Russia FDI

Presented to: Prof. Kishor BhanushaliRussia FDI Presented By:Rishabh Mehta (38)Bhumika Bunha (10)PGDM 2014-2016

Russia Foreign Direct Investment - Net FlowsForeign Direct Investment in Russia increased to2640 Million USD in the second quarter of 2015 from 1704 Million USD in the first quarter of 2015.Foreign Direct Investment in Russia averaged 5979.45 Million USD from 1994 until 2015Foreign Direct Investment in Russia is reported by the The Central Bank of the Russian Federation.

Net Flow

Net FlowRussia Foreign Direct Investment - Net Flows is forecast to go down to 1967.96 Million USD in Q3 2015.In the long term, Russia Foreign Direct Investment - Net Flows is predicted to converge to 4660.6 Million USD.

Inward FDI in RussiaIn 2013, more than 90% of Net Inward Foreign Direct Investment in Russia came from six countries: United Kingdom (26.8 percent)Luxembourg (16.5 percent)Ireland (14.8 percent)British Virgin Island (13.3 percent)Cyprus (11.8 percent)Netherlands (8.14 percent).Russia Foreign Direct Investment - Net Flows - was last refreshed on Friday, October 23, 2015.Source: http://www.tradingeconomics.com/russia/foreign-direct-investmentInward FDI by Industries

Automaker Investment in RussiaChinese automakers have made several large-scale investments in Russia in recent years as they seek to establish their brands in the market.Among recent investors, Hawtai Motor Group said it planned to invest $1.1bn in the construction of a car production plant in Russia.Chongqing Lifan Industry, an automotive company, plans to establish a new engine factory in Russia after 2021.The new facility represents part of the companys strategy for localisation of manufacturing in Russia.7OutflowAccording to data from the Russian Central Bank, in 2014 capital outflow totaled $151 billion.By comparison, outflow in 2013 was $61 billion and even during 2008s economic crisis it was lower at $133.6 billion.The Ministry of Finance had estimated that capital outflows in 2014 would be in the range of $90-100 billion, while the Central Bank had predicted a total of $128 billion.ConsequencesAccording to the Central Bank, capital outflow was a consequence of the growth of dollar deposits and the repayment of foreign debts by Russia's private sector due to the limited possibility of refinancing debt because of the economic sanctions imposed on the country.But the main reason for such a level of capital outflow was the behavior of Russian citizens.In 2014 Russians acquired a record $34 billion through the conversion of rubles, with a significant portion of it being purchased in the fourth quarter.In recent years the population's income has increased, while the ruble remained sensitive to the fluctuation of currenciesSectors affecting outflowOil and gasMetallurgyTradeAgricultureReal estate investment

Outbound of FDI - RussiaRussias difficulties, including a weakened ruble, have dented the ability of Russian companies to expand internationally.Russian outbound greenfield FDI fell 73 per cent by volume of announced capital investment to $5bn, according to FDI Markets.The country has fallen out of the top 10 as a source of outbound greenfield investment from Europe.Such figures refer strictly to corporate expansion, not general capital outflows which, by contrast, are rising to record levels.Capital outflows hit $151bn in 2014, according to the Russian central bankThis is two-and-a-half times those of 2013 and even surpassing the $133.6bn that left the country in the throes of the financial crisis in 2008.Current ScenarioForeign investment is now below zeroForeign direct investment stopped coming to Russia at the beginning of 2014 according to Central Bank data.The overall amount for the year will be available later, after the publication of the fourth quarter data.The total amount of foreign capital outflow for the first three quarters was $21.7 billion.Currently, there are direct and indirect bans on investing in Russia and our western partners now have doubts about some of Russia's large-scale projects

ConclusionGeopolitical tensions, international sanctions and economic instability appear to have damagedRussias ability to attract inward investment, but Chinese investors are stepping into the breach and making their moves into the market at a time when western companies are shying away.The number of greenfield FDI projects into Russia declined 39 per cent to just 134 in 2014Russia now stands as the eighth most popular investment destination in EuropeRussia received only a third of the number of projects that second-ranked Germany did, and a seventh of the number registered by top European destination the UK.Russia was the second ranked country in Europe last year for capital expenditure in inbound greenfield projects, with an estimated total of $12bn, capturing 10 per cent of European FDI.The top five biggest investors in Russia were all Chinese companies, which together announced more than $5bn of FDI projects in Russia in 2014.