Investment Policies in Russia: The Northern
Dimensionby
Rainer GeigerDeputy Director, OECD Financial and Enterprise
Affairs
The Northern Dimension ForumSt. Petersburg13 May 2008
Investment trends and policies in the Russian Federation
• Strong performance in inward and outward investment
• Recent policy developments• The 3rd OECD Investment Policy Review• A strategy for business climate
development for the Northwest Federal District
2
Russia’s FDI: Country of origin 2007 (%)
5
FDI inward stock FDI outward stock
Totalof which
100 100
Cyprus 34.4 13.5Netherlands 34.2 51.9Luxembourg 0.7 -United Kingdom 3.3 4.7Germany 4.4 1.9US 3.5 8.1Ireland 0.4 -France 1.5 -Switzerland 1.6 0.6Virgin Island 2.8 0.3Austria - 0.0Ukraine - 0.9Belarus - 4.7Others 13.2 13.4
Russia’s FDI in comparison with emerging market economies
Indicator Brazil Russia India China
FDI inflows (in billion USD) 18.8 28.7 17.5 78.1
FDI outflows (in billion USD) 28.2 18.0 9.0 17.8
FDI inward stock (in billion USD) 214.3 93.9 67.7 699.5
FDI outward stock (in billion USD) 107.5 75.2 21.1 82.3
FDI inflows per head (in USD) 102 201 16 60
FDI inflows as per cent of gross fixed investment (%)
10.5 16.3 6.4 6.8
FDI inward stock per head (in USD)
1160 660 60 530
FDI stock as per cent of GDP (%)
inward 20.1 9.5 7.3 25.7
outward 10.1 7.6 2.3 3.0
Outward/inward FDI stock ratio (%)
50 80 31 12
6Source: EIU (2007), World Investment Prospects to 2011: Foreign Direct Investment and the Challenge of Political Risk, September 2007.
Recent policy development
• Strategic sectors• Strategic corporations under
state control• Russia’s policy framework for
energy investment
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The Northwest District: Regions with unexploited opportunities
• Access to large markets• Natural resources• Good industrial and
technological base• Potential for trans-border
investment8
Challenges to improve the policy environment in the
regions• Public sector integrity and corporate
governance• Policy transparency• Modernisation of regulations• Infrastructure• Human resources – SME• Access to finance
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A business climate development strategy
with a Northern dimension• Based on the OECD Policy Framework for
Investment• Benefiting from experience with regional
programmes (e.g. the Investment Reform Index of the South East Europe Investment Compact)
• Backed by Knowhow of OECD / World Bank• Interactive process of local / regional
partnership10
The Policy Framework for Investment
• Identifies 10 core policy areas and 82 questions to help governments maximise the benefits of international and local investment
• Promotes tailor-made solutions regarding good practice
• Is the most comprehensive multilaterally endorsed investment instrument to date
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How to take advantage of the PFI
• Self evaluation• Comparative benchmarking in a
regional context• Policy coherence at government level• Public-private sector dialogue on
reforms• The Business Climate Development
Strategy12
The business climate development strategy – Key features
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Define baseline Set
Priorities Implement
The Business Climate Development Strategy (BCDS) as a whole is targeted at…
Improving the business environment to increase investment and competitiveness, thereby contributing to growth and employment
Supporting a dynamic and sustainable reform process
It is a systematic approach involving three basic steps:
Methodology successfully applied in South East Europe: Investment Reform Index
Breakdown of Chapters in Sub-dimensions and Indicators Indicators with five assessment levels, ranging from least to best
practice Self-assessment by Country Economic Team and external assessment
by OECD experts
Methodology
BCDS Creating value for the Northwest District
1. Provide a single comprehensive document defining a business climate reform strategy based on best practice in OECD countries;
2. Leverage existing evaluations of the business climate including those by the OECD, The World Bank and the European Commission;
3. Support leadership in federal, regional and local governments to ensure coordination and consensus on priorities for reform throughout a broad range of policy areas affecting the business climate;
4. Involve continuously government and private sector throughout the process to increase buy-in for business climate reform;
5. Identify priorities for action and provide support for implementation.
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