Monitoring of Mutual Investments in Cis Countries 2016 Monitoring of Mutual Investments in Cis Countries 2016
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RepoRt 39 CentRe foR IntegRatIon StudIeS 2016 MONITORING OF MUTUAL INVESTMENTS IN CIS COUNTRIES 2016 MONITORING OF MUTUAL INVESTMENTS IN CIS COUNTRIES 2016 Report 39 Centre for Integration Studies Saint Petersburg 2016 UDC 331.556.4-0.27.541 BBK 6.0.7.65.7.65.9.67.412.1 Editor of the series of reports: Evgeny Vinokurov, PhD (Econ) Managing Editor: Anna Isakova Translation: Valery Prokhozhy Proofreader: Ann Hedrick Layout: Victoria Medvedeva Authors: Alexey Kuznetsov, RAS Corresponding Member, Doctor of Economics (Author Team Leader), Yulia Baronina, Anna Gutnik, Yuri Kvashnin, Candidate of Sciences (History), Anastasia Nevskaya, Candidate of Sciences (Economics), Anna Makarova, Anna Chetverikova, Candidate of Sciences (Economics), Alexander Shchedrin, Candidate of Sciences (Economics) (RAS IMEMO), Georgi Mdivani (Georgia). Paragraph 2.1 was prepared with the participation of Yuri Danilov, Candidate of Sciences (Economics); paragraph 2.2 was fully prepared by Yuri Danilov. Project manager: Taras Tsukarev, EDB Centre for Integration Studies. Monitoring of Mutual Investments in CIS Countries 2016. — Saint Petersburg: EDB Centre for Integration Studies, 2016. — p. 64 ISBN 978-5-906157-30-0 This report is the seventh in a series of publications presenting the findings of a permanent research project concerned with the monitoring of mutual investments in CIS countries and Georgia. The analysis is built on a database that has been maintained on the basis of diverse data obtained from publicly available sources. The database is generated “from the bottom up”, as its creators rely on corporate statements and other primary information. As a result, the project makes it possible to take into consideration such factors as investments made through offshore structures and other “trans-shipping destinations”, and reinvested foreign profits. The report contains detailed information on the scope, dynamics, geographical and sectoral structure of mutual investments in CIS countries and Georgia as of the end of 2015. Special effort was made to thoroughly analyze mutual direct investments of companies representing member states of the Eurasian Economic Union. The authors also consider, for the first time, mutual cross-border portfolio investments and long-term credits. Electronic version of the report is available on the Eurasian Development Bank’s website at: http://www.eabr.org/e/research/centreCIS/projectsandreportsCIS/invest_monitoring/ UDC 331.556.4-0.27.541 BBK 6.0.7.65.7.65.9.67.412.1 ISBN 978-5-906157-30-0 © Eurasian Development Bank, 2016 EDB Centre for Integration Studies 7 Paradnaya street, St. Petersburg, 191014, Russia Tel.: +7 (812) 320 44 41 E-mail: [email protected] Design, layout and publishing: Airoplan design studio. www.airoplan.ru. 8a Zaozernaya, St. Petersburg, Russia. All rights reserved. Any part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise on the condition providing proper attribution of the source in all copies. Points of view or opinions in this document are those of the author and do not necessarily represent the official position or policies of Eurasian Development Bank. Signed to print on October 20, 2016. Circulation 200 copies. Helvetica, Petersburg Font Family. Format 205×260 mm. Printed by PSP-Print. 32A Bela Kun st., Saint-Petersburg, Russia, 192236. TABLE OF CONTENTS LIST OF TABLES AND FIGURES . 4 ACRONYMS AND ABBREVIATIONS . 5 SUMMARY . 6 INTRODUCTION . 11 1 . MUTUAL DIRECT INVESTMENTS IN THE CIS AT THE END OF 2015 . 13 1 .1 . General Description of the MIM CIS Database . 14 1 .2 . Ukrainian Economy Retains Investors from CIS Countries . 21 1 .3 . Azerbaijan as a Net Exporter of FDI into the CIS . 26 2 . MUTUAL PORTFOLIO INVESTMENTS AND LONG-TERM LOANS IN CIS COUNTRIES . 30 2 .1 . Monitoring Methodology and Overview of the Current Situation . 30 2 .2 . Current Problems Affecting Investment Interaction between EAEU Countries at the Corporate Level . 37 3 . MUTUAL DIRECT INVESTMENTS IN EAEU COUNTRIES . 43 3 .1 . Investments in the EAEU: Relative Sustainability . 43 3 .2 . Russian Direct Investments: Asset Revaluation Impact . 46 3 .3 . Special Investment Model of Belarus . 49 3 .4 . FDI Flows of Other EAEU Countries: What Has Changed? . 52 CONCLUSION . 56 REFERENCES . 57 LIST OF TABLES AND FIGURES Table A . Mutual Direct Investments by EAEU Countries at the End of 2015 . 8 Table B . Top Investor Companies in the MIM CIS Database at the End of 2015 . 9 Table 1 . Mutual FDI Scope at the End of 2015 (MIM CIS Data) . 17 Table 2 . Comparison of IMF and MIM CIS Data on FDI Stock in Certain CIS Countries at the End of 2014 . 18 Table 3 . Russian FDI Stock in CIS Countries and Georgia in 2009–2015 (Comparison of CBR and MIM CIS Data) . 19 Table 4 . Top 15 Investor Companies in the MIM CIS Database at the End of 2015 . 20 Table 5 . Distribution of CIS FDI Stock (Excluding the Banking Sector) by Ukrainian Regions at the End of 2015 . 24 Table 6 . Value of CIS Mutual Portfolio Investment Stock, $ billion . 35 Table 7 . Structure of CIS Mutual Cross-Border Portfolio Investment Stock by Nature of Relations between the Investor and the Recipient . 35 Table 8 . Structure of Post-Soviet Mutual Cross-Border Portfolio Investment Stock by Recipient Countries, 2015 (% of Total Investment Stock) . 36 Table 9 . Scope of EAEU Mutual FDI Stock at the End of 2015 (according to MIM CIS) . 44 Table 10 . Largest Investment Projects Involving Mutual FDI by EAEU Countries in the MIM CIS Database at the End of 2015 . 48 Figure A . FDI Stock of Key Investor Countries in the CIS in 2008–2015, $ billion . 7 Figure B . Comparison of Mutual FDI Stock of CIS Countries and EAEU Countries in 2008–2015 . 8 Figure C . Sectoral Structure of EAEU Mutual FDI Stock at the End of 2015 . 9 Figure 1 . Distribution of MIM CIS Database Projects by Stock Value . 15 Figure 2 . Russian, Kazakh, Azerbaijani, Ukrainian, Belarusian, and Georgian FDI Stock in the CIS in 2008–2015, $ billion . 16 Figure 3 . Sectoral Structure of CIS and Georgian Mutual FDI Stock at the End of 2015 . 20 Figure 4 . Termination of Investment Projects (with Values in Excess of $1 Million) in the MIM CIS Database, by Year . 26 Figure 5 . Liquidity of Certain Emerging Stock Markets (based on the Ratio of Annual Stock Trade to Capitalization) . 39 Figure 6 . Comparison of Mutual Direct Investment Stock of CIS Countries and EAEU Countries in 2008–2015 . 43 Figure 7 . Sectoral Structure of EAEU Mutual FDI Stock at the End of 2015 . 45 Figure 8 . Sectoral Structure of Russian FDI Stock in EAEU Countries at the End of 2015 . 47 Figure 9 . Sectoral Structure of Belarusian FDI Stock in EAEU Countries at the End of 2015 . 52 Figure 10 . Sectoral Structure of Kazakh FDI Stock in EAEU Countries at the End of 2015 . 53 ACRONYMS AND ABBREVIATIONS CBR – Central Bank of the Russian Federation (Bank of Russia) CDN – Commodity Distribution Network CIS – Commonwealth of Independent States DIM-Eurasia – Monitoring of Direct Investments by Russia and Certain Other Post-Soviet States in Europe and Asia outside the CIS and Georgia EAEU – Eurasian Economic Union EDB – Eurasian Development Bank FDI – Foreign Direct Investment FX – Foreign Exchange IMF – International Monetary Fund IT – Information Technologies JV – Joint Venture MIM CIS – Monitoring of Mutual Investments by CIS Countries and Georgia OECD – Organization for Economic Co-operation and Development RAS IMEMO – Primakov National Research Institute of World Economy and International Relations (Russian Academy of Sciences) RSCI – Russian Science Citation Index TNC – Transnational Corporation UNCTAD – United Nations Conference on Trade and Development Monitoring OF Mutual Investments IN CIS COUNTRIES Summary The CIS Countries and Georgia Mutual Direct Investments Monitoring Database (MIM CIS) is an ongoing EDB Centre for Integration Studies project . The database contains detailed information on mutual FDI stock related to projects implemented by investors from post-Soviet countries . MIM CIS has been maintained since 2011 on the basis of diverse data obtained from publicly available sources . The database is generated “from the bottom up”, as its creators rely on corporate statements and other primary information . As a result, MIM CIS makes it possible to take into consideration such factors as investments made through offshore structures and other “trans-shipping destinations”, and rein- vested foreign profits . In this respect, it is different from official statistics . The MIM CIS Database features data which represent critical inputs for compre- hensive investment project analyses: investor country, recipient sector and industry (according to the two-level classification developed within the framework of the project), investor company, FDI recipient region, project, nature of investment (e .g ., greenfield pro- ject or acquisition), project start year (project completion year for finalized investments), FDI year-end value in 2008–2015, additional comments, and sources of information . The applied nature of the database makes it relevant both for researchers and for EDB member state government bodies which seek, more and more frequently, to obtain useful supplementary MIM CIS-based information and analyses . • Mutual FDI in the CIS: negative changes gaining momentum. According to mo- nitoring results, at the end of 2015 mutual CIS and Georgia FDI stock amounted to $42.4 billion (excluding projects valued at less than $1 million). The indicator — which in 2009–2012 had grown from $36.9 billion to $57.2 billion — has reversed its vector, having succumbed to a downward trend that emerged in 2013. In 2015 CIS and Georgia FDI stock shrank by $2.2 billion, or by 5% (see Figure A). • Devaluation of national currencies became the key FDI contraction driver in 2015. The overall negative impact was the net result of the operation of multiple inter- twined causes: generally adverse economic conditions, aftermath of the Ukrainian crisis, and revaluation of investments by companies (among other things, reflecting the weakening of national currencies).