Foreign investment in Russia fell a whopping 13% last year and is now half what it was four years ago. Vladislav Inozemtsev, professor of economics, director of the Moscow-based Center for Post-Industrial Studies and editor-in-chief of Svobodnaya Mysl, writing in the Moscow Times, explains why:
President Dmitry Medvedev publicly acknowledged last week what everyone has known for two decades: The investment climate in Russia is bad. While the measures Medvedev proposed to improve the investment climate are generally sound, there are several reasons why they won’t work.
In 2010, fixed capital investment in Russia totaled 8.35 trillion rubles in constant 2008 prices ($310 billion), the same as it was in 2007. In China, however, investment in 2010 was 14.4 trillion yuan ($2.16 trillion). One of the main reasons China’s investment level is so high is its high domestic savings. But the higher the level of savings, the lower the level of consumption.