Stepping into the XXI century

ST. PETERSBURG AND FOREIGN INVESTMENT

Georges Ivanoff,
Manager
TACIS project

        To an outsider, the St. Petersburg approach to attracting foreign direct investment is indeed original and most probably one of the best suited to periods of expenditure restraint and limited resources in today's Russia. The creation of the Foundation for Federal and Regional Projects and the work undertaken so far deserve both respect and encouragement.
        In a short period of time the Foundation's objectives, design and structure have been set up. Its originality is in the fact that it gathers both private and public interests in a unique institution where both parties can reach a clearer understanding of each other's goals. This should have positive effects on the relationship between existing and potential foreign investors and the city administration and must be a useful tool to make foreign companies and institutions feel a favourable investment climate or, at least, help any effort made in this direction.
        It should be stressed that the Governor's chairmanship of the Foundation should reinforce investors' confidence as major decisions are taken or approved at governor level in Russia. A number of activities have been deployed since the creation of the Foundation: organization of an investment infrastructure, including appropriate legislation and a web site information programme but also more material realizations such as, inter alia, engineering and transport infrastructure of the city. In transition economies, the patterns of inflows of foreign capital can create misleading impressions about the motivation of investors and that foreign investment comes automatically and its attraction requires no effort. But when the initial wave of consumer goods' companies - Coca Cola, Unilever, for instance - and those wishing to gain a strategic position within their sector - BMW, ABB - is decreasing the situation usually returns to a more normal state, where countries, regions and cities need to work hard to attract foreign investment. Much of the current investment in Russia falls into the category of strategic investment where companies have invested with a view to the market potential in Russia.
        Much greater economic benefit can be obtained from second wave foreign investment, particularly where this investment is manufacturing products for export. This type of investment employs more people and brings hard currencies into the country, but for this type of investment the investor has a completely free choice on where to place an investment and needs to be convinced of the advantages of a particular location. In order to attract this type of investment, a great deal of effort is required to gain the economic benefits of foreign investment. The effort needed to attract foreign investment is particularly great when levels of foreign investment are low, and this is the case at present, the competition between various investment destinations being extremely fierce.
        It is certainly an appropriate moment for the Foundation to develop further in order to implement the essential efforts to attract foreign investment, which is one of the ways to secure a stable economic development for the city of St. Petersburg.
        This is why the TACIS project "Support for Foreign Investment in the Russian Federation" supports the Foundation's activities in providing technical assistance in the investment promotion area, as it also does in two other Russian regions, namely Novgorod and Samara, thanks to a European Union grant.