Foreign Direct Investment in Russia: A Strategy for Industrial Recovery

604 Pages·2000·7.851 MB·English

by  Paul Fischer (auth.)

Foreign Direct Investment
in Russia
A Strategy for Industrial Recover
Paul Fischer
Foreign Direct Investment in Russia
Also by Paul Fischer
THE COMMONWEALTH OF INDEPENDENT STATES AND THE EUROPEAN
UNION: Facts and Figures
OPTIMIZING RUSSIAN STATISTICS DURING TRANSITION, 1993–1997:
Strategic Orientations for the Russian Government and Statistical Services
PROTECTION OF MINORITIES AND HUMAN RIGHTS: A Prerequisite for Peace
and Stability in Post-Communist Europe
RETAILING IN THE SINGLE EUROPEAN MARKET
AUF SICHEREN WEGEN DEN US-MARKT ERSCHLIEßEN
Foreign Direct Investment
in Russia
A Strategy for Industrial Recover
Paul Fischer
First published in Great Britain 2000 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 6XS and London
Companies and representatives throughout the world
Acatalogue record for this book is available from the British Library.
ISBN 978-1-349-41658-5 ISBN 978-0-333-97759-0 (eBook)
DOI 10.1057/9780333977590
First published in the United States of America 2000 by
ST. MARTIN’S PRESS, INC.,
Scholarly and Reference Division,
175 Fifth Avenue, New York, N.Y. 10010
ISBN 978-0-312-23055-5
Library of Congress Cataloging-in-Publication Data
Fischer, Paul.
Foreign direct investment in Russia : a strategy for industrial recovery / Paul
Fischer
p. cm.
Includes bibliographical references and index.
ISBN 978-0-312-23055-5 (cloth)
1. Investments, Foreign—Russia (Federation) 2. Russia (Federation)—Economic
conditions—1991– I. Title.
HG5580.2.A3 F574 2000
332.67'3'0947—dc21
99–049536
©Paul Fischer 2000
Softcover reprint of the hardcover 1st edition 2000 978-0-333-77483-0
All rights reserved. No reproduction, copy or transmission of this publication may be made
without written permission.
No paragraph of this publication may be reproduced, copied or transmitted save with written
permission or in accordance with the provisions of the Copyright, Designs and Patents Act
1988, or under the terms of any licence permitting limited copying issued by the Copyright
Licensing Agency, 90 Tottenham Court Road, London W1P0LP.
Any person who does any unauthorised act in relation to this publication may be liable to
criminal prosecution and civil claims for damages.
The author has asserted his right to be identified as the author of this work in accordance with
the Copyright, Designs and Patents Act 1988.
This book is printed on paper suitable for recycling and made from fully managed and sustained
forest sources.
10 9 8 7 6 5 4 3 2 1
09 08 07 06 05 04 03 02 01 00
To the people of Russia
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Contents
List of Figures xiv
List of Tables xviii
List of Boxes xx
List of Maps xxi
Foreword xxiii
Preface xxv
A Word from the Author xxvii
List of Acronyms xxix
Introduction: Background and Rationale of the Study
I FDI: a new challenge for Russia 1
II Need for a national programme for investments in industry 4
III FDI in current international debate 7
IV Study contents and methodology 10
PART I FDI THEORIES AND POLICY IMPLICATIONS
1 Overview of Main FDI Theories 19
1.1 FDI theories from a historical perspective 19
1.2 International product cycle paradigm 21
1.3 Monopolistic competition and market imperfections 24
1.4 FDI and defensive oligopolistic behaviour 25
1.5 Internalization theory 27
1.6 The ‘flying geese’ paradigm of economic development 28
1.7 FDI and the competitive advantage of nations 31
1.8 The eclectic paradigm 34
1.9 The investment development path of nations 37
1.10 Policy implications of major FDI theories 42
PART II GLOBAL FDI POTENTIAL AND OPPORTUNITIES FOR
THE RUSSIAN ECONOMY
2 Determinants ofGlobalFDI 51
2.1 Economic liberalization and deregulation at national level 52
2.2 Globalization and integration of world economies 54
vii
viii Contents
2.3 The formation of regional groupings 57
2.4 The role of international organizations for global
investment standards 63
2.5 Dynamics of transnational corporations 67
2.6 Promotional activities of regional bodies 70
2.7 The spread and development of key technologies 71
2.8 International movements of capital 74
3 GlobalFDI Trends 79
3.1 Significance of FDI for the world economy 79
3.1.1 Main FDI indicators 79
3.1.2 FDI and public aid 80
3.1.3 Global economic integration through FDI 84
3.1.4 The Triad and its cluster regions 87
3.2 Main investing nations 89
3.2.1 Historical shifts in outward FDI 89
3.2.2 FDI from G5 countries 90
3.2.3 FDI from other industrialized and emerging economies 93
3.3 Major destination countries for global FDI 94
3.3.1 FDI in the industrialized Triad economies 95
3.3.2 FDI in the emerging economies of Asia and Latin America 98
3.3.3 FDI in European transition countries 100
3.4 Sectoral distribution of foreign investment 105
3.4.1 The growing role of services 105
3.4.2 Sectoral distribution of FDI in Central and Eastern Europe 107
Annex3.1 Theworld’s leading FDI source countries, 1983–97 110
Annex3.2 Theworld’sleading FDI recipient countries, 1983–97 112
4 TNCsasGlobal Investors 116
4.1 The world’s leading TNCs and their FDI impact 116
4.2 The ‘hidden champions’: the growing importance of
medium-sized TNCs 120
4.3 Global FDI strategies of TNCs 123
4.3.1 Options for market entry 123
4.3.2 Cross-border mergers and acquisitions 126
Annex 4.1 The world’s top 100 TNCs ranked by foreign
assets, 1996 132
Annex 4.2 Top 50 TNCs of emerging economies, 1996 138
PART III FDI AS THE CATALYST FOR INDUSTRIAL TRANSFORMATION
IN SELECTED LARGE EMERGING MARKETS
5 FDI PoliciesandProspectsinChina 147
5.1 Competitive advantages and lessons for Russia 148
5.2 Inward FDI policies and economic reforms, 1978–98 150
5.2.1 FDI policy adjustment since the late 1970s 150
Contents ix
5.2.2 Main features of Chinese macro management 152
5.2.3 Formation of ‘national champions’ for industrial
development 155
5.3 Foreign investment patterns in the 1990s: origin and
destinations 157
5.3.1 FDI inflows and stock 157
5.3.2 Regional and sectoral distribution of FDI 160
5.3.3 Leading TNC investors in China 162
5.3.4 China’s outward investment position 164
5.4 Foreign investment legislation and incentives 166
5.4.1 Equity joint ventures 167
5.4.2 Wholly-owned subsidiaries and holding companies 168
5.4.3 Industries to be promoted during 1996–2000 170
5.4.4 Incentive mechanisms for foreign investors 171
5.5 Macroeconomic impact and industrial restructuring
through FDI 171
5.5.1 FDI-induced economic changes 173
5.5.2 Impact of FDI on domestic investment and private sector
structures 176
5.5.3 Impact of FDI on export performance and employment 179
5.5.4 Industrial diversification at sectoral and regional level
through FDI 182
Annex 5.1 Catalogue for the guidance of foreign investment
industries, China, 1997–2002 190
6 FDI PoliciesandProspectsin India 197
6.1 Competitive advantages and lessons for Russia 198
6.1.1 India’s future assets 198
6.1.2 India’s policy challenges and achievements 200
6.2 Foreign investment policy in preliberalization India 203
6.2.1 Prime Minister Nehru’s socialist course and policy of
self-reliance 203
6.2.2 The shift towards an open economy under Prime
Minister Rajiv Gandhi 205
6.3 India’s New Industrial Policy: economic reorientation
through FDI 207
6.3.1 Key organizations and procedures for FDI approvals 209
6.3.2 Prospects for FDI policy improvements until 2000 215
6.3.3 Investment incentives under the NIP 217
6.4 FDI-related legislation and bilateral agreements 219
6.5 Foreign investment patterns in the 1990s: origin and
destination 222
6.5.1 FDI approvals and inflows 222
6.5.2 Sectoral and regional distribution of FDI 224
6.5.3 India’s outward FDI position 226
6.5.4 Scope for Indo–Russian FDI 229