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

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114 Outward Foreign Direct Investment by Enterprises from the Russian Federation from ConocoPhillips for $266 million, which provided it with better control of value chain. In addition, the acquisition of the secondlargest Finnish petroleum retail chain provided Lukoil with strategic accessed to the Finnish market with introduction of its own petroleum products. • Expanding access to natural resources. RusAl has been able to improve its competitiveness by acquiring strategic companies abroad to access raw material. OFDI has helped Norilsk Nickel increase the company’s competitiveness by strengthening its global access to natural resources in Australia and elsewhere, and increases its overall raw material stock. In the case of Lukoil, foreign ventures had extended the company’s hydrocarbon resource base and contributed to cover the depletions of its domestic resources. E. OFDI policies The Russian Federation does not have a specific policy promoting OFDI. Despite the absence of a policy, Russian enterprises are active investors among emerging economies. The low level of real sector investments in the Russian economy and massive capital outflows are among the main challenges faced by the Russian Government. These factors partly explained the absence of specific policy supporting OFDI. The new regulatory framework on capital exchange, enacted in 2003, is expected to ease OFDI by increasing transparency and legitimizing capital movements. This new regulation, known as the Currency Law, regulates cross-border currency and capital transactions, including direct investments (Ernst and Young 2005). Under this new regulation, capital exchange control is relaxed. While not directly targeting OFDI, the improved exchange control environment is expected to have a positive impact on Russian investment abroad in the future. F. Conclusion The Russian Federation is an emerging outward investor, with significant recent OFDI flows. While most of the OFDI is dominated by large Russian enterprises, particularly resourcebased and transportation companies, OFDI by SMEs and manufacturing and telecommunication firms is increasingly visible. The cases of internationalizing Russian firms presented in this paper confirm that OFDI has helped increase enterprise competitiveness through strengthening their global market position, expand their natural resources base, gain better control over the value chain, increase global sales and the acquisition of strategic assets abroad. The future prospects for OFDI from the Russian Federation are promising despite the lack of specific policies promoting it. The recent relaxation of exchange control is expected to contribute to this trend as will the increasing competition from within and outside the country. OFDI by Russian enterprises is essential for both the individual enterprises and the Russian economy as a whole. It is imperative that Russian enterprises become more internationalized with a view to increasing their ability to compete in the global market. Competition at home through imports, inward FDI and non-equity forms of participation is likely to increase once the Russian Federation becomes a member of the World Trade Organization. To better integrate into the world economy, Russian enterprises should be encouraged to invest abroad. The Government could consider improving the regulatory framework and offering institutional support to facilitate OFDI by Russian enterprises. A number of specific policy options could also be considered, if OFDI is deemed important and it is viewed as a way to strengthen the economy and enhance enterprise competitiveness. For example, any administrative OFDI requirement such as OFDI approval should be easy to comply with. Support measures such as outward investment missions to target host countries could include SMEs. Provision of information on markets and investment opportunities in target host countries by the Russian Government could also help. Transparency for OFDI could also be encouraged through regularization and legalization of existing overseas investment activities and assets. Consideration could be given to the establishment of public-private sector forums to provide a platform for the exchange of views and experiences of Russian enterprises with regard to internationalization through OFDI. To the extent possible, the Government could consider providing investment guarantees and financing support. The latter is particularly important for SMEs, which often face limited access to finance and are more concerned about operating risks. Due consideration should be given to improving the national statistical system to collect data on OFDI by Russian enterprises, particularly with respect to SMEs. Improvement and availability of comprehensive statistics will help increase the understanding of OFDI by SMEs, including how enterprises can benefit from investing abroad, and formulation of appropriate policies to further
strengthen the competitiveness of Russian SMEs, through internationalization. The private sector could also take a number of measures. Russian enterprises, particularly the SMEs, could increase their knowledge and understanding of the challenges and risks associated with internationalization through OFDI. They could strengthen their capacities to associate in forums or industry club, sharing experiences with other SMEs that have invested abroad. To this end, the Russian business schools could assist in providing programmes CHAPTER IX 115 to support capacity building and development of management skills in internationalization. Increasing expertise on managing cross-border transactions, cross-cultural issues and international laws are important aspects that deserve attention as well as the understanding on how to obtain and manage information to operate effectively abroad. Russian enterprises, including SMEs, should observe good corporate governance and while investing abroad should strive to contribute to the development of the host countries.
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United Nations Conference on Trade
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Preface The landscape of internatio
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Acknowledgements This publication i
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