Where Has All the Foreign Investment Gone in Russia?
Since its transition to a market economy began, Russia has not attracted much foreign direct investment (FDI). Inflows of FDI into Russia are much lower than those into other transition countries in the region, adjusted for population size and simi...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2001/07/1552021/all-foreign-investment-gone-russia http://hdl.handle.net/10986/19575 |
| Summary: | Since its transition to a market economy
began, Russia has not attracted much foreign direct
investment (FDI). Inflows of FDI into Russia are much lower
than those into other transition countries in the region,
adjusted for population size and similar measures. Clearly,
if Russia is to grow it must increase the level of FDI
inflows, which is why a good deal of policy attention has
focused on the problem. Equally important for achieving
sustainable growth in such a large, heterogeneous economy is
learning how to make the spatial distribution of FDI within
Russia more even. Inflows are strikingly skewed. Close to 60
percent of FDI goes to four regions in te western part of
the country--Moscow City, Moscow oblast, St. Petersburg, and
Leningrad oblast--which account for only 22 percent of
Russia's gross national product and only 13 percent of
Russia's population. Only two of the other 85 regions
account for more than 2.5 percent of the country's FDI
and most account for much less. Surprisingly, neither
policymakers nor observers and analysts have paid much
attention to diagnosing the reason for this imbalance in
FDI's distribution. The authors try to empirically
unbundle the determinants of FDI's regional
distribution within Russia. They find that faactors
associated with market size, infrastructure development, and
the policy environment seem to explain much of the observed
variation in FDI flows to regions in Russia. Moreover, the
explanatory power of the model that best explains
cross-regional variation in FDI flows from 1995 to 1998
changes significantly after the 1998 default and ruble
devaluation--suggesting the possibility of a
"structural change" in the determination of FDI
after the 1998 crisis. |
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