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The foreign investment mystery

Strong growth and enhanced political stability appear to have broken down the barriers to foreign investment in Russia. But since much of what flows is disguised in various ways, it's hard to state precise figures.

Offshore oil platform near Sakhalin
Island: the area is the site of a
£10 billion gas liquefaction plant
being developed by Sakhalin

FOREIGNERS HAVE BEEN eyeing Russia's wealth of natural resources and 145 million-strong consumer market hungrily for most of the past decade. But the few that attempted an investment often came away with their fingers badly burnt.

Foreign direct investment has remained stuck at about $20 to $25 a head of the Russian population. By contrast, most other countries in eastern Europe can boast per capita FDI of several hundred, if not thousands, of dollars. But on the back of stellar economic growth and a return to political stability this year the first big foreign investments have arrived since the fall of the Soviet Union.

Measuring foreign investment is difficult as so much of Russia's trade is done under the table and many of the big companies are registered offshore for tax reasons. However, even the official balance of payment statistics show that FDI was up 326% to $1.6 billion over the first quarter of this year compared with the same period in 2002 and the real figure is likely to be much higher.


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