FOREIGN DIRECT INVESTMENTS

Summary

Text by: Inkeri Hirvensalo
Center for Markets in Transition, HSEBA
August 2001

According to the definition of International Monetary Fund direct investment is a category of international investment where a resident entity in one country obtains a lasting interest in an enterprise located in another country.

Among Central and Eastern European countries Russia started to attract significant flows of foreign direct investment in 1995. The FDI inflows in Russia peaked in 1997 at about 6 billion USD but decreased radically after the 1998 financial crisis and have not yet recovered their previous level. At the same time, FDI inflows particularly to Poland and the Czech Republic have continued to grow. The Russian situation as a host to FDI is, however, unique in Eastern Europe as it is the only net exporter of capital. Accordingly, the net inflows of FDI have been considerably smaller than the total inflows of FDI. In terms of cumulative inflows of FDI Russia takes the second position among Central and Eastern European countries after Poland.