“Investment noise”: investments in the country’s economy rise by 10% in a year

Banks turned out almost cut off from investing on the Russian scale – credits account for just 11% of all investments, while foreigners almost stopped investing in the Russian economy

The volume of investments to Russian enterprises’ fixed capital totalled 13,2tr rubles last year with a 9-10% growth pace, which has stood still for two years already. And if, generally speaking, the Russian economy recovered from the 2014-2016 crisis, we cannot speak about it in Volga Federal Okrug regions. Realnoe Vremya’s analytic staff studied investments and learnt that banks turned out almost cut off from investments in enterprises – credits account for 11% of all investments (budget money do for 15%). And foreign investments amount to 1% after “the window to Europe closed”, and only in several regions of the country. It also turned out that in volume of foreign investments Tula Oblast with its special economic zones and priority social and economic development areas is far ahead of the Republic of Tatarstan with its SEZs and PSEDAs.

Investments in the economy grew by a third over 4 years of sanctions

Investments in the Russian economy’s fixed capital in 2018 were 13,2tr rubles, which is nearly 10% more than a year ago. The volume of investments have grown by more than a third for 4 years of colder relations between the Russian Federation and the West: 9,8tr rubles were invested in 2014. It should be noted that immediately after the crisis broke out, the growth pace of investments was just 4,3% (in 2015), it grew to 7% a year later and has exceeded 9% in the last two years.

Tyumen Oblast, which received 2,2tr rubles last year, formally remains a leader in investments in fixed capital. In fact, if we point out the key oil regions of the country in the oblast – Yamalo-Nenets Autonomous Okrug and Khanty-Mansi Autonomous Okrug – Tyumen will be just 11th in volume of investments. YNAO and KMAO are second and third in this indicator, that’s to say, 1 trillion and 879bn rubles respectively were invested in the oil producing sector last year.

It’s interesting that against the backdrop of a rise in tax payments of the oil industry in the last years (we should remind that YNAO and KMAO account for 36% of all taxes paid to the federal budget), the volume of investments here, on the contrary, falls: investments in YNAO fell by 5,5%, in KMAO – they did by 2%. It’s also interesting to compare the volumes of taxes and investments in the country’s oil regions: 1tr rubles of investments in YNAO last year had 1,2tr rubles of taxes to the federal budget, in KMAO, 879bn rubles of investments got 3tr rubles taxes. The two oil regions of the Russian Federation hold 14,3% of all Russian investments in total.

Investments in YNAO fell by 5,5%, in KMAO – they did by 2%. Photo: gazprom-neft.ru

Moscow remains the driver of the Russian economy – the volume of investments of its enterprises has increased for the second year, and growth is 20%.

Moscow is first in investments, 1,7tr rubles were invested in its economy in 2018, which is by 20% more than one year ago, or it’s 13% of all Russian investments. Moreover, a 20% growth pace has maintained for the second year in a row. To compare, it was just 9,4% in 2015. The volume of investments in the capital’s economy rose 1,85 times over four years.

Moscow Oblast where the concentration of big businesses is also great follows KMAO and YNAO. It became a record holder in growth pace of investments in the top 10 regions of the country: the volume of investments last year grew almost 1,5 times and totalled 726, 4bn rubles. We will separately note that the oblast showed positive growth paces only for the second year in a row: the economy stagnated in the 2015-2016s, investments fell (by 0,5-1%). The volume of investments in Moscow Oblast grew 1,6 times during four years (from 436bn rubles).

Saint Petersburg also showed the same pace (fifth place), but the volume of investments in the last four years never reduced: it amounted to 553,6bn rubles last year.

Krasnodar Krai didn’t manage to entice after the Olympics in Sochi

Unlike the economic tycoons from the top 5, the second top 5 shows a notably lower growth pace of investments. While Krasnodar Krai, for instance, suffered more in the crisis of the 2015-2016s when investments fell by 20 and 25% relatively. As a result, Krasnodar Krai turned out the only region in the top 10 in volume of investments where the volumes of investments didn’t grow but fell over the four years or, more precisely, collapsed by 32% (547,1bn rubles were invested in the regional economy in 2014).

Krasnodar Krai turned out the only region in the top 10 in volume of investments where the volumes of investments didn’t grow but fell over the four years. Photo: parkseason.ru

However, like in case of Krasnodar Krai where investments fell by 1% totalling 375,7bn rubles, it rather reflects the situation in construction of infrastructure to host sporting events (the Winter Olympics ended in Sochi then) when investments unexpectedly go up to a record high and then decrease. On the other hand, this means that expectations of regional and federal authorities that the Universiade or the Olympics, in the end, will give a great impetus to develop the economy by causing an inflow of new investors don’t cut it.

Most developed Volga regions slowed down

Tatarstan isn’t an exception. In fact, if we judge by the size of investments, the volume of investments grew by 9,6% in 2015, while the growth pace a year later turned out negative and was equal to just 92,6% (332bn rubles – it is a bit more than in 2014). In 2017, the volume of investments grew by 2,1%, and a noticeable acceleration could be mentioned last year – 10%.

Samara Oblast (16th place) where the volume of investments was 210,6bn rubles with 3,9% growth showed the second result after Tatarstan. During the four years, the volume of investments in the Samara economy, in reality, decreased by 10% (233,3bn rubles were invested in 2014).

The Crimean success is explained by explosive growth of construction of infrastructure, particularly the Crimean Bridge. Photo: wikipedia.org

Interestingly, with the volume of investments, economically developed Samara Oblast hardly catches up with Crimea in whose economy 195,8bn rubles were invested last year, while Crimea is a subsidised region and ranks seventh in the amount of subsidies (they were 20,3bn rubles in 2018). Samara Oblast, on the contrary, is among 13 regions of the Russian Federation that don’t receive any subsidies and is ninth in size of taxes paid to the federal budget (the oblast sent 291,17bn rubles to Moscow in 2018). The Crimean success is explained by explosive growth of construction of infrastructure, particularly the Crimean Bridge.

In another region of Volga Federal Okrug, Perm Krai, the volume of investments grew by 18,6% over the four years. However, this growth was mainly in 2015, after which the growth pace began to annually to fall going down to zero (0,7%) in 2017, while last year the volume of investments for the first time reduced by 3,4% having totalled 183bn rubles.

The state of affairs in Bashkortostan isn’t better than in Tatarstan or Perm: the volume of investments grew by the same 10% over the years, but, in fact, the biggest growth was in the 2015-2016s (17,2% and 21,7% respectively), after which the volume of investments collapsed by 25%. And Bashkortostan got a positive growth pace (4,3%) back only last year by having increased investments in the economy to 172,3bn rubles. The situation in Nizhny Novgorod Oblast is analogous to Samara – the volume of investments fell by 14% over the four years and was just 169,1bn rubles last year. Regions’ successes anyway aren’t compared to a rise in investments in Leningrad and Moscow Oblasts, Moscow, oil regions and so on. Besides, the four-year growth pace is three times lower than the Russian general one (34%). And even if we exclude big cities (Moscow and Petersburg) with their oblasts, oil regions and the top 10 big regions, the average growth pace in the Russian Federation made up 23,3% over the four years.

How Tula Oblast with its SEZs and PSEDAs is far ahead in foreign investments

Only 23 regions of the country received foreign investments last year. As strange as it might sound, not Moscow but Tula Oblast turned out the leader here, where foreigners invested 24,7bn rubles, or 20,7% of all investments, last year. This is probably linked with the fact that a special economic zone opened near Tula in the 2016-2017s.

Foreigners invested 24,7bn rubles, or 20,7% of all investments, in Tula Oblast last year. Photo: sdelanounas.ru

At the Petersburg International Economic Forum last year, it was announced that Cargill from the USA and authorities of Tula Oblast planned to create a biotechnological cluster in the region with a total volume of investments 10 billion rubles. The first tranche – 1,5bn rubles – will be invested in the construction of an energy centre in this region on the territory of Yefremov Priority Social and Economic Development Area hoping that it will become the centre of a big technological cluster in the short run. The oblast’s turnover with the USA doubled in 2017 totalling $0,5bn. Tula Oblast is in the top 5 Russian regions with more favourable investment climate due to its vicinity to Moscow. To compare, direct investments in Tatarstan with Alabuga SEZ and several PSEDAs were just 2,7bn rubles last year (seventh in the country).

Enterprises only in 10 Russian regions took out credits in foreign banks last year, if we count Tyumen Oblast, including KMAO and YNAO, it is seven. And the foreign banks mostly preferred to lend oil production in KMAO and YNAO. Tatarstan has nothing in this indicator.

By Sergey Afanasyev