Sunday, December 1, 2013

Chinese Investment Propelling both Russia and Ukraine

            FDI has the effect of introducing markets to new technologies and improved management systems.[1] This will allow Russia’s inefficient and outdated sectors to become productive and compete on the international market, allowing the country to profit from increased export revenue.[2] The Government has recognized the need for diversification and modernization but change and reforms have been slow to develop.[3] In addition to export revenues, increased output will provide the government with more tax receipts, which in theory they will direct into social projects, designed to benefit the public.[4] Russia has begun to realize the advantages of increased in encouraging FDI and has seen a positive impact from investment in its automotive and aerospace industries.[5] This has provided those industries with the skills, managerial experience and technology to begin to compete on the international level.[6] Dispiute the level of China’s investment other income will be necessary to further propel growth.
Many consider corruption to be Russia’s preeminent issue and while the government has made efforts to combat the issue progress has been limited. According to Transparency International’s Corruption Perception Index (CPI), Russia ranks 133 out of 182 in the 2012 CPI ranking, placing the nation as the most corrupt of all the BRIC’S,[7] and reports suggest that the average bribe is about $7,866.[8] This has led to discouragement among those who attempt to battle the plague, fifty-two percent of individuals’ surveyed feel that the government’s efforts to combat corruption are largely ineffective.[9] Moreover, the WEF has ranked given Russia a poor ranking for judicial independence (116) protection of property rights (121) and efficiency and settling disputes (109).[10].  Although Russia is a member of the Council of Europe Group of States against Corruption (GRECO), the country has only fulfilled one-third of its anti-corruption obligations.[11] 
                Perhaps unsurprisingly, Ukraine has also begun to receive significant investment from China. Just as Russia fuels the Asian giant, Ukraine feeds it.[12] In recent years, Ukraine has been attracting investment from Chinese companies seeking to meet their growing demands for grains and meat. This recent development is particularly relevant in light of Ukraine’s decision to reject an EU partnership agreement. Viktor Yanukovich cited Russian pressure as the basis for his decision. While his decision has met vehement protests in Kiev, it may simply be too soon for the Ukraine to move away from its Russian connection.[13] What would allow Ukraine to move away from its eastern partner will be the development of its own economy and creating alternative trading routes. China’s interest in the region would satisfy both of those needs.
           
                  



[1]. John W. Head, Global Business Law, 450 (North Carolina Academic Press, 3rd ed. 2012).
[2]. European Bank for Reconstruction & Dev., Strategy For the Russian Federation, 2 (2012), available at http://www.ebrd.com/downloads/country/strategy/russia.pdf [hereinafter EBRD].
[3]. Id., at 7.
[4]. See Head, supra note 1, at 450.
[5]. Industry in Russia: Lurching Into the Fast Lane, Economist, Jul. 14, 2012 [herein after Industry in Russia].
[6]. Id.
[7]. See Transparency International, Corruption Perceptions Index 2012 Results, (2012), available at http://cpi.transparency.org/cpi2011/results/#CountryResults.
[8]. Average Bribe Amount in Russia more than Tripled Last Year, Rus Legal Info. Agency, January 27, 2012, available at http://rapsinews.com/anticorruption_news /20120127/259820426.html.
[9]. Transparency International, Global Corruption Barometer 2012, Appendix C,Table 1, (2012), available at http://www.transparency.org/policy_research/surveys_indic es/gcb/2010/results.
[10]. Id.
[11]. Council of Europe - Group of States Against Corruption(GRECO), Compliance Report on the Russian Federation, Dec. 3, 2010.
[12]. Roman Olearchyk, China Looks to Ukraine as Demand for Food Rises, Fin. Times, (Nov. 5, 2013), available at http://www.ft.com/intl/cms/s/0/a9c0db18-4554-11e3-b98b-00144feabdc0.html#axzz2mHetckLt.
[13]. Mary Dejevsky, The Setback with Ukraine Will Teach Brussels to be Patient, Fin. Times (Dec. 1, 2013) available at http://www.ft.com/intl/cms/s/0/383da05a-5aaf-11e3-942a-00144feabdc0.html#axzz2mHetckLt.

No comments:

Post a Comment