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    Foreign direct investment in Russia due to consumers - OECD

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    MOSCOW, June 27 (RIA Novosti) - Russia's huge capacity for foreign direct investment (FDI) is mainly thanks to consumer spending, rather than friendly government policies, the Organization for Economic Cooperation and Development (OECD) said in a report, Trends and Recent Developments in Foreign Direct Investment.

    Today's issue of Kommersant, a business daily, cited the report as saying FDI in Russia rose to $11.7 billion last year, overtaking India ($5.3 billion) but still hopelessly trailing China ($54.9 billion).

    The OECD linked the investment boom to a similar boom in retail, which has been fueled by growing incomes and a surge in consumer loans. According to the organization, foreign producers who once preferred to work in Russia through their representatives are now moving their production assets closer to the sales market.

    The report highlights the automotive industry as a target for massive investment in the last few years.

    On the whole, the OECD report produces the impression that foreign direct investment in Russia only goes to those retail sectors where rapid growth is so high that red tape is not a major problem.

    However, the OECD experts were concerned about the broader investment picture. Russian businessmen invested up to $9.6 billion outside the country in 2004, which the organization said was most likely due to state interference and problems with the practices of the taxation services.

    OECD economist William Thomson said the outside world had heard little good news from the Russian economy in the last 18 months. But he added that the world had seen what had happened to Yukos, and this had seriously undermined the investment climate.

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