Studies Eastern European Markets
Eastern European Markets


2010

Alexey V. Kuznetsov
Industrial and geographical diversification of Russian foreign direct investments

Electronic Publications of Pan-European Institute 7/2010

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Conclusions

The character of the Russian investment expansion has already changed significantly. Undoubtedly, the modern global economic crisis restrains further internationalization ofRussian companies, but many large TNCs continue their activities abroad and make new OFDI.

Moreover, development of Russian transnational corporations depends argely on the speed of modernization of the whole Russian economy. After this crisis plenty of countries will try to base their economies on more advanced industries. At the same time, it is a question whether Russia can change its international specialization in resources or the country cannot make necessary reforms for development of high-tech industries and services with high value added (including transformation of its institutional environment and the real struggle against corruption). The second scenario means only a short boom of Russian OFDI.

I want to stress that some important features of industrial and geographical diversification of Russian OFDI have uncertain consequences:

• On the one hand, first Russian transnational corporations in some industries can become pioneers of internationalization of these industries of the Russian economy. On the other hand, these new transnational corporations can remain rare exceptions or even will be acquired by foreign giants.
• Russian OFDI in Asia, Africa and Latin America can support further development of Russian companies activities in the European Union and North America by expansion of Russian experience in foreign business operations and so on. However localization of Russian subsidiaries mainly in the countries of the Third World can be a weak attempt of postponement of the Russian entrance to markets with normal competition (and nothing else).

Thus, internationalization of the Russian economy is a very important process but it is only a “derivative” of economic and social transformation of the Russian Federation and its inner market.

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