Monitoring of mutual investments in CIS

The Eurasian bank of development and the Institute of World Economy and International Relations carried out the research “Monitoring of mutual investments in the CIS countries.” The initiators believe that their monitoring will help companies to get oriented in the business-world and will contribute to segmental cooperation between states.

Igor Finogenov, the chairman of the Eurasian bank of development

 

The Eurasian bank of development contributes to integration, modernization, and the growth of economies of the Common Economic Space and other members of the bank. That is why we pay serious attention to the analysis of the integration dynamics in separate segments of economy and in certain countries. The focus of our analysis is the economic aspects, but we pay attention to other integration issues too. Recently the Center of Integration Studies of the Eurasian bank has presented the results of the complex analysis of integration preferences of the CIS countries’ population. More than 13 thousand citizens from 10 countries of the CIS and Georgia participated in the research. It was found out that population of all countries-members of the Customs Union support the idea of its establishing, as well as the Common Economic Space – from 60% to 80% of interviewed. An interesting fact is that significant support of the CU is provided by other countries of the CIS and neighboring with the CU members countries.

The research characterizes not only economic, but also humanitarian aspects which show that without the positive humanitarian aspect economic integration is impossible. We confirm that the volume of mutual directed investments in the region is no less than $55 billion. It is much more than the official statistics present which don't consider investments through off-shores, i.e. through Cyprus, the Netherlands, and other countries which are off-shore countries in the investment sense. In reality the CES and the CIS have even more mutual investments, and we will pay attention to the segments where the business of our countries works in the markets of each other. It is interesting for our projects, regional development of the bank and providing our mission, i.e. support of the business which provides mutual investments to the CIS countries.

Our analytical research aims at business’s necessities, and it contains information on more than 500 deals on mutual investments in the regions. It is the biggest data base in the region. It allows conclusions to be drawn on investment dynamics, their branch reserves, and possible growth. The Eurasian bank of development intends to develop this database. Such monitoring of mutual investments is necessary to the region companies for development of adequate investment strategies, especially when they come to the markets of the CEX and the CIS. 

 

Yeugeni Vinokurov, the director of the Center of Integration Studies of the EABD

We faced this problem three years ago when we worked on the other project – the system of indexes of Eurasian integration. We saw that we cannot develop indexes on mutual investments in the region, as the official statistics angles information connected with differences between countries and segments. We had to use some other methods. A new qualitative base should be established. We looked through foreign experience: the European Union has a huge base Ernst & Young and Oxford Intelligence which contains 40 thousand treaties. It began to be composed in 1997. Now it is the main source on mutual investments in the EU. We looked at the countries which have similar structure: Poland has an agency which gathers information from businessmen and develops special statistics. It appeared the only instrument is gathering information from the bottom, i.e. looking through old newspapers, magazines, specialized press, then find the annual reports of the companies, verify the information by various means and compose a more or less truthful database which can solve our problems.

The first problem is off-shores. The factor of off-shores should be excluded. If a Russian investment comes to Ukraine through Cyprus, it is still a Russian investment to Ukraine, but not a Russian investment to Cyprus. If Ukrainians invest to Georgian through Dutch SPV, it is a Ukrainian investment to Georgia, not to the Netherlands.

The second problem is the consideration of re-invested sums. For example, a Russian company invested into Kazakhstan, and revenues of the Russian company in Kazakhstan begin to be re-invested abroad. The official statistics don’t register the money, although it concerns hundred million dollars. There are also other methodological aspects which we eliminated in our database. We have to realize it is an instrument which is an alternative to the official statistics; it verifies and completes it. One should use both sources.

Monitoring is the base which contains 600 deals, 526 out of which are implemented. We found out about deals from the 1990s, but the maximum accuracy was achieved only for recent 6-7 years when the investment boom took place. We hope this base will be helpful for business, as you should realize what you neighbors are doing, what investment opportunities are available, where investments might be made, where others invest and what mistakes are committed. We hope it will be helpful for integration processes too, for state bodies. The Customs Union and the Unified Economic Space were established, i.e. the frame of integration. Now the content should be developed.