RUSSIAN FDIs IN GERMANY

Until recently, the image of funds flowing between the Russian Federation and Germany was dominated by an active engagement of German companies on the Russian market. However, this perception has changed during the last few years, and rightly so as the public has become aware of a steadily increasing number of Russian companies involved in Germany. According to OECD statistics direct investments of Russian companies in Germany have increased fivefold – from € 567 million to € 2.9 billion – in the last decade alone (2000 to 2010).

There are both economic and political reasons that illustrate this change. One such example is the above-average growth rates of Russian companies and their subsequent increase in capital availability. Another example that has had an appreciable influence on the level of Russian investments is the reinforcement of German-Russian relations and a more positive appreciation of the German market in the eyes of Russian investors. Investors attribute Germany a sustainable investment climate built on technology, quality and know-how – all characteristics with a promising impetus. This impetus is also beneficial for the Russian economy in times of an accelerated internationalization of the global economy and the ensuing competitive pressure. By August 2013 2,554 companies in Germany had at least one shareholder based in Russia . The large majority of these – 2,385 companies, i.e. 93 percent – are share ownerships of individuals residing in Russia. In comparison, less than 10 percent – 203 Russian companies present in Germany – have institutional investors such as industrial enterprises, financial institutions, insurance companies or public enterprises.

Three quarters of these investors entered the market by setting up a subsidiary in Germany, most of them in the service sector. Because the Russian economy has traditionally been focused on natural resources such as the provision of raw materials, construction materials and the corresponding logistics, this plays a prominent role in today’s development. In addition Russian companies provide a significant amount of economic and technical services, such as business and management consultancy as well as research and development. In contrast to cross-border green field investments most acquisitions of (shares in) German companies take place in the manufacturing sector, predominantly in mechanical engineering. Yet forward-looking sectors such as IT, electronics and nano technology are also becoming increasingly attractive.

Even though the level of direct investments in Germany is still lower than the level of German investments in the Russian market, the growing number and reach of companies nation-wide with a Russian shareholder is a sign of the increasing importance of Russian direct investments in the German economy. With initiatives for the promotion of business activity at national, regional and local levels, business consultancies as well as political actors have recognized and sought to support the trend. They create an attractive investment climate and provide extensive options for the promotion of business, while seeking to break down existing prejudices both in the economic and the social sphere.