Studies Eastern European Markets
Eastern European Markets
Tauno Tiusanen - Kirsi Talvitie - Sirpa Vinni
Western investors in large transitional economy
Lappeenranta University of Technology
Studies in Industrial Engineering and Management. 1999, N:o 6

    Some final conclusions

    The post-communist Russia is in many senses an extremely exiting target market for international investors. Big internal market, huge natural resources, big pool of engineers, low nominal wages, etc. are attractions, which can hardly be ignored by international companies with FDI intensions.

    However, Russia has not been able to offer optimal investment climate in the 1990s to international investors. This is visible from surveys made among business people active in the TEs. Relative reluctance to invest in post-Soviet Russia is also visible in actual figures. The stock of FDIs in Central Eastern Europe (five countries) is about double that in the CIS (12 countries). In absolute figures, Hungry (with some 10 million people) and Poland (with less than 40 million inhabitants) have received more FDIs than Russia.

    In the CIS, there are two countries, Kazakhstan and Azerbaijan, which have been rather successful in attracting FDIs. Both of these national economies are rich on oil, and thus, internationally mobile capital has been moving into these two nations. Kazakhstan and Azerbaijan have both FDI of more than USD 300 pr capita.

    The relative (per capita) figure in the Russian case is however very modest indeed (about USD 100 per head). It is less than one sixth of the equivalent Polish figure. In Hungary, in the most successful TE in attracting FDIs, the per capita figure is 17 times higher in comparison to Russia. Alltogether, CIS countries are not scoring high in FDI figures.

    In sum, the Russian society in transition is an extremely interesting unit to observe. On the basis of intensive observations, it can se concluded that the most difficult period of post-communism is over. Relative price stability has been achieved and there are several signs of an economic upturn to start in the turn of the century.

    However, there is still plenty of elements of uncertainty in the Russian political scene. Social tension is pretty high, but not necessarily explosive. Thus, it is understandable that so far there has not been an uncontrollable inflow of FDIs into the Russian market. This is visible in the concrete quantitative figures, as well as in the qualitative indexes measuring investment climate in TEs, including Russia.

    At the same time, it is quite obvious that Russia with its huge natural resources and large market offers long-term business oppurtunities, which are unique within the TE group of countries. As we have seen in this short review, many interesting examples of FDIs in Russia can be described. Russia has started her long march towards the global economy providing risks and opportunities to internationally active companies.

Dr. Tauno Tiusanen is Professor in the Department of Industrial Engineering and Management at Lappeenranta University of Technology, Finland. He is the author of numerous books on communist and post-communist economies. In the 1990s, he has monitored closely foreign direct investment development in transitional economies.

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