Factors affecting the foreign direct investment in Russia

Abstract

This paper analyses some links between the last crisis of the banking sector, the system of corporate governance and the level of investment (and foreign direct investment in particular) in Russia. Russian contrasting outcomes are the result of a complex set of factors depending on investment, regulation inadequacy, reforms structure and transition process consequences. We start with a short analysis of the transition process. The analysis is consistent with the hypothesis that both macroeconomic stabilization and structural reforms are necessary for growth. Afterwards we analyse the outcomes of the banking system in Russia with special emphasis to the reform strategy proposed after the crisis of 1999, as well as some of the associated controversies with the current system of corporate governance. The Russian experience of corporate governance is unique; and the lessons that Russia teaches are not trivial. Russia's enterprise pathologies improve our basic understanding of how corporate governance works.