Foreign Direct Investment in Russia: How Can It Be Made More Effective for the Country?

The subject of this study is the financial aspects of international industrial cooperation. The aim of the work is to identify the motivations of foreign companies to engage in production activities in the Russian Federation and develop proposals to improve its economic efficiency. The research methodology includes the use of theories of international economic cooperation, as well as empirical-statistical and qualitative analysis. The study found that countries with large and solvent markets, such as China and Russia, are attractive to foreign direct investment (FDI). Multinational enterprises (MNEs)operating in these countries often use more advanced production technologies than they would in other countries. As a result, the rate and amount of profit from producing goods in these countries is typically higher than exporting the same goods from the manufacturing country. The paper argues that these circumstances may override MNEs’ desire to maintain control over imported technologies if the authorities of the FDI host country insist on partnership with a local company in the enterprise established by the MNE. A condition of such partnership should be the obligation of the MNE to transfer its technology used in production to the local company, with the right for the latter to freely use and further develop it. Although such a requirement did not exist for foreign companies in the Russian Federation previously, the study suggests that foreign MNEs are likely to consider this exchange acceptable and beneficial. Establishing a condition for foreign MNEs to carry out production activities in the Russian Federation in partnership with local businesses would allow Russian companies to more quickly adopt new technologies. This would contribute to enhancing the efficiency of the Russian economy. Additionally, society would benefit from higher-quality products that are created with the participation of local capital, meeting the demands of consumers.

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