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"A Great Leap Forward"

Article provided by:Gateway2RussiaGateway2Russia

12 March 2004
"A Great Leap Forward"

In the next five years, Russian banks’ assets will double, while competition with foreign financial institutions will be limited to specialized niches such as loans for major export companies and retail banking for the wealthy.

A healthy and efficient financial system is a key factor in Russia’s further economic growth. Though foreign direct investment (FDI) in Russia grew by 1 1/2 times last year, one should not assume that it will become the main source of investment in fixed assets. Even in China the influx of foreign investment, huge by Russian standards, provides for the same share of investment in fixed capital as in Russia. Though in absolute terms FDI for 2003 totaled $51 billion in China and only $6.5 billion in Russia, the share of FDI in total investments in Russia was slightly higher than in China, 8.3 percent versus 7.9 percent. For this reason, the Russian financial system, the stock market and banks, must provide new investments by ensuring that the savings of individuals and institutional investors move into the economy, in addition to the assets of insurance and pension companies. But is the system capable of accomplishing this?

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