Discussion

Ex. 10. Read and discuss the texts.

a) Say what hinders the influx of foreign capital to Russia.

a) Foreign investors participating in the Russian market see that there are many difficulties and important differences in the structure and behavior of the Russian market. Though risky, investing in Russia gives many opportunities to earn profits and superprofits. Some investors managed to achieve remarkable returns by implementing strategies specifically tailored to the Russian market.

Foreign investments are coming to Russia as direct investments i.e. financial participation in the creation of joint ventures and fully foreign-owned firms, and indirect or portfolio investments, i.e. purchase of stock, without sharing in the institution's management.

However, the influx of foreign capital is still insufficient. The process is hindered by high interest rates, inadequate tax and customs legislation.

Russian investment industry is developing rather rapidly. Russian investors are beginning to play a prominent role in Russia and abroad. Along with investing their own resources, they participate in investment auctions, help to allocate investment from international financial organizations.

Over the last three months, Russian mutual funds, known as payeviye investitsionniye fondy (PIFs) have collected $12 million. Though the money invested in mutual funds equals a mere 0.02%-0.05% of the Russian population's savings, this fact shows that people are prepared to invest. Russian mutual funds invest in government securities and equities. The main problem in investment activities in Russia is objective valuation of fund assets - Russia still lacks officially recognized valuation centers.

Russian investors have a tremendous potential for growth.

Words you may need:

Англійський варіант superprofit n strategies tailored (to) influx n hinder v mutual fund valuation

Російський варіант сверхприбыль стратегия, разработанная с учетом определенных требова­ний приток затруднять взаимный фонд оценка

Український варіант надприбуток стратегія, розроблена з урахуванням певних вимог притока утрудняти взаємний фонд оцінка

b) Discuss and compare the investment climate in Brazil and in Great Britain.

c) Brazil Attracts Foreign Investors

Increasing numbers of foreign investors are looking toward Brazil as their gateway into the Latin American market. As a result, there has been a dramatic increase in merger and acquisition activity, with more than half of the deals including foreign investors. The sectors involved range from chemicals and petroleum to agribusiness and finance. Brazil's privatisation program has also given outside investment an additional boost.

Trade between the US, however, has deteriorated, with accusations that US import policies are restrictive. Consequently, the US accounts for a steadily decreasing share of Brazil's exports. In 1990 the US share was 25% and is expected to drop to 15% by the year 2000. Therefore, Brazil's exporters are turning more and more to other Latin American countries and to Europe for future increases in sales.

d) Investment in the UK

In recent decades the UK has invested a smaller share of GDP than other industrialised countries - around 18% of GDP, compared with the OECD average of almost 21%. This has left a legacy of low capital stock per worker. Following growth of around 4% a year in the 1980s, investment in the UK declined during the recession of the early 1990s. However, in 1997 investment (gross fixed capital formation) at constant 1995 prices increased by 6.1%, the fastest rate of growth since 1988. Business investment rose by 8.8%, with private sector investment in dwellings up by 7%, although investment by general government fell by 9.1%. During the second quarter of 1998 overall investment at 1995 prices was 5.7% higher than a year earlier, with a stronger rise in business investment (7.1%) and a sharp rise in investment by general government (of 26.1%).

Business investment has been helped by the high level of inward investment. In recent years, the UK has received the greatest share of inward investment into the European Union, including over 40% of Japanese investment and about 40% of US investment.

Words you may need:

Англійський варіант gateway merger acquisition n legacy n gross fixed capital formation dwellings n

Російський варіант ворота слияние приобретение наследство, наследие валовые вложения в основной капитал жилье

Український варіант ворота злиття придбання спадок, спадщина валові вкладення в основний капітал житло

Ex. 11. Give extensive answers to these discussion questions:

1. What is investment?

2. What do investment activities depend on?

3. Why have investment activities become a fundamental feature of international economic development?

4. What are the major channels of foreign investments?