Russia and its Competitor LEMs
As an emerging market, Russia faces direct competition from a number of neighbouring countries that offer higher levels of economic and political stability (transition economies of Central and Eastern Europe) or from those representing an equally significant market potential (other LEMs). This chapter will compare FDI patterns in Russia and major LEM competitor economies. 1
LEMs have significant populations with rising purchasing power, skilled labour and abundant raw material and agricultural resources. Growing at much faster rates than the leading OECD markets, these countries offer sustainable expansion prospects for large and medium-sized TNCs, which are increasingly compelled to globalize their operations owing to the shrinking of their home markets. Compared with smaller emerging and transition countries with limited market potential and natural resources (e.g. Hungary, Poland, Malaysia), LEMs are in a position to attract all types of FDI, including market-seeking, raw materials-seeking, export-oriented and strategic investments meant to 'contain' competition even before the market potential can be fully realized. 2
Poland was included in this comparative analysis despite its smaller population size and market potential than LEMs. In Eastern Europe, Poland (population: 40 million) represents the third most populated country after Russia (148 million) and Ukraine (50 million); it continues to attract FDI following the introduction of investor-friendly policies in 1993. Other emerging economies such as Argentina, Chile, Malaysia, Thailand and Turkey also receive a growing portion of FDI, but their success in economic transformation through FDI cannot match that of Poland. It benefited significantly from western European and US investments in anticipation of the country's integration into the EU. 3
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Publication information: Book title: Foreign Direct Investment in Russia: A Strategy for Industrial Recovery. Contributors: Paul Fischer - Author. Publisher: St. Martin's Press. Place of publication: New York. Publication year: 2000. Page number: 356.
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