Investment Policies in Russia: The Northern Dimension

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Investment Policies in Russia The Northern
Dimension

• byRainer Geiger
• Deputy Director, OECD Financial and Enterprise
  Affairs
• The Northern Dimension Forum
• St. Petersburg
• 13 May 2008

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Investment trends and policies in the Russian
Federation

• Strong performance in inward and outward
  investment
• Recent policy developments
• The 3rd OECD Investment Policy Review
• A strategy for business climate development for
  the Northwest Federal District

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Russias inward and outward FDI 2000-2007
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Russias FDI inflows Sectoral distribution, 2007
()
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Russias FDI Country of origin 2007 ()
FDI inward stock FDI outward stock
Total of which 100 100
Cyprus 34.4 13.5
Netherlands 34.2 51.9
Luxembourg 0.7 -
United Kingdom 3.3 4.7
Germany 4.4 1.9
US 3.5 8.1
Ireland 0.4 -
France 1.5 -
Switzerland 1.6 0.6
Virgin Island 2.8 0.3
Austria - 0.0
Ukraine - 0.9
Belarus - 4.7
Others 13.2 13.4
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Russias FDI in comparison with emerging
market economies
Indicator Brazil Russia India China
FDI inflows (in billion USD) 18.8 28.7 17.5 78.1
FDI outflows (in billion USD) 28.2 18.0 9.0 17.8
FDI inward stock (in billion USD) 214.3 93.9 67.7 699.5
FDI outward stock (in billion USD) 107.5 75.2 21.1 82.3

FDI inflows per head (in USD) 102 201 16 60
FDI inflows as per cent of gross fixed investment () 10.5 16.3 6.4 6.8

FDI inward stock per head (in USD) 1160 660 60 530
FDI stock as per cent of GDP ()
inward 20.1 9.5 7.3 25.7
outward 10.1 7.6 2.3 3.0
Outward/inward FDI stock ratio () 50 80 31 12
Source EIU (2007), World Investment Prospects to
2011 Foreign Direct Investment and the Challenge
of Political Risk, September 2007.
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Recent policy development

• Strategic sectors
• Strategic corporations under state control
• Russias policy framework for energy investment

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The Northwest District Regions with unexploited
opportunities

• Access to large markets
• Natural resources
• Good industrial and technological base
• Potential for trans-border investment

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Challenges to improve the policy environment in
the regions

• Public sector integrity and corporate governance
• Policy transparency
• Modernisation of regulations
• Infrastructure
• Human resources SME
• Access to finance

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A business climate development strategy with a
Northern dimension

• Based on the OECD Policy Framework for Investment
• Benefiting from experience with regional
  programmes (e.g. the Investment Reform Index of
  the South East Europe Investment Compact)
• Backed by Knowhow of OECD / World Bank
• Interactive process of local / regional
  partnership

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The Policy Framework for Investment

• Identifies 10 core policy areas and 82 questions
  to help governments maximise the benefits of
  international and local investment
• Promotes tailor-made solutions regarding good
  practice
• Is the most comprehensive multilaterally endorsed
  investment instrument to date

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How to take advantage of the PFI

• Self evaluation
• Comparative benchmarking in a regional context
• Policy coherence at government level
• Public-private sector dialogue on reforms
• The Business Climate Development Strategy

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The business climate development strategy Key
features

• The Business Climate Development Strategy (BCDS)
  as a whole is targeted at
• Improving the business environment to increase
  investment and competitiveness, thereby
  contributing to growth and employment
• Supporting a dynamic and sustainable reform
  process
• It is a systematic approach involving three basic
  steps

Define baseline
Set Priorities
Implement

• Synthesis of existing evaluations using OECD
  methodology for policy prioritization
• Stock-taking of existing business climate reform
  projects.

Define time-bound strategic priorities with
government leaders, including consultations with
other stakeholders
Support the design and implementation of improved
policy at national and regional level
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BCDS Framework

• I. Business Operational Environment
• Investment Policy and Investment Promotion
• Strategies for Privatisation and SOE Management
• Tax Policy and Administration
• Trade Policy and Facilitation
• Competition Policy
• Better Business Regulation

• II. Business Integrity
• Anti-corruption
• Corporate Governance and Corporate Social
  Responsibility
• Regulatory reform and judiciary system

• III. Factor Markets
• Infrastructure (including land, transport and IT)
• Human Capital (including labour regulations)
• Financial Markets Development

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Methodology

• Methodology successfully applied in South East
  Europe Investment Reform Index
• Breakdown of Chapters in Sub-dimensions and
  Indicators
• Indicators with five assessment levels, ranging
  from least to best practice
• Self-assessment by Country Economic Team and
  external assessment by OECD experts

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BCDS Creating value for the Northwest District

• 1. Provide a single comprehensive document
  defining a business climate reform strategy based
  on best practice in OECD countries
• 2. Leverage existing evaluations of the business
  climate including those by the OECD, The World
  Bank and the European Commission
• 3. Support leadership in federal, regional and
  local governments to ensure coordination and
  consensus on priorities for reform throughout a
  broad range of policy areas affecting the
  business climate
• 4. Involve continuously government and private
  sector throughout the process to increase buy-in
  for business climate reform
• 5. Identify priorities for action and provide
  support for implementation.

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Conclusions Moving forward

• Increasing the competiveness of the region as a
  location for investment
• Identifing investment opportunities and increase
  sectoral competitiveness
• Improving policy coherence and capacities for
  implementation
• Developing effective tools for communication