Investments with a “neighborhood effect”: Belarus invested in the EAEU economies three times less than it received
At the end of 2020, Belarus had accumulated more than USD 5.2 billion of foreign direct investment (FDI) from the EAEU member countries. This is the second indicator after Kazakhstan, according to the data of monitoring of mutual investments of the countries of association, prepared by the Eurasian Development Bank (EDB).
Thus, Kazakhstan’s FDI indicator exceeded $ 11 billion, Russia – $ 4.3 billion, Armenia – $ 3 billion, Kyrgyzstan – $ 1.5 billion.
Our main part of funds – almost 99% of the total amount – came from Russia, 0.73% – from Armenia, 0.46% – from Kazakhstan. FDI from Kyrgyzstan was not recorded.
The Russian Federation remains the predominant investor for all EAEU states. The picture is slightly different in Kyrgyzstan, where, at the same time, the share of Kazakhstan’s investments is quite large.
The Belarusian side invested more than USD 1.5 billion in the economies of the merger partners. This is a natural third place after Russia and Kazakhstan. Recipients of 97% of the funds are located in the Russian Federation.
Otherwise, there is little constancy
In the EAEU, the neighborhood effect plays an important role, it is considered in the study.
This directly affects the dynamics of Russian, Belarusian and Kazakh FDI, especially in border regions. Whereas the mutual investment flows of states.
For example, in 2019, a net inflow of Belarusian FDI to Kazakhstan was recorded at the level of USD 23 million, and of Kazakh FDI to Belarus – USD 5 million. A year later, there was already an outflow of Belarusian FDI from Kazakhstan, but direct investment from Kazakhstan to our country increased by another $ 4.1 million.
“Defined potential“, According to experts, it is associated with the Belarusian-Armenian bilateral investment cooperation.
In recent years, the best dynamics have been shown by Russian FDI in Kazakhstan and Belarus. In four years, their accumulated volume in these countries increased by 36% and 47%, respectively.
At the same time, Russian investments in Belarusian chemical production showed almost threefold growth.
State-owned companies are in the lead
The sectoral structure of mutual FDI of the EAEU countries is as follows: mining of metal ores – 19.8% of total investment, followed by land and pipeline transport (14%) and financial services (11.4%). Oil and natural gas production ranks fourth (9.5%). Leadership in the production of metal ores is ensured by projects implemented by investors from Russia and Kazakhstan. This industry made the main contribution to the growth of the accumulated areas of mutual FDI of the EAEU countries over four years (by 2.2 billion out of 25 billion US dollars).
The share of private investors invests in the structure of companies investing internally: 55% by the end of 2020 The share of investor companies controlled by the state (participation in capital is more than 50%) has remained almost unchanged since 2016 and amounted to 36% last year … Moreover, half of them are companies with full state control.
The number of projects where, including the owners of the investing company, transnational corporations with foreign capital are present, is decreasing: over the past 5 years – from 10% to 6%.
It is specified that the seven main Eurasian investor companies amount to USD 11.3 billion of capital investments within the EAEU accumulated at the end of 2020. Their share is 45% of the EAEU mutual FDI, and over the past four years it has increased by 4 percentage points.
Less capital intensive projects have wider coverage and higher growth rates. Thus, the number of projects up to $ 5 million has increased over 2016–2020. by 11%, the total volume of FDI on them – by 16%. Projects up to $ 300 million make up the bulk of all (90% of the total) and cover 38 mutual investments.
The EDB also draws attention to the fact that for Eurasian suppliers there are more interesting projects from scratch (created from scratch) than acquiring shares in those already being implemented. The accumulated volume of such FDI has grown 1.6 times over four years, and their annual growth is more than 10%.
A new trend in the study is the growth of mutual investments in the production of vehicles, machinery and electrical equipment. Over the past three years, such volumes of FDI have increased 1.6 times, but their volume is still small.
Author of the publication: Alexey ALEXANDROV