasm and apart from the countries that joined the EU, the levels of FDI elsewhere in Eurasia was low, or focused on a few mega raw materials and energy projects.
In the last decade regional governments have increasing turned inwards and begun to mutually invest into their neighbours, promoting trade and mutually beneficial infrastructure projects. In particular, Azerbaijan, Georgia and
“In the last decade regional governments have increasing
turned inwards and begun to mutually invest into their neighbours, promoting trade and mutually beneficial infrastructure projects”
Turkey formed a golden triangle of mutual investment with each of the three playing to their mutually complementary strengths. A similar, but less pronounced, effect has been seen amongst the countries of the CIS.
“Azerbaijan is an active investor in the region. Its outward FDI amounted to 6.7% of the country’s GDP (compared to 2% in Russia). This suggests that Azerbaijani companies have enhanced their investment capacity and are now expanding into other CIS markets,” the EDB said in a report.
Mutual FDI as at mid-2022, US $ billions
In terms of inward mutual FDI, Kazakhstan has the largest share at 24.3% as of the first half of 2022, followed by Uzbekistan (20.1%) and Belarus (12.6%).
In 2022 there have been significant changes in the investment structure compared to 2016, with Ukraine's share declining threefold from 12.0% to 4.0%, after it broke off relations with Russia and turned to the EU instead. Uzbekistan, on the other hand, saw the largest increase in inward investment, from 11.7% to 20.1%, due to an improved investment climate following the election of Uzbek President Shavkat Mirziyoyev in 2016.
The top five FDI destinations in the CIS are Kazakhstan, Uzbekistan, Belarus, Azerbaijan and Armenia, all receiving
the lion’s share of investments from Russia. Other important destinations include Russia (for Kazakhstan's FDI), as well as Georgia and Ukraine (for Azerbaijan's FDI), according to the EDB.
In addition to Kazakhstan, which accounted for 53% of Russia’s FDI in the EAEU and 30% of its FDI in the CIS as at mid-2022, Russian investors have been boosting investments in Uzbekistan and Azerbaijan. Over the past six years, Russian FDI in Uzbekistan has grown by a factor of 2.1 and in Azerbaijan 1.7, the EDB said.
Corporate investment
The leading corporate investor in the region is Russia’s privately owned oil major Lukoil, which has doubled its presence in Azerbaijan's Shah Deniz oil and gas project.
Intra-regional investment has largely formed the profile
of the FDI made by international companies into the FSU countries, as it remains heavily concentrated in the raw materials and hydrocarbon sectors. Lukoil and the Russian state-owned gas behemoth Gazprom (including its oil production arm, Gazprom Neft) account for over 40% of the mutual FDI stock in the CIS.
Source: EDB MMI database
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