Global Players from Emerging Markets: Strengthening ... - Unctad

More documents

Recommendations

Info

110 Outward Foreign Direct Investment by Enterprises from the Russian Federation Table 3. Russian Federation: Cross-border M&A purchases by Russian enterprises, by geographical distribution, 1995-2004 (Number of deals) Economy 1995-1999 2000 2001 2002 2003 2004 2000-2004 1995-2004 Total world 32 12 22 21 31 25 111 143 Developed countries 14 4 12 10 10 13 49 63 Lithuania – 2 – 3 2 2 9 9 United Kingdom 1 1 1 1 1 1 5 6 United States – – 1 1 1 3 6 6 Czech Republic 1 – – – – 4 4 5 Germany 1 – 1 2 1 – 4 5 Latvia 2 – 1 – 1 – 2 4 Netherlands 1 – 2 – – 1 3 4 Developing economies – – – 2 1 1 4 4 Mongolia – – – 2 – – 2 2 Turkey – – – – – 1 1 1 Chinaa – – – – 1 – 1 1 Transition economies 18 8 10 9 20 11 58 76 Ukraine 3 7 2 6 3 4 22 25 Armenia – – – – 6 2 8 8 Belarus 2 1 3 – – 1 5 7 Uzbekistan – – 1 1 3 2 7 7 Bulgaria 3 – 1 1 1 – 3 6 Georgia 3 – 1 – – – 1 4 Kazakhstan 1 – 1 – – 2 3 4 Source: UNCTAD cross-border M&A database. a Intensifying energy cooperation between the Russian Federation and China is likely to lead to increasing investment flows by Russian companies to this vast energy-consuming market, including infrastructure and downstrean projects. home rather than abroad. The lack of international networks remains a discouraging factor for many Russian enterprises especially in the manufacturing sectors where business networks are traditionally build around large domestic conglomerates. C. Drivers and motivations At the initial stage of internationalization, Russian OFDI was closely related to exportsupporting activities and access to natural resources (Bulatov 1998; McMillan 1987; Hamilton 1986). Russian OFDI was also traditionally driven by the motives to diversify risk through reducing exposure to the domestic business environment. At a later stage of enterprise internationalization, the motives for OFDI became more diverse and strategic (Vahtra and Liuhto 2004). Thus, Russian enterprises are now investing abroad for a diverse set of corporate strategic reasons rather than for limited motives as witnessed in the earlier internationalization period (Sokolov 1991). OFDI motivations differ among Russian TNCs and by industries (table 4; box 1). Resource-seeking firms invest abroad to access natural resources, while telecommunication firms do so to expand market base. Russian enterprises are investing abroad for reasons ranging from strengthening market position, expanding global reach, accessing natural resources to strengthening control of value chains. Three key features of Russian OFDI need to be emphasized:
ii ii(i) strong export revenues of large industrial resource-based enterprises have helped finance active OFDI activities; i(ii) acquiring of assets abroad by Russian enterprises is on the rise; and (iii) investment opportunities and privatization in CIS countries encouraged Russian enterprises to acquire strategic assets in the neighbouring countries (Liuhto and Jumpponen 2003). The main drivers include: • Strengthening value chains. Russian oil enterprises invest abroad to exercise better control of value chain internationally. By acquiring refineries and sales outlets abroad, Russian enterprises achieved better control over foreign demand, processing oil in their own refineries and selling the products via their own petroleum stations. In the oil industry, the infrastructure assets are of vital importance and Russian oil enterprises have gained control of several strategic infrastructure assets in the CEE countries, including seaports and oil pipelines delivering crude oil and products to the European and the United States markets. Lukoil possesses a wide infrastructure network in the Baltic and several CEE countries. The acquisition of the second-largest petroleum retailer in Finland, Teboil, and its sister company Suomen Petrooli provided Lukoil with a strong foothold in the Scandinavian petroleum markets. Through these acquisitions, Lukoil is able to introduce its own petroleum products in the Finnish market. The acquisition of Lithuanian Mazeikiu Nafta and Slovak Transpetrol by Yukos is another example. Table 4. Motivations of Russian OFDI Motivations Corporate examples Efficiency-seeking motivations (e.g. compulsion to control the entire value chain) Strategic asset-seeking motivations (e.g. securing infrastructure functionality abroad) Resource-seeking motivations (e.g. accessing natural resources ) Market-seeking motivations (market expansion in neighbouring countries and further afield) Source: UNCTAD. CHAPTER IX 111 Oil companies’ acquisitions of retail assets, petrol stations in the CEE, United States and Baltic countries. Acquisitions by Yukos of Mazeikiu Nafta in Lithuania and Transpetrol in Slovakia; Severstal’s acquisition of Rouge Industries in the United States. Oil companies’ upstream acquisitions in the Middle East, South America and the CIS. Acquisition by RusAl of Queensland Alumina (Australia) and Norilsk Nickel’s acquisition of Gold Fields (South Africa). Telecommunication companies’ acquisitions of mobile operators in the CIS. • Securing natural resources. Other resourceseeking Russian enterprises (metal and mining activities) such as Norilsk Nickel are extending their global reach in accessing natural resources. M&As were used to acquire strategic assets abroad. The recent acquisition of a 20 per cent stake in Queensland Alumina (Australia), the world’s largest alumina refinery, by RusAl for $460 million in 2005 is an example. The acquisition increased RusAl’s raw material stock and strengthened the company’s position in the world aluminium markets. Russian enterprises such as Lukoil, Yukos and Gazprom also invested abroad to access natural resources (box 1). • Expanding market reach. Russian enterprises are investing abroad to expand their markets and for long-term growth. Russian TNCs in transportation (Novoship, Primorsk Shipping Corporation, Far Eastern Shipping Co.) have a strong presence overseas, with a considerable share of their assets and revenues emanating from abroad (UNCTAD 2004, p. 317). In telecommunications, Russian enterprises invested abroad to expand markets (e.g. MTS, VimpelCom). D. OFDI and implications for enterprise competitiveness The company cases analyzed in this paper suggest that OFDI has helped increase the competitiveness of Russian enterprises, especially in increasing revenues, strengthening global networks, better control of value chain and access to natural resources. These effects are reviewed below:
Page 2 and 3:
United Nations Conference on Trade
Page 4 and 5:
Preface The landscape of internatio
Page 6 and 7:
Acknowledgements This publication i
Page 8 and 9:
viii Global Players from Emerging M
Page 10 and 11:
x Global Players from Emerging Mark
Page 12 and 13:
2 Global Players from Emerging Mark
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
10 Global Players from Emerging Mar
Page 22 and 23:
Page 24 and 25:
14 Outward Foreign Direct Investmen
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43:
Page 44 and 45:
Page 46 and 47:
Page 48 and 49:
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
Page 56 and 57:
Page 58 and 59:
Page 60 and 61:
Page 62 and 63:
Page 64 and 65:
Page 66 and 67:
Page 68 and 69:
Page 70 and 71: 60 Outward Foreign Direct Investmen
Page 110 and 111: 100 Outward Foreign Direct Investme
Page 170 and 171:
160 Outward Foreign Direct Investme
Page 172:
162 Outward Foreign Direct Investme
show all

Global Players from Emerging Markets: Strengthening ... - Unctad

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?