Foreign Investment into the Economy of St. Petersburg

Information source: Peterburgcomstat
Comments from the External Relations Committee

Investment

• Investment volume in 1999:
  in foreign currency - 659.6 mln USD
  Including direct investment - 235.4 mln USD
  
• Investment in Roubles - 1049.5 mln RUR
  Including direct investment - 987.3 mln RUR
  

The dynamics of the main indices (% to 1996)

	1997	1998	1999
USD proceeds	123	2.2 times	4.7 times
RUR proceeds (as many times)	2.4	6.6	6.8

Foreign Investment Structure by Business in 1999 (% of Total)

	Investment in foreign currency	Investment in RUR
Total	100.0	100.0
Industry	68.6	34.0
Transport & Communications	17.0	0.6
Construction	0.9	7.4
Trade & Catering	10.7	52.6
Other branches	2.8	5.4

Enterprises with the Participation of foreign capital, including small businesses 1)

• Average number of employees in1999 - 122.000

Main indices:

	1999
Volume of production (works, services) in actual prices, bln RUR	59.6
Number of active enterprises	1479

1) Preliminary data

Number of Foreign Companies by Partner-countries in 19991):

Partner-countries	No.
Austria	28
Bahama Islands	22
Belgium	12
Belorussia	23
Bulgaria	13
China	20
Cyprus	85
Denmark	17
Estonia	30
Finland	282
France	35
Germany	175
Ireland	18
Italy	29
Latvia	22
Lithuania	10
Luxemburg	15
Netherlands	33
Norway	14
Poland	27
Sweden	56
Switzeland	26
Ukraine	16
United Kingdom	85
USA	195
Vitgin Islands (UK)	21
Other countries	70

1) excluding the enterprises with the participation of foreign capital in the registered fund less than one thousand Roubles

Foreign investment in 1999:

Name	Mln USD		Mln RUR
	Accrued on 01.01.99	Received during the year	Accrued on 01.01.99	Received during the year
Investment, total	928.7	659.6	1727.8	1049.5
including
Direct investment	730.8	235.4	1498.8	987.3
including
Fees to the registered capital	488.5	63.8	1414.1	972.4
Credits of joint owners	137.2	168.8	43.6	11.5
Other direct investment	105.1	2.8	41.1	3.4
Portfolio investment	0.3	0.0	109.9	12.5
including
Shares	0.3	0.0	109.8	8.2
Promissory notes	-	-	0.1	4.3
Other investment	197.6	424.2	119.1	49.7
including
Trade credits	29.5	20.0	0.7	39.8
Other loans	149.1	402.3	83.3	9.6
Other	19.0	1.9	35.1	0.3

Foreign Investment Received by Industry in 1999

Name	Foreign Investment
	Mln USD	Mln RUR
Investment, total	659.6	1049.5
including
Industry	452.1	357.0
Transport & Communications	112.2	6.6
Construction	6.0	77.6
Trade & Catering	70.8	552.4
Other	18.5	55.9

Dynamics of Foreign Investment in St. Petersburg in 1993-1999

Mln USD	1993	1994	1995	1996	1997	1998	1999
Investment Volume in foreign currency	90	36	153	139	171	309	660
Investment Volume in Roubles			3	31	63	101	46
Total Foreign investment	90	36	156	170	234	410	706

The total volume of the foreign investment has been growing steadily since 1993, with the only exception in 1994.

Over the period of 1992-1994 the statistics for the development of the market economy was being formed, so we do not possess any more detailed data as to the investment process character. We can only assume that the reason for this fall may lie in the drastic inflation rise in 1992 and in the political crisis in Russia in 1993.

1996 showed a slight decrease of the foreign currency investment which was compensated for by the increase in the Rouble foreign investment. Most likely, the lower investment in 1996 was linked to the anticipated political instability to follow the presidential elections and the elections of the regional governors. In general, it must be noted that in 1995-1996 the investment process was in stagnation. The absolute investment volume was insignificant (less than 180 mln USD).

Since 1997 the foreign investment volume started to exponentially grow. It was preceeded by the Rouble investment rise in 1996 and 1997 equal to more than 30 mln USD annually. In 1997 the total volume of foreign investment rose by 64 mln USD (37% up as compared to 1996).

This positive tendency became even more apparent in 1998 when the currency foreign investment rise exceeded the 1997 data by 80%, the foreign currency equivalent of the Rouble investment exceeded the miserable amount of 100 mln USD, and the total investment volume grew by 75% to exceed 400 mln USD.

The results of 1999 showed clearly that the achievements of the previous years were quite explainable. The foreign investment volume in hard currency grew by 114% to reach 660 mln USD . The foreign investment volume in Roubles reached the amount of 1050 mln RUR (or 46 mln USD).

The total foreign investment volume into the economy of St. Petersburg reached 706 mln USD and rose as compared to the previous year by 72%.

The most attractive sectors for foreign investment proves to be in 1999: industry (67%), in particular food industry , telecommunications (16%), as well as catering (13%).

The leading countries in the investment processes are: the USA (44%), Finland (19.6%) and the Netherlands (8.4%). Cyprus and Luxemburg make together 13%, the next is the United Kingdom. Most likely, the geography of the investment does not quite adequately reflect the countries of the investment origin, which is defined by the global character of the investment process and also by the tendency to bring back to Russia the funds once taken out . Such funds are coming back through the countries having off-shore modes.

The analysis of the foreign investment dynamics over the last years does not give any reason to anticipate the decrease in the rate of the investment process, as it is based on the partnership formed between the City Administration and the international investment community in the framework of the policy being implemented in the city in 1997-1999 which is known in the West as PPI (public-private-initiative), and also in the framework of the activities of the Investment Council acting under the Governor of St. Petersburg.

Development of the Investment Process

By the results of 1999 года, the foreign investment volume reached the level of 659.6 mln USD and 1049.5 mln Roubles out of which 235.4 mln USD and 987.3 mln Roubles were invested directly.

The dynamics presented shows growing investment attractiveness of St. Petersburg after the financial crisis of 1998.

The most attractive spheres for the investors were industry - 68.6% of the total volume of the funds invested, transport and communications - 17%, trade and catering - 10.7%.

The steadiest partners for St. Petersburg are the USA and Finland. The investment share of the USA is varying between 18% to 44% from the total investment volume, the investment share of Finland - from 10% to 20% annually.

In early 1999 investment from the countries with the off-shore mode (Cyprus, Luxemburg) was growing. Most likely, this tendency reflects the process of bringing back to Russia through St. Petersburg the Russian capital once taken out due to the instability .

The investment growth can be explained by a successful implementation of the large-scale projects with the participation of foreign capital in 1999:

• Commissioning of "Wrigley" factory producing chewing-gum;
• Completion of the construction of "Gillette international" plant producing shaving devices;
• Commissioning of a food-for-children shop by "Petmol" company;
• Putting in operation of the first stage of an oil-loading terminal of "Neste" company in Lomonosov;
• Commissioning of a new brewery production line at "Vena" company;
• Starting of a brewery line by "Bravo" company.

The Committee on Law of the City Administration has now a Public Consulting Council to assist it, which deals with the problems of the development of the legislative basis for St. Petersburg.

During 1999 the Commission on the Business Information Support in St. Petersburg held several meetings. The final stage of the competition took place among security-investigation establishments to provide security of the business activities in St. Petersburg. On the 3rd of December cooperation agreements were signed between the City Administration of St. Petersburg represented by the external relations Commiittee and the companies who won the competition.

With the participation of the Investment Council the Business Code of Honour was passed which was signed by the end of the year by more than 100 city's companies.

In a joint effort with the Government of the Leningrad Oblast, the Finnish Ministry of Transport and Communications, The State Customs Committee of the Russian Federation, The Finnish Customs Administration, as well as а number of the leading companies from the EU countries and Russia the "EUROROSSIA" program is being implemented, which is directed at the development of the customs system, a business-parks network, and also of the logistics and informational support network.