This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious




Foreign Investment In Russia Up In 2000

Tatiana Smolenska, Tax-News.com, Moscow

10 January 2001

Offshore centres figured prominently in the list of providers of FDI (Foreign Direct Investment) to Russia in 2000. The presence on the list of favourite Russian flight capital destinations such as Cyprus and Gibraltar suggests, but doesn't prove, that some of the $350bn of capital which is thought to have left Russia in the last ten years is beginning to wing its way back again. Russian businessmen and oligarchi have consistently said that they would re-invest in Russia when the economic and tax conditions for investment became more reasonable, so perhaps the first signs of spring are showing through.

Foreign investments in Russia during 2000 increased by 20-25% over 1999 to $11.5-12 billion, according to preliminary figures from the Russian Ministry of Economic Development and Trade reported by RIA Novosti, although more than half of this is classified as portfolio investment. Direct investment as such increased only slightly within the overall figure to an estimated $4.5-5bn for the year - but there are major problems of classification.

The main investment targets seem to have been the food industry and 'trade and public catering' = MacDonalds? You can hardly move now even in Moscow's outer suburbs without tripping over a MacDonalds, a Pizza Hut or a BurgerKing, not to mention their Russian equivalents.

The sources of investment generally were Germany, the U.S., France, the UK, Netherlands, Sweden, Switzerland and Turkey. Cyprus was the source of 11.4% of foreign investments.

Perhaps though, just as capital can fly out, in order to escape taxation, it might fly back in again for the same reason. The economic backdrop is certainly more conducive to investment, but you can't say the same for corporate taxation just yet. The Russian tax office must rub its hands with glee when a foreign biznismeni announces the official arrival of $1m of investment: little of it is ever going to find its way back to Cyprus! So the official figures probably underestimate the rate of inward investment, just as they underestimate the rate of everything else, except bomshi (homeless on the streets).

.

 

 






Write a comment