A SUPPLEMENT TO EUROMONEY/APRIL 1998: EASTERN EUROPE
Bankers talk a lot about Russia's potential to attract massive foreign investment. But, with only around $10 billion having been committed so far, foreign direct investment (FDI) has been slow in coming to Russia.
Part of the reason is that, to date, direct investments - as opposed to portfolio investments - in Russia have generally failed to produce returns for foreign investors, largely on account of the punitive tax regime. A string of high-profile disasters has also left would-be investors asking whether the slender rewards justify the very real risks.
Last year British consultancy Control Risks Group ranked Russia as the most corrupt country in the world. In its last "Transition" report, the EBRD paid particular attention to corruption, warning of the substantial cost to investors and the economy as a whole.
But the tables may, at last, be turning in Russia's favour. The country is just edging out of a 10-year recession. "Given the natural resources and human capital, one unit of capital invested in Russia should produce some of the best returns anywhere in the world," says Roland Nash, a senior economist at MFK Renaissance.