Formal and Actual Foreign Direct Investment in the Russian Economy

Formal and Actual Foreign Direct Investment  in the Russian Economy 

Abstract 
According to the Bank of Russia (BR), Russian inward and outward foreign direct investments (FDI) are quite significant. However, the article shows that no less than half of them in practice can only formally be viewed as direct investments since the main sources for most FDI in Russia are Russian orporations round-tripping their investments “Russia → the rest of the world → Russia”, with foreign special purpose entities being transfer agents in this chain.  It is shown that the statistics provided by the Bank of Russia on FDI flows from the European Union to Russia is very different from that of the Eurostat. There seem to be two main reasons for such a discrepancy: a part of the funds presented by BR statistics as the Russian FDI to the EU is  regarded by the Eurostat as  irreversible capital flows from Russia; the Eurostat does not fully consider the Russian FDI movement. The FDI circular flows in the production  
of tradable goods in Russia (manufacturing, mining and quarrying) are assessed. The article presents comparative price levels (as key indicators of FDI appeal) in Russia, Hungary, Poland and the Czech Republic. 

Keywords 
foreign direct investment, the Bank of Russia, the Eurostat, directional principle, special purpose entities, roundtripping, tradable goods 

Funding 
The research was carried out with the state assignment IEIE SB RAS project XI.170.1.1. “Innovative and ecological aspects of structural transformation of the Russian economy in the conditions  of new geopolitical reality” АААА-А17-117022250127-8 

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