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Direct foreign investment in 1H06 up 16% y-o-y - ministry

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MOSCOW, August 11 (RIA Novosti) - Direct foreign investment in Russia rose 16% in the first half of 2006 to hit $15 billion, the economics ministry said Friday.

"More intensive investment from the Russian private business was complemented with an inflow of direct foreign investment," the ministry said in a socioeconomic report to the government. "of $15 billion in the first half against $12.9 billion in the first half of 2005."

The ministry said, "Investment demand increased in the first half by 9.4%."

The Ministry of Economic Development and Trade said the structure of investment had seen a positive shift.

"Housing construction developed more rapidly than expected with encouragement from a national project," the ministry said, adding that investment in the manufacturing sector had also been on the rise.

Head of the macroeconomic planning department in the ministry Andrei Klepach has said that the ministry expected inflow of capital into Russia and higher accrued investment.

"In 2006-2009, we expect a positive inflow in view of capital repatriation, growing loans and IPOs of Russian companies," he said.

The ministry also said that investment was expected to soar 10% in the next three years. "This will make it possible to increase accrued investment from 17% of GDP to 19%," Klepach said.

The share of state investment is expected to drop in relation to private investment from 20% to 16% in the medium term.

"The government is seeking to improve the investment climate to encourage business investment in Russia," Klepach said.

He added that the government had already decided to provide tax holidays for companies developing fresh oil and gas deposits in East Siberia, and reduced the mineral extraction tax rate for developed fields.

The move is designed to encourage oil business to invest in new deposits and fully exploit the already operable holes.

Klepach also said that the government and business had launched ambitious infrastructure projects but it did not mean that state investment would replace private funds. On the contrary, he said this would attract more private investment.

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