Click to watch Dr. Juergen Weber -
Click to watch Dr. Juergen Weber -
euro resources

Need an office in Europe or Eastern Europe? Office suites, meeting rooms, virtual offices, network access

free downloads
EUROPE: "Autos: European Demand Remains Strong Heading into 2016" report

EUROPE: "Autos: European Demand Remains Strong Heading into 2016" report. 7-page report by BAIRD.

proceed to download

back to index backEUROtalk May,  2005

Consumer spending keeps FDI in Russia on course

FDI levels are holding fast in Russia, despite the dip in overall foreign investment. After a decade of dithering, foreign direct investors are pouring money into Russia.

Foreign investment surged between January and September 2004 to hit a record $29.1bn. While figures from the third quarter indicate a slowing of the market, there is still no let up in FDI, which was up by a fifth to $5.6bn over the first three quarters of 2004.

Soaring incomes and burgeoning consumer credit have lead to a retail boom in Russia, but as imports are punished by high import duties, foreign firms can no long ignore the need for domestic production if they are going to meet growing Russian demand for their goods.

About half of FDI went into industry and half of that into the oil and gas sector, still the biggest draw to investors in the Russian economy. However, the non-fuel part of the economy is attracting more investment each year: wood, paper and food processing all received about $1bn of foreign direct investment each since the start of the year.

This year's numbers have been boosted by a handful of massive deals. US oil major ConocoPhillips spent just under $2bn for a 7.95% stake in LUKoil, Russia's largest oil company, in July 2004 and has since raised its stake to 10%. The company says it will invest up to $5bn over the next four years.

But the most frenetic investment activity is being carried out by medium-sized companies. Average incomes were up 15% year-on-year in November and have driven ballooning sales across the board. And the advent of consumer credit – now a $16bn business – has made big-ticket items affordable to more Russians.

Ford, which opened a greenfield Ford Focus production plant near St Petersburg in 2002, says Russian sales of its cars doubled in 2003 – a trend it expects to continue.

General Motors (which owns Ford) broke new ground when it tied up with AvtoVAZ, the maker of the ubiquitous Lada, in February 2001 and has just committed itself to investing $50m in its plant in Vsevolozhsk to boost production from 25,000 to over 100,000 cars a year.

Volkswagen and Renault have also launched projects but Toyota's plans are the most ambitious. The company is in the final stages of negotiations to build what will be one of the most expensive car plants in Russia. Toyota says it will invest between $770m and $950m in a Leningrad-based plant to produce 100,000 cars a year after it opens in 2006.

Money is also pouring into a host of smaller facilities that will make everything from chocolate bars to bricks. German firms have been particularly active – among them, chocolate producer Alfred Ritter and Knauf Group, a major construction materials company. Germany's Stada – a leading European supplier of inexpensive generic drugs and products for self-medication – made the first substantial investment into Russia's nascent pharmaceutical sector, beating off several other suitors with a €80m-€85m bid for Nizhfarm, Russia's top-rated pharmaceutical producer.

Source: FDi Magazine - GAI

previous page

go top
search our site



Other articles from the same issue (May,  2005).

Win some, lose some
play read on

Tricks of the Trade—A physicals trader's approach to sourcing
play read on

MG Rover becomes the first client for the Pension Protection Fund
play read on

The high tech promise of the East
play read on

German economic recovery in jeopardy?
play read on

Consumer spending keeps FDI in Russia on course
play read on

Romania: Under Scrutiny
play read on

Region in Focus: Eastern Europe
play read on

EU Employment: The New Frontier
play read on

Our Free eJournals

To visit GlobalAutoExperts Directory, click here.

©2008 | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120