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5.3 FDI
Russia was successful at attracting FDI. Accumulated foreign direct investment was about 28% of GDP at the end of 2021 according to the OECD. However, this is the total accumulation of the flows of investment into Russia over thirty years and is small for a country the size of Russia. The OECD average is 62.9%, and the G20 average is 38%. China is 22% and India is 16%. So, Russia is above average for its peers, but it is important to remember that a large part of this is offshore money being reinvested in Russia. Another factor that may inflate Russia’s number is that much of the investment in Russia is in capital-intensive natural resource projects, which have a higher capex per worker.
How “foreign” is Russian FDI? In many cases, a Russian oil company might leave its revenues offshore but borrow the money from this offshore company to pay for its investment projects, both for tax optimization reasons and to hide the money from Russian regulators and potential raiders. Perhaps a better way of looking at the data is to look at information about actual foreign companies that operate in Russia. A survey covering this was organized by the Foreign Investment Advisory Council (FIAC) and published in 2021. Notably, the FIAC companies said that they had invested about $197bn in Russia, whereas the OECD puts total cumulative FDI at $498bn.
Foreign companies are not the largest employers. The companies responding to the FIAC survey employ about 250,000 people, a small proportion of Russia’s total working population of about 70mn. Many of these are likely in Moscow. There are probably other employees in supplier companies whose jobs depend on foreign investors, but the data does not go into this level of detail. This is small relative to the largest Russian employers, which are likely less efficient in their use of personnel. However, they are an important training ground for some of Russia’s most skilled workers and its managerial class.
Revenue estimates. The total revenue of the foreign companies surveyed by FIAC was about $55bn. Russian GDP in 2021 was about $1.8 tln, so on this measure, foreign companies’ revenues are only around 3% of GDP. We have
65 RUSSIA Country Report November 2023 www.intellinews.com