Barriers and obstacles to foreign direct investment (FDI) into Russia

Abstract

The transition from socialism to capitalism in Russia is both a political and an economic process. An important aspect of the latter is the possibility of integration into the world economy (through trade and capital flows) is a crucial and related element of the former. Foreign direct investment (FDI) is a particularly important element of the transition process itself and economic integration, because it opens not only possibilities for accelerated growth, technical innovation and enterprise restructuring, but also for capital account relief (Bevan and Estrin, 2000). There is growing evidence that enterprise productivity, R&D expenditure, innovation and company performance are higher in foreign owned firms — both in the transition economies and in the West. However, the inflows of foreign direct investment to Russia up until now were at the low level in comparison with the FDI to other country with transitional economies such as, for example, Poland or Hungary. Thus, the paper focuses on answering the following questions:  what are the reasons for the lack of interest and enthusiasm on the part of foreign direct investors?  what are the most important problems foreign direct investors come across with?  are there any changes and improvements in investment climate in Russia happened nowadays comparing with the situation in the beginning and mid 1990s?