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. Last Updated: 07/27/2016

Report: FDI to Rise in Russia, but Drop in Developed World

Foreign direct investment worldwide will fall by 25 percent this year, but Russia should buck the trend along with some other developing nations, according to the United Nations.

China will become the world leader in FDI and Russia could experience growth for the first time in three years, the UN Conference on Trade and Development said in a report released last week. Developed countries will be the biggest losers.

China, like other developed countries, is benefiting from the movement of manufacturing to cheaper labor markets, and FDI will grow to $50 billion in 2002 compared with $47 billion last year.

Eastern Europe, meanwhile, is expected to remain stable, with FDI remaining at $27 billion for the entire region.

In Russia, FDI is expected to grow to $3 billion in 2002 from $2.5 billion last year. The country received $3.3 billion in FDI in 1999 and $2.7 billion in 2000, according to the Bank of Russia, whose data was used in the report.

But not all experts are optimistic about Russia's ability to draw foreign investment, both portfolio and direct.

Yevgeny Yasin, an economist and former economics minister, said that in two to three years the country will be able to draw $7 to $8 billion in total investment, but will not reach $10 billion in the foreseeable future.

A slump in mergers will be to blame for plummeting investment in the United States, where the report says FDI will drop to $44 billion in 2002 from $128 billion last year. There were $250 billion worth of mergers in the first three quarters of 2002 compared with $460 billion in the same period last year -- a decrease of 45 percent.

The situation is similar in Britain, where FDI is expected to plummet the most dramatically -- from $45 billion to $12 billion -- a drop of 75 percent.

Other factors affecting FDI in Britain is the country's inability to draw investors interested in the euro zone.