Foreign Direct Investment Strategies Into Environmental Services Into Russia

Definition of Foreign Direct Investment (FDI)

Foreign direct investment (FDI) occurs when a foreign investor exerts direct control over domestic assets. It mainly consists of an international capital flow from the home country to a host country for the purpose of acquiring partial or whole ownership of substantial business activity. Technically, it is the book value of the equity held by the foreign investor that attached to the asset. In most cases, the asset is a firm in a developed country, such as the United States, and the equity consists of two components: ordinary (common stock) and retained earnings (Itay, pp. 15-65). If both foreign and domestic investors own the common stock, then only a portion held by foreign investors considered to be FDI, and if only a threshold percentage attained, that deemed to give the foreign investor control of the business. In the United States, this threshold is 10%, but some countries establish a higher minimum level of stock ownership, usually 25% (Yeung pp, 1-25).

Foreign investment can take place in two ways: Foreign investors can establish new firms overseas, which they control, or foreign investors can acquire controlling interests in the previously established domestic firms, or spin-offs of such firms. FDI as a vehicle of transnationalization is a significant contributor of economic development.Transnational corporations (TNCs) act as significant transmitters of economic, social, cultural, and political change into different countries, sectors, and motivations. TNCs take advantage of geographical differences in the distribution of factors of production (natural resources, capital, and labor) and local policies (taxes, trade incentives, and subsidies) (Hanafi, pp: 185-198). Other than FDI, TNCs engage in various kinds of collaborative ventures by which they coordinate and control transactions within geographically dispersed production networks. Resulting from these ventures, the global economy envisaged as linking two sets of networks: (1) organizational (in the form of production circuits and networks) and (2) geographical (which include localized clusters of economic activity).

Foreign Direct Investment In Russia

Since the beginning, of market reforms industry in Russia has suffered a significant decline in production and lost their competitiveness, to that exerted a decisive influence unprecedented volume of imports of consumer and industrial products. It is obvious that the only way out of Russia's economic crisis is the revival of industry. And to achieve this goal industrial sector in Russia needs investment. But the mere domestic savings and government grants would not be enough. International assistance programs also have little effect on the modernization of industry in Russia (Graham, pp. 9-11). In turn, Foreign Direct Investment (FDI on here) will have a longer-term momentum, as is evident from what is happening in other major emerging markets.

Total foreign investments into Russian economy in the first half of 2011 totaled $ 87.698 billion, which is 2.9 times higher than in January-June 2010. Foreign direct investment in the first half rose by 29.8% - to $ 7.039 billion (first half of last year the reduction was 11.0%). Of these contributions to the capital had ...