Foreign Investors Return to Russia

Published: 16 June 2016
The number of FDI projects in Russia grew 61% to 201 in 2015. According to EY's 2016 European Attractiveness Survey, this is one of the best results for Russia since 2005. Manufacturing was in the spotlight of foreign investors.

- Russia retained eighth position among European countries by level of foreign investment
- The number of foreign direct investment (FDI) projects in Russia has grown to 61%.
- Western Europe remains Russia's largest foreign investor
- Russia comes fourth in Europe by number of FDI projects in manufacturing

Russia retained eighth position among European countries by level of FDI, but the figures improved significantly: the number of projects grew 61%. This means that Russia has the highest FDI growth rate among the top 10 European countries by number of FDI projects. Poland follows closely with 60% and the Netherlands comes third with 47%. In terms of jobs created by FDI, Russia takes fourth position in Europe, securing 13,672 new jobs.

Alexander Ivlev, EY's Country Managing Partner for Russia, says, "Western Europe remains Russia's largest foreign investor. Despite the sanctions and challenging macroeconomic environment in Russia, we are seeing an increasing number of FDI projects financed by investors from these countries. Last year, West European investors put capital into 106 projects – the highest number since 2005 and a growth rate of 77% year on year."

The milestone of 100 FDI projects from Western Europe was exceeded only once – in 2010. The top three European countries in terms of FDI projects in Russia are Germany (36 projects and 2076 jobs created), France (20 projects и 819 jobs created) and Italy (12 projects and 777 jobs created). US investors come after Europe by level of FDI in Russia with 29 projects (2868 jobs created) in 2015 – twice as many as in the previous year. Investors from Asia are still bracing themselves for greater involvement but the trend has shown an uptick. Chinese investors ventured to set up 12 FDI projects in Russia in 2015 – the largest number since 2005. Putting this into perspective, there was only one Chinese FDI project in 2007 and in 2014 their number increased to seven. FDI inflows from other Asia-Pacific countries grew as well, pushing the number of projects up almost fourfold to 11.

Manufacturing has historically attracted the most FDI in the Russian economy and 2015 was no exception. The number of FDI projects in manufacturing increased by 80%: to 171 in 2015, up from 95 in 2014, bringing Russia up to fourth position in Europe after Germany, the UK and France.

Alexander Ivlev says, "With the macroeconomic environment still turbulent, foreign investors are wary of putting their capital into other sectors of the economy. FDI is slowing in the transport, communications, retail and hospitality sectors. The number of FDI projects in the financial and business services is still only half of what it was in the late 2000s."

Manufacturing also secured the majority of new jobs created by foreign investors – 13,144. Most of the FDI projects in manufacturing (153) focused on production facilities. There were 20 projects in sales and marketing, while logistics and R&D each secured 10 projects.

Source: EY