FDI in CIS countries down 5% over the year

EBD: CIS countries lost USD2.2 bln foreign direct investment mainly due to the devaluation of national currencies
FDI in CIS countries down 5% over the year
19 October 12:38 2016 Print This Article

Foreign direct investment (FDI) stock in CIS countries have shrunken 5% over the year (or USD2.2 bln) mainly due to the devaluation of the national currencies and respective asset revaluation, reads the Monitoring of Mutual Investments in CIS Countries 2016 report prepared by Eurasian Development Bank’s (EDB) Centre for Integration Studies.

The devaluation of the national currencies has affected in particular Russian FDI stock. The most serious decrease over the last year was recorded in Kazakhstan (-19%). In Belarus, Russian FDI was cut by 2.4%. In Armenia, the Kyrgyz Republic and Tajikistan, however, it slightly increased.

At the same time, according to the report the contribution of mutual FDI by the EEU countries to total mutual direct investments originating from CIS countries and Georgia reached 56% totaling USD23.7 bln.

Russian investors account for almost 80% of mutual FDI in CIS countries. Kazakhstan ranks second with 11.6% of exported FDI. The share of non-Russian direct investment is growing slowly, but steadily; while Russian transnational companies more often prefer to invest beyond the post-Soviet space, the report says.

Ukraine remains the leader in terms of FDI imports from CIS countries accounting for over 20% of all investments attracted in the region. Belarus also accounts for a huge part of almost 19.8% of total attracted FDI. Kazakhstan ranks third with 17%.

The structure of mutual investments in CIS countries is dominated by several sectors, mainly oil and gas, as well as non-ferrous metals. FDI is also significant in transportation, agriculture and food production, communications and IT, finance, and infrastructure networks.

Oil and gas sector’s leadership is ensured by two major Russian projects: Gazprom’s gas transport subsidiary in Belarus and LUKOIL’s production of crude hydrocarbons in Kazakhstan. Russia’s top five investors, naming Gazprom, LUKOIL, MTS, VimpelCom, and VTB Group together account for over USD18.1 bln or almost 43% of total FDI stock in the CIS countries, the report reads.

Portfolio investments in the CIS countries are significantly lower than FDI. There haven’t been recorded any practically large projects with mutual portfolio investments, apart from LUKOIL’s 5% share in the Tengiz oil field development project in Kazakhstan (about USD1.8 bln).

According to The Centre for Integration Studies, in the near future, the structure of investment flows in the post-Soviet area will be highly determined by integration processes within the Eurasian Economic Union. New opportunities to work together for the common market of the EEU will eventually change the picture of transboundary investments.

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