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106 Outward Foreign Direct Investment by Enterprises from the Republic of Korea Choi, B. R. (2001). A Study on the Strategies of SMEs’ FDI Promotion (in Korean). Collected papers: Chonbuk Research Institute of Industry and Economy. Ha, B. K. (2003). “Deindustrialization in the Korean Economy: Does outward direct investment matter?” Seminar report for Industrial Restructuring or Hollowing-out in Asian Economies, pp.125-157. KCCI (2002). A survey on the future plan and current status of relocation of production facilities abroad by Korean firms (in Korean). Seoul: Korea Chamber of Commerce and Industry. KCCI (2005). A survey on the current status of the domestic capital outflows and policy implication (in Korean). Seoul: Korea Chamber of Commerce and Industry. KITA (2003). A Report on the trade and employment effect of overseas direct investment (in Korean). Seoul: Korea International Trade Association. MOCIE (2002). A research on foreign investment by Korean firms (in Korean). Seoul: Ministry of Commerce, Industry, and Energy. _______ (2003). An analysis of current situation of Korean manufacturing companies overseas (in Korean). Seoul: Ministry of Commerce, Industry, and Energy. ________ (2004a). A survey on the current status of market expansion to BRICs (in Korean). Seoul: Ministry of Commerce, Industry, and Energy. ________ (2004b). An analysis of economic effect by foreign direct investment (in Korean). Seoul: Ministry of Commerce, Industry, and Energy. ________ (2006). Overseas enterprises promotion plan for global business expansion (in Korean). Seoul: Ministry of Commerce, Industry, and Energy. References MOFE (2004). The provision of foreign direct investment (in Korean). Seoul: Ministry of Finance and Economy. MOFE (2005). OFDI promotion plan (in Korean). Seoul: Ministry of Finance and Economy. Moon, H. C. (2002). ‘A New Theory of Explaining FDI Motivations, Global Coordination, and Entry Modes: An Imbalance Approach to the Empirical Analysis of Korean Firms’ (in Korean), Journal of International Area Studies, 11(4), pp. 1-20. Moon, H. C. and T. W. Roehl (2001). ‘Unconventional foreign direct investment and the imbalance theory’, International Business Review, 11 (2), pp. 197-215. Moon, H. C., A. M. Rugman and A. Verbeke (1998). ‘A generalized double diamond approach to the global competitiveness of Korea and Singapore’, International Business Review, 7, pp. 135-150. Porter, M. E. (1990). The Competitive Advantage of Nations. New York: The Free Press. Rhim, H. G. (1975). Foreign Exchange Control: The theory and practice (in Korean). Seoul: Sam Young Sa. The Export-Import Bank of Korea (2001). Annual Overseas Foreign Direct Investment Trends Report (in Korean). Seoul: The Export-Import Bank of Korea. The Export-Import Bank of Korea (2004). Annual Overseas Foreign Direct Investment Trends Report (in Korean). Seoul: The Export-Import Bank of Korea. United Nations Conference on Trade and Development (UNCTAD) (2004). World Investment Report. New York and Geneva: United Nations.
A. Introduction This paper provides an overview of the trends and motivations in overseas investments by Russian enterprises. Selected cases of Russian enterprises and their overseas investment activities are discussed. The paper also examines the OFDI policy framework and how investing overseas has increased the competitiveness of some Russian enterprises. It concludes by discussing policy options to strengthen the internationalization of Russian enterprises, for both large companies and SMEs, through OFDI. B. OFDI from Russia: Trends and development OFDI from the Russian Federation has increased significantly in recent years, contributing to the growth of OFDI stock that rose from $20 billion in 2000 to $72 billion in 2003 (table 1). OFDI flows in 2004 exceeded $9 billion. The significant increase in OFDI stock was partly attributed to a recently improved State’s data registering system and significant increase in outflows. The Russian Federation is the fifth largest emerging economies’ direct investor after Hong Kong (China), Singapore, Taiwan Province of China and the British Virgin Islands (UNCTAD 2005). Although there is widespread debate concerning the total amount of Russian OFDI and capital abroad, it is widely acknowledged that the actual figures are considerably higher than suggested by the official data (European Commission 2004; Buiter and Szegvari CHAPTER IX OUTWARD FOREIGN DIRECT INVESTMENT BY ENTERPRISES FROM THE RUSSIAN FEDERATION* * This paper was prepared by Peeter Vahtra and Kari Liuhto, Pan-European Institute, Turku School of Economics and Business Administration, Finland. 107 2002; Loungani and Mauro 2000; Grigoryev and Kosarev 2000). 87 Geographical distribution. Russian investment abroad is mainly in the neighbouring areas such as the Commonwealth of Independent States (CIS) 88 , European Union, and Central and Eastern Europe (CEE). OFDI to other locations such as Australia, Africa and the United States is increasingly visible. About half of Russian OFDI stock is in the European Union, while the CIS and the United States each accounted for about a one-fifth share (Kalotáy 2003). 89 For many Russian enterprises, the CIS is the first region to invest in when internationalizing (Pchounetlev 2000). Russian enterprises are dominant market players in CIS countries (Zashev 2004; Heinrich 2003; Pelto et al. 2003; Liuhto 2001 and 2002), but they have smaller market shares in developed countries, and leverage on their product and corporate strengths (Vahtra and Lorentz 2004). Industrial distribution. Russian enterprises investing in natural resources have a strong presence in the CIS markets and are increasingly investing beyond the neighbouring region. Oil and gas industries accounted for nearly 60 per cent of the value of OFDI by Russian enterprises. The ferrous and non-ferrous metals industries accounted for about a quarter of shares. The Russian manufacturing and 87 Various estimates are provided on additional capital flight from the Russian Federation. The non-recorded capital flight from Russia totalled $245 billion in 1992-2002 (European Commission 2004). 88 Includes Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Republic of Moldova, Tajikistan, Turkmenistan, Ukraine, Uzbekistan. 89 Russian OFDI to the United States could be considerably larger than what has been reported in various other studies, particularly in view of a few large-scale investment projects by the Russian firms in that host country. The actual amount of Russian investments in the CIS could be considerably higher if round-tripping and transhipped FDI are taken into account (Kalotáy 2003).
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