In an increasingly interdependent world, when a country like Russia faces a crisis, its immense potential is lost to the global economy. The world needs Russia as much as Russia needs the world. Paradoxically, the current crisis has shown its own solution: revive the industrial sector to create a strong foundation for the real economy. Industry is the pillar for all other economic activities, and it makes the country less vulnerable to the whims of financial markets.
Germany has supported Russia's reforms by promoting concrete projects in the manufacturing, infrastructure, and energy sectors through its TRANSFORM programme. During his last two visits, Chancellor Schröder reiterated that targeted investments, rather than general financial assistance, would have a positive impact. It is along these lines that Germany will defend Russia's case with the European Union, the international funding agencies, and the WTO.
Official bodies such as KfW, CIM, GTZ, DEG, as well as the German Federation of Industry (BDI) and the Association of German Chambers of Industry and Commerce (DIHT) have played a pivotal role in promoting cooperation and foreign direct investment (FDI) in manufacturing. Today, Germany is Russia's first creditor and trading partner. It is also one of the largest investors in Russia, with a total accumulated FDI of about DM1.8 billion, which, however, accounts for only 0.3 per cent of German stock worldwide.
Russia's share in global FDI inflows hardly matches the potential that the country offers. Germany's Mittelstand, with its tens of thousands of companies, represents an immense untapped potential in capital, know-how, and technology. Many of these companies as well as those from other countries are waiting to expand their business to Russia. However, they need adequate assurance that their investments are safeguarded and that the Russian government is serious about integrating FDI. A far-sighted FDI policy, buttressed by strong institutions and accompanied by a clear commitment to the rule of law, would improve investors' confidence.
I am pleased to present this publication on FDI as a serious option for industrial revival in Russia. It is the result of years of study and analysis by the author in the framework of a bilateral programme sponsored by the German Ministry of International Cooperation (CIM–GTZ facility) and implemented in close cooperation with the Russian Ministry of Education (MESI–ICA).