PRIME TASS EDB: Mutual FDI in the CIS fell by 12% to US $45.3 billion in 2014

One of the main causes for this drastic decline in all mutual FDI in the CIS was the destabilised economic and political situation in Ukraine. At the same time, while overall investment activity in the CIS has shrunk, the young integration vehicle - the Eurasian Economic Union (EEU) - demonstrates stability. Even despite the devaluation of national currencies, mutual FDI in the EEU in 2014 increased from US $24.8 billion to US $25.1 billion. The report states that the positive dynamics in investment flows in the EEU was largely due to the advancement and strengthening of integration cooperation.

Russian transnational companies remain the largest investors. Russian investors accounted for 84% of mutual FDI in the CIS and Georgia, and Russia attracted almost 9% of mutual FDI. The second most important player in mutual investment flows is Kazakhstan, with 9% of exported and 20% of imported mutual investments. The top five countries also include Ukraine, Belarus and Azerbaijan. Ukraine remains the largest recipient of FDI, although with a lower share than before (23% vs. 32% in the end of 2013). The third country among the top three leaders is Belarus, which attracted 18% of investment in the CIS and Georgia.

The largest recipients of mutual FDI are the fuel sector, non-ferrous metallurgy, and telecommunications. The financial and transport sectors also play a notable part. In Kazakhstan, the agroindustrial sector and tourism stood out. Mutual FDI with Belarus were mainly represented by one sector - wholesale and retail distribution networks used by Belarusian producers to promote their commodities in neighbouring markets.

According to the report, the structure of investment flows in the near years will change. The main causes for this will be the unstable situation in Ukraine and, accordingly, the decrease in the share of investors from other CIS countries in its economy, and the active development of mutual linkages in the EEU. The EDB Centre for Integration Studies believe that the deepening of Eurasian integration within the EEU and its single market open new opportunities for corporate interaction, and that "second echelon" investors, which represent a wide range of sectors, can build trans-boundary value-added chains more actively.