Overall volume of foreign investments to Samara region in 2007 amounted to 2366.6 MM USD (132,1% increase compared to 2006), including direct investments – 84.2 MM USD (105.7%); miscellaneous foreign investments increased by 33,8% compared to amount of the same period in the last year and made up 2275.2 MM USD; portfolio investments amounted to 7.2 MM USD (60,8%).
This is the most superlative result for all the past years.
The distinctive feature of investment process in Samara Region last year was the ongoing usage by the companies of such financial instrument as trade crediting. Over 80% of all foreign investments were attracted using this financial instrument (over 60% in 2006). The main credit receivers were AVTOVAZ OJSC (50% of overall trade credits amount), Togliattiazot OJSC (30%), KO Rossiya OJSC.
Despite such structural dependence and relatively insignificant growth of direct foreign investments, the 2007 result is on the third place of record since 1998. Looking into trends in the area of foreign investments attraction, one should single out the segment distribution of two main groups in FIA – inpayments to capital and credits, received from foreign owners:
Over Russian Federation, the inpaymets to capital in the first half of 2007 amounted to 42.4%, credits of foreign co-owners – 54.3%. In Samara Region, the situation is inverse – the share of capital inpaymens is 58.8%, and the share of credits – 41.2 %. Compare: the resulting share of capital inpayments in the first half of the last year within the total amount of FIA made up merely 16.8%. All this supposedly shows that foreign investors switched from recon tactic to proactive entry to the market. Meanwhile, the market is gradually becoming more transparent and investors consider effective the purchase of shares in the capital of Russian companies – Samara companies in particular, this means the strategy they’ve chosen is a long-term one.
Portfolio investments in 2007 more than double exceed the best figure of the last 7 years, except the exceptional success of 2006. These figures and the announced plans of some companies, located within Samara Region, also mean the significant increase of trust to Russian securities. The official opening of European Bank
The opening of Samara Subsidiary of the European Bank for Reconstruction and Development will also become an important event of spring 2008.
Distribution by types of economic activity
Within 9 months of 2007 over 14% of miscellaneous foreign investments were made in form of credits into manufacturing industries: metal manufacture (in particular – EBRD credit at amount of 37,6 MM USD), production of electrical machinery, vehicles and associated equipment. The rest was invested to companies, operating in the area of crude oil production and delivery by pipelines and water shipment.
The main volume of direct investment in 2007 was attracted by manufacturing and service companies. The Delphi American corporation (co-owner – PES/SSK CJSC) made investments to implementation of projects, aimed towards expansion of automotive constitutive elements production. PKHR CJSC obtained credit from foreign co-owners of the company. Foreign founders of Aktiv LLC (financial intermediation company), PB Samara LLC (marine freight) have made investments in form of cash assets to replenish the company’s capital. Aist CJSC (telecommunications), Igris LLC (automotive components, assemblies and accessories trade) have aimed the received foreign investments towards development of the business.
Portfolio investment were made to companies that operate in the area of power production, distribution and transfer. In the last year the Volzhskaya TGK capital issues have passed the RTS Board quotes, which has allowed to attract attention of investors to these capital issues even before they were placed on brokers' board.
In 2006-2007 a trend was established that the investment flows were redirected from primary sector to transport, processing industry and services, which is also specific for Samara Region.
Foreign investments per classes of business activities
– first 9 months of 2007
Mln. USD
|
Received in |
including |
|||
|
|
January-December 2007 |
direct |
portfolio |
miscellaneous |
|
TOTAL, including: |
2366.6 |
84.2 |
7.2 |
2275.2 |
|
Minerals production |
53,4 |
- |
- |
53.4 |
Manufacturing |
|
|
|
|
|
including: |
2214.1 |
26.0 |
- |
2188.1 |
|
Food |
198.3 |
0.3 |
- |
198.0 |
|
chemicals |
595.5 |
2.5 |
- |
593.0 |
|
metal casting and metal wares production |
251.7 |
1.6 |
- |
250.1 |
|
Electrical equipment |
9.1 |
0.5 |
- |
8.6 |
|
Transport vehicles and equipment |
1159.5 |
21.1 |
- |
1138.4 |
|
Production and distribution - Power, gas and water |
4.9 |
- |
4.9 |
- |
|
Construction |
11.3 |
6.3 |
- |
5.0 |
Оптовая и розничная торговля |
9.2 |
9.1 |
- |
0.1 |
|
Transport and communications |
21.5 |
17.6 |
- |
3.9 |
|
Financial activities |
34.9 |
15.4 |
- |
19.5 |
|
Immovable property - lease, services |
17.2 |
9.7 |
2.3 |
5.2 |
|
Miscellaneous |
0.1 |
0.1 |
- |
- |
Investor countries structure
Investor countries structure has not suffered any significant change compared to 2006. The main investor countries that made major additions to Samara Region Economy within 9 months 2007 were Ukraine (33,9%), Switzerland (31,9%), Cyprus (3,7%), Germany (2.7%), Spain (2,6%).
By the volume of attracted foreign investment, Samara Region continuously stays on the first place in Privolzhsky Federal Region, including as per 2007 results.
As for distribution of foreign investments within Samara Region, there is still a situation when foreign investments are only committed to two biggest cities of the region – Samara and Togliatti, same as in 2006. Foe 9 months of 2007, the foreign investments were received by only 4 municipal areas of Samara Region (Neftegorsky area – 8.6 MM USD, Volzhsky area – 2.5 MM USD, Stavropolsky area – 3.2 MM USD, Kinelsky area – 39.4 K USD) which is absolutely incomparable, for instance, with figures for Avtozavodskoy area (1136.0 MM USD) of Komsomolsky area (593.1 MM USD) of Togliatti city. The leaders among Samara city districts are Kirovsky area (449.5 MM USD), Samarsky area (68.7 MM USD) and Okyabrsky (46.5 MM USD).
This is partially due to actual factors, but we would like to point out the need to intensify the joint work of municipal organizations and Samara Region Government within the issue of foreign investors attraction on their own territory, preparation of platforms, thorough preparation of investment projects, that could use all those support measures that are currently being implemented and will be implemented in Samara Region also on the level of Government of Russian Federation in the area of foreign investments promotion and stimulation of highly-processed products export.
Foreign investments development trends
The data of the Consultative Body for Foreign Investments under the Government of Russian Federation show that over 80% of foreign investors that already work in Russia, claim the intent to perform additional investments to their existing projects within the Russian Federation, predominantly in Russian provincial regions. This is also confirmed by the data of German BDI association, showing that large German companies are planning to increase investment to Russia. In addition, the Chinese prime-minister, Vyen Tzabao claimed the encouragement of Chinese investment to joint projects on Russia’s territory.
Following main directions of foreign investments can be identified in 2008: blocking minority ownership submittal by Avtovaz OJSC to the French Renault, possible partnership between AvtoVAZ with Japanese Nissan company is being discussed, which as the result will enable a new inflow of investment towards development of this company.
In the current year, Alkoa American Corp. will continue to invest into the purchased Samara Metallurgic Plant OJSC. The French retailer Ashan is planning to develop the network of malls in Samara Region. The completion of MEGA project will attract new large foreign participants, such as Leroy Merlin. There exists a number of projects for construction of high-class and business-class hotels. In the nearest future we forecast growth of projects with foreign participation in the area of insurance, information technologies, trade, consultation and management services.
The Government of Samara Region is also planning to intensify its activity in this sector, in particular, within the Foreign Investments Promotion Board under Samara Region Government, that was created as a platform for constant dialogue between the region’s potential and already working foreign investors and as a tool to support the investors in problem-solving within the effectiveness of their activities during implementation of their projects on the territory of Samara Region.
It is anticipated to start-up the information-analytic site “Invest in Samara” within the Internet Portal of the Ministry of Economic Development, Investments and Trade of Samara Region. The main goals are increase of transparency of Samara Region Government in the area of solving the issues of foreign economic ties and foreign investments attraction. The Portal’s features will be the modern presentation of information, daily updates, feedback, system of links, presence in the main search systems, for the first time the content will be translated to the main foreign languages and the possibility to organize live broadcasting of symbolic events via Internet.
The Samara Region Government should not stand aside of the project for the making of federal structure for promotion of domestic companies interests abroad, improving Russia’s image and attraction of foreign investments, that is proactively lobbied trough by the MEDT RF. The implied cost of the project is 0.6 to 1 Bln. USD. We should integrate into this project as soon as possible, and, as one of the options, consider the possibility to create analogous structure on the level of regions.
We also anticipate to intensify the targeted work with foreign investors. Of course, we need personal approach to each of the potential investors, we should understand that this class of activity probably does not provide momentary benefit, bit it creates overall positive effect, herewith many contacts like any other project are put into practice only several years later. In this regard, the desired result may only be ensured using powerful analytical section, systematic tracing of world trends and maximized work in advance.
Department Manager S. Subbotin
