Essence and Classification of Foreign Investment

PLEKHANOV RUSSIAN ACADEMY OF ECONOMICS

INTERNATIONAL BUSINESS SCHOOL

COURSWORK IN NATIONAL ECONOMY

FOREIGN INVESTMENT IN RUSSIA

Student: Leontyeva E.

Group: 5302

Supervisor: Piastolov S.M.

Moscow

2009

Contents

 

Introduction. 3

1. Essence and Classification of Foreign Investment 5

1.1. Essence of foreign investments. 5

1.2. Classification of foreign investments. 5

1.3 Role of foreign investments in economy. 8

2. Situation with foreign Investment in Russia today. 9

2.1. Conception of an investment climate. 9

2.2 Investment climate in the main regions of Russia. 10

3. Structure of foreign investment in 2000-2009 12

3.1 Structure of foreign investment by its kinds in 2000-2009. 12

3.2 Structure of foreign investment by industry in 2005-2007. 15

4. Risks in the sphere of international entrepreneurship. 17

4.1. Main methods of risk assessment and management. 17

4.2. Main types of risk. 18

4.3 Peculiarities of business risks in Russia. 19

Conclusion. 21

Endnotes. 23

Bibliography. 24

Appendices. 25

 

Introduction

One of the most important factors of the development of economy is investments, i.e. long-term investments of capital with the aim of creating a new manufacturing machine or perfecting and updating it for the purpose of gaining profits.

Today Russian economy does need foreign capital inflow. This is caused by virtually full discontinuance of financing from the state budget, lack of funds in enterprises, significant wear of equipment installed in enterprises and a number of other reasons.

One can hardly believe that foreign investments alone can raise the economy of our huge country. On the other hand they may serve as a stimulus, a catalyst for development and growth of domestic investments. Especially this is true in case of direct investments as not only funds but also many years’ experience accumulated by investor companies in the world market come to Russia with them. Foreign investments can also help to temporarily ease monetary difficulties of the government, albeit by means of increasing foreign debts which means by growth of the country’s dependence. Finally growth of foreign investments is an indispensable concomitant of Russia’s “building’ into the world cycle of capital flow and will facilitate the country’s integration into the world economy and finding an optimal “niche” in the world division of labor.

    In the last decades capital flow in various forms has been gaining in importance in the world economic relations. If earlier certain countries as a rule were either exporters or importers of capital, now the majority of them at the same time export and import capital. From early 90-ties mobilization of foreign investors has become the most important trend in the international politics.

    Development of mutual relations with Russia for European companies who have faced the problem of oversaturation of national markets is an excellent opportunity to expand the scope of their activities and support competitive ability. Strengthening of Russia’s positions as an important economic platform has been reflected in the growth of interest shown to it by Western transnational corporations.

   Nevertheless Russia has faced serious problems which if one approaches their solution rashly may bring about major social and ethnic conflicts on its whole territory. Russia has lost competitiveness in many industrial sectors and the majority of Russian enterprises remain ineffective due to lack of capital and not ready for international competitiveness either.

   In order to overcome these difficulties Russian politicians should concentrate on the creation of a stable macroeconomic climate which implies reduction of inflation, support for the private sector and minimization of the impact of the economic crisis on Russian economy. As never before it is important exactly now to stabilize and strengthen Russian economy having increased competitiveness of domestic enterprises, in particular, by encouraging cooperation between Russian and foreign companies. It is right now when the economic crisis endangers capital investments in many developed countries, when investments which seemed to be reliable are under threat there is a chance to attract investors to own economy.

  The revival of the real sector of Russian economy can be achieved by means of restructuring industry, obtaining advanced experience and technologies, conversion of military-industrial establishment. These actions will require rational macroeconomic and financial leadership by the state and foreign investments.

  The purpose of the present paper is to study the notion “foreign capital”, its essence and its main basic forms.

  When writing this paper I set myself the following tasks:

1. to consider main problems of attracting foreign investments into Russian economy, state of foreign investment activities in Russia, and also basic forms of investments;

2. to consider which investor countries are more active with respect to Russia, what is the share of each of these counties in the total volume of investments;

3. to study region-wise allocation of foreign investments in Russian Federation, which regions are leading in the quantity of foreign investments invested in them;

4. to describe investment climate in the main regions of Russian Federation;

5. to consider main risks in the field of international entrepreneurship.

  All the tasks mentioned above have been studied and dealt with. In the paper one can find answers to many questions concerning investment activities in Russia.

  In the course paper I’ve written what quantity of foreign investments fall on a certain economic sector, given statistics of basic forms of foreign investments received into the economy of Russian Federation for certain time-periods. I’ve also indicated the volume of foreign investments received as per the kinds of economic activity, the quantity of investments main investor countries invest into the economy of Russian Federation

  At present the subject of the course paper is topical as the investment policy of our state is acquiring higher and higher priority day by day.

Essence and Classification of Foreign Investment