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. Last Updated: 07/27/2016

Foreign Investment Leaps 40%, Experts Cautious

Total foreign investment in Russia in the first half of 2001 jumped 40 percent year-on-year to $6.684 billion, the State Statistics Committee said Thursday ? but analysts were not impressed by the "small" numbers.

Foreign direct investment ? the amount overseas companies commit to concrete projects ? grew by more than 40 percent to $2.509 billion, while portfolio investment increased some 500 percent to $238 million. Other investment, mostly loans, grew by about 30 percent to $4 billion.

Germany, the United States and Cyprus were the biggest lenders ? each investing more than $5 billion for an accumulated foreign investment of $34 billion from the West, the committee said. Accumulated foreign investment is capital invested and then kept in the country.

But the seemingly spectacular increase did not impress analysts, who said the numbers are still ridiculously out of proportion with the size of the Russian economy. They also said it would be premature to hail the hike in foreign investment as the beginning of a trend.

"We are talking small numbers," said Oksana Dynnikova, an analyst with the Finance Ministry's Economic Expert Group. "I would be careful about them and rather not jubilate about a rise in foreign investment inflow."

Leaders in Investment in Russia

Germany$6.085 billion
United States$5.365 billion
Cyprus$5.15 billion
France$3.538 billion
Britain$3.238 billion
Netherlands$2.228 billion
Italy$1.655 billion
Sweden$732 million
Switzerland$616 million
Japan$553 million


Dynnikova added that the committee's figures reflect investment turnover, inflow and outflow. Based on other statistics ? such as those provided by the Central Bank ? the increase in FDI is a smaller but still considerable 20 percent.

"The [committee's] figures, of course, will make reports prettier," said Oleg Vyugin, a former deputy finance minister and now executive vice president of Troika Dialog. This doesn't mean, however, that the growth is not there, he said.

Furthermore, committee data signalled Russian reinvestment may be on the rise, Vyugin said.

Oil export revenues were reported as being several billion rubles higher than exports themselves ? an indication that producers have decided to reinvest at home some of the money they earlier preferred to keep abroad, he said.

Another sign of Russian money coming back home is the stream of investment from offshore haven Cyprus.

"Whenever you see money from Cyprus, you can be sure it is Russian money returning, which is a positive sign," said Alexei Moiseyev of Renaissance Capital. It may not, however, contribute the expertise that the country needs to close the technological gap with developed countries, he said.