Eurasian Integration Yearbook 2012

The Economics of the Post-Sovietand Eurasian IntegrationA clearer picture of cross-border investment ties within the region provided bythe MMI CIS exercise will not only benefit consumers in public administration,scientific and expert analysis but also the business community. Companiesactive in CIS countries have an interest in the availability of proficient consultingservices; such consultancy is not generally offered by leading western agenciesdue to the highly specific nature of FDI in the post-Soviet space. Nevertheless,the combination of a quality information source (database) and professionalsummary analysis may raise the “eligibility criteria” for foreign competitors whoare able to mobilise considerable resources to enhance their presence in CIScountries. This effect has already been observed in the scientific sphere, whereprofessionals from the US and EU have begun cooperating with leading expertsfrom Russia (Kuznetsov, 2010).MMI CIS has several targets, and this is reflected in the structure of our paper. InSection 1 we discuss flaws in the existing MMI official statistics in CIS countries.Section 2 describes the algorithm of MMI applicable to the CIS. Section 3describes the geographic structure of accumulated FDI that has emerged fromthe MMI CIS. Section 4 gives a breakdown of FDI by industry and corporation.Finally, in Section 5, we suggest ways of applying MMI CIS on a wider scale.1. Flaws in the official statistics on mutual investmentin CIS countriesDespite many attempts by international organisations to standardise FDIstatistics (e.g., the introduction of a 10% threshold to distinguishing betweendirect investment and portfolio investment), there are still features which arepeculiar to the CIS countries and Georgia:• coverage of investment projects (especially small ones);• method of calculating accumulated FDI;• establishing the “nationality” of FDI;• inclusion of reinvestments in existing foreign projects.The most comprehensive assessment of FDI flows can be obtained from balanceof payment statistics which are normally published by national central banks.However, these central bank publications rarely provide sufficient detail onthe industry or geographic structure of investment. In Russia, FDI statistics areavailable from the Central Bank (CB) and Rosstat (the national statistics agency);the latter relies on surveys completed by investor companies (Kuznetsov, 2009).However, not all companies readily supply the information requested on theInvest-1 form.There is no perfect method of calculating accumulated FDI. Due to high inflationrates (especially in CIS countries), calculations based on historic prices result inlower FDI figures for periods in the past compared with more recent years. Any130 EDB Eurasian Integration Yearbook 2012