MINSK – The downward trend governing the changes of foreign direct investment (FDI) stock of CIS countries during the period from 2013 to 2015 has been replaced with significant growth. According to the latest data, over the course of 2016 mutual CIS and Georgia FDI stock increased by 7.9% to $45.1 billion after a three-year decline.
Russia has begun to attract more investment capital from its neighbours: FDI stock has gone up by 61.1% to reach 6.1 billion. Higher values were posted only in 2010-2012. Still, in terms of FDI imports from post-Soviet states, Russia comes only third after Belarus and Kazakhstan. This fact is mentioned in the report “Monitoring of Mutual Investments in CIS Countries – 2017” prepared by the Centre for Integration Studies of the Eurasian Development Bank on the basis of a unique investment projects database.
The top four Russian investors include Gazprom, LUKOIL, VimpelCom, and MTS. At the beginning of 2017, they accounted for $19.5 billion of total FDI stock. This represents more than 43% of total mutual direct capital investments in the CIS (or almost 56% of total Russian FDI in the post-Soviet area). The ten largest investors in the CIS (now represented not only by Russian companies, but also by Belarusian, Azerbaijani and Kazakh companies) account for 59% of total mutual FDI stock in CIS countries and Georgia. The most notable change in the list of the leading investors that occurred in 2016 is the inclusion of the Belarusian Yuras Oil. VTB Group, on the contrary, left the list due to the impairment of its Ukrainian assets.
The sectoral structure of CIS mutual FDI Stock is dominated by Russia’s traditional specialization sector, Oil and Gas (at the beginning of 2017, its share stood at 40%). The closest also-rans, with a sizeable lag, were Communication and IT (9.8%), Non-Ferrous Metals (7.2%), and Infrastructure Networks (6.4%). Compared to the end of 2008, the share of Oil and Gas has increased by 10.1 p.p., while the share of Communication and IT has gone down by the same value. In the first case, the increase is attributable to the ongoing growth of oil and gas projects, while in the second case the reason for the decline is that the mobile telephony market has reached the point of saturation, and new investment capital is used primarily to retain existing customers.
Azerbaijan is one of the two countries (Russia being the other one) acting as net exporters of direct capital investments into the CIS countries and Georgia. Azerbaijani FDI in post-Soviet states is characterized by non-stop growth – in 2016 it went above the $2.4 billion mark (a 19.4% increase relative to 2015). Despite the adverse economic climate, Azerbaijan is still prepared to invest its capital in the region, primarily in transportation projects. Azerbaijani FDI in the post-Soviet area is also becoming more diversified geographically, with investment projects now registered in five states (Georgia, Russia, Ukraine, Kazakhstan, and Belarus).
Ukraine has lost the status of the leading CIS FDI recipient. While in 2013 it accounted for $17.0 billion, or 31.2%, by the end of 2016 that indicator, following a period of unrelenting decline, plummeted to $5.6 billion, or 12.4%. It is quite possible that in 2017 Ukraine will be overtaken not only by the trio of EAEU founders but also by Uzbekistan, where the 2016 year-end figure was $5.4 billion. Compared to 2013, Ukrainian FDI exports to CIS countries and Georgia slid from the third to the fifth position.
“Future changes in mutual CIS FDI will be determined by investment activity within the Eurasian Union, primarily of Russia,” says Evgeny Vinokurov, EDB Centre for Integration Studies’ director. “When mutual investments declined in 2013-2015, the rate of decline in the EAEU was considerably lower. When investments soared in 2016, the rate of growth in the EAEU was twice as high (16% vs. 8%).”
EDB analysts believe that data, analyses, and applied conclusions presented in the report Monitoring of Mutual Investments in CIS Countries – 2017 will help companies to better find their bearings in the business environment of the region, while governments may use them as an efficient tool to promote mutually beneficial industrial cooperation.
The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB charter capital totals US $7 billion. The bank’s member states are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan.
The Centre for Integration Studies is a specialist research centre of Eurasian Development Bank. The Centre organises research and prepares reports and recommendations on regional economic integration. It has published over 45 public reports over six years of its operation.