13.01.2016, 00:06
EDB: Asian Investments in EAEU Economies Is Growing Steadily
OREANDA-NEWS. Chinese investors show the strongest dynamics of foreign direct investment (FDI) in the EAEU countries. Between 2008 and 2014, China's FDI stock in the region more than doubled, from USD11 billion to USD27,1 billion. Over the same period, Japanese FDI reached USD14,4 billion, and South Korean FDI reached USD1,9 billion. These are the findings of the report EAEU and Eurasia: Monitoring and Analysis of Direct Investments prepared by Eurasian Development Bank's (EDB) Centre for Integration Studies. The report is based on unique "bottom-up" data on investment projects, which means that the authors use companies' reports and other primary information as their sources for analysis. This enables to define more precisely the ultimate beneficiaries of investment and factor in profit reinvestments.
The data on FDI in the EAEU countries suggest that Chinese FDI is primarily concentrated in Kazakhstan, and Japanese in Russia. In terms of sectoral structure, Japanese and Chinese investors focus, in the first place, on raw material resources of the EAEU countries.
In 2014, Chinese FDI stock in hydrocarbon production in Kazakhstan reached USD17,1 billion. Kazakhstan's transport sector attracted USD6,2 billion in FDI from China. Investments by Chinese TNCs in Russian oil and gas sector amounted to USD1,2 billion.
Almost all direct investments by Japanese companies were channelled into oil and natural gas production in Russia. Sakhalin-1 and Sakhalin-2 projects attracted USD10,1 billion from Japan.
Japanese and South Korean corporations are significantly interested in the EAEU mechanical engineering sector (USD2 billion in FDI stock). South Korean FDI focuses on motor vehicles and electronics, expecting to export their output to other post-Soviet countries.
Investment cooperation between the EAEU countries and Iran is interesting. Iran continues to increase its investments in the EAEU countries at low, yet stable rates. The main recipient of its FDI is Belarus (commercial construction and development). As at the end of 2014, Iranian FDI stock in Belarusian economy was USD731 million (USD64 million as at the end of 2008). The prevailing sector in the sectoral breakdown of Iran's FDI in the EAEU countries is construction, followed by infrastructure networks and transportation. According to the EDB Centre for Integration Studies, Iranian FDI stock in the surveyed post-Soviet countries is more than 90 times higher than counter-investment in Iran (USD966 billion vs. USD10 million).
As distinct from investments by East Asian countries and Iran, Turkish FDI in EAEU countries is distributed by sectors more uniformly. It is represented across all aggregated sectors, except non-ferrous metals and oil and gas sector. Geographical diversification is also observed in most sectors. Turkish FDI stock in the EAEU region as at the beginning of 2015 totalled USD7,9 billion. Russia's share in Turkish FDI in EAEU was 72.5%, Belarus' - 13%, and Kazakhstan's - 10.8%.
Indian FDI in EAEU is distributed between two countries only: Russia (USD3,6 billion), and Kazakhstan (USD 2,3 billion). Other EAEU economies are of low interest to Indian TNCs for the time being. Two sectors - ferrous metals (FDI in Kazakhstan) and oil and gas sector (primarily, through ONGC's participation in Sakhalin-1 project) - dominate in the sectoral breakdown.
Despite low growth rates in the global economy, as well as volatility and uncertainty in financial markets, the investment expansion by Asian countries in the EAEU economies has not suspended. The experts of the EDB Centre for Integration Studies believe that Asian FDI in EAEU countries will continue to grow. The main role will be played by Chinese investors, which try to give effect to memoranda and preliminary agreements entered into in 2014-2015 and thereby to increase their expansion in a wide range of directions. Japanese companies will try to occupy free niches in Central Asia, where competition among transnational corporations is still low. Iranian investors will continue to strengthen their investments.
The data on FDI in the EAEU countries suggest that Chinese FDI is primarily concentrated in Kazakhstan, and Japanese in Russia. In terms of sectoral structure, Japanese and Chinese investors focus, in the first place, on raw material resources of the EAEU countries.
In 2014, Chinese FDI stock in hydrocarbon production in Kazakhstan reached USD17,1 billion. Kazakhstan's transport sector attracted USD6,2 billion in FDI from China. Investments by Chinese TNCs in Russian oil and gas sector amounted to USD1,2 billion.
Almost all direct investments by Japanese companies were channelled into oil and natural gas production in Russia. Sakhalin-1 and Sakhalin-2 projects attracted USD10,1 billion from Japan.
Japanese and South Korean corporations are significantly interested in the EAEU mechanical engineering sector (USD2 billion in FDI stock). South Korean FDI focuses on motor vehicles and electronics, expecting to export their output to other post-Soviet countries.
Investment cooperation between the EAEU countries and Iran is interesting. Iran continues to increase its investments in the EAEU countries at low, yet stable rates. The main recipient of its FDI is Belarus (commercial construction and development). As at the end of 2014, Iranian FDI stock in Belarusian economy was USD731 million (USD64 million as at the end of 2008). The prevailing sector in the sectoral breakdown of Iran's FDI in the EAEU countries is construction, followed by infrastructure networks and transportation. According to the EDB Centre for Integration Studies, Iranian FDI stock in the surveyed post-Soviet countries is more than 90 times higher than counter-investment in Iran (USD966 billion vs. USD10 million).
As distinct from investments by East Asian countries and Iran, Turkish FDI in EAEU countries is distributed by sectors more uniformly. It is represented across all aggregated sectors, except non-ferrous metals and oil and gas sector. Geographical diversification is also observed in most sectors. Turkish FDI stock in the EAEU region as at the beginning of 2015 totalled USD7,9 billion. Russia's share in Turkish FDI in EAEU was 72.5%, Belarus' - 13%, and Kazakhstan's - 10.8%.
Indian FDI in EAEU is distributed between two countries only: Russia (USD3,6 billion), and Kazakhstan (USD 2,3 billion). Other EAEU economies are of low interest to Indian TNCs for the time being. Two sectors - ferrous metals (FDI in Kazakhstan) and oil and gas sector (primarily, through ONGC's participation in Sakhalin-1 project) - dominate in the sectoral breakdown.
Despite low growth rates in the global economy, as well as volatility and uncertainty in financial markets, the investment expansion by Asian countries in the EAEU economies has not suspended. The experts of the EDB Centre for Integration Studies believe that Asian FDI in EAEU countries will continue to grow. The main role will be played by Chinese investors, which try to give effect to memoranda and preliminary agreements entered into in 2014-2015 and thereby to increase their expansion in a wide range of directions. Japanese companies will try to occupy free niches in Central Asia, where competition among transnational corporations is still low. Iranian investors will continue to strengthen their investments.
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