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Foreign investment in transition economies rose in 2011, report says
World Investment Report 2012 says further expansion likely in the medium term, due in part to accession of the Russian Federation to the World Trade Organization

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05 July 2012, 19:00 Geneva Time, 17:00 GMT, Geneva Time

Geneva, Switzerland, (05 July 2012)

Foreign direct investment (FDI) flows to the transition economies of South-East Europe, the Commonwealth of Independent States (CIS) and Georgia recovered some lost ground in 2011 after two years of stagnant performance. This was driven in large part by cross-border merger and acquisition (M&A) deals, UNCTAD’s annual investment survey reports.

The World Investment Report 20121 , subtitled “Towards a New Generation of Investment Policies”, was released today.

While manufacturing FDI increased in South-East Europe, buoyed by competitive production costs and open access to European Union markets, in the CIS incoming investment continued to be focused on natural resources.

FDI inflows remained concentrated in a few economies, with the top five destinations accounting for 87 per cent of investment directed to the region. The Russian Federation saw FDI flows grow by 22 per cent to $53 billion (see figure), the third-highest level ever recorded for the country. Foreign investors were motivated by the continued strong growth of local domestic markets, affordable labour costs and productivity gains, the report says. Foreign investors also continued to be attracted by high returns in energy- and natural-resource-related projects.

The region’s FDI rebound was due mainly to a surge in cross-border M&As, from $4.5 billion in 2010 to $33 billion in 2011, the report says. While deals in energy, mining, oil and gas tend to attract most media attention, one of the liveliest magnets for cross-border M&As was the consumer market in 2011.

The services sector still plays only a small part in inward FDI to the region, but its importance may increase with the accession to the World Trade Organization (WTO) of the Russian Federation, the World Investment Report 2012 notes. Through accession, the country has committed itself to reducing FDI restrictions in a number of services industries, including banking, insurance, business services, telecommunications and distribution. Accession also may boost foreign investors’ confidence and improve the overall investment environment, the report says.

Developed countries, mainly European Union members, remained the most important source of FDI to the transition region, accounting for the highest share of projects (comprising cross-border M&As and greenfield investments), although projects by investors from developing and transition economies also gained in importance.

FDI outflows from the transition economies, mainly from the Russian Federation, reached an all-time record in 2011, the report reveals. The region’s natural-resource-based transnational corporations, supported by high commodity prices and higher stock market valuations, continued, and will continue to expand their operations in emerging markets rich in natural resources, the study predicts. Other firms from the region also are investing, including Russian banks which help to finance the foreign activities of Russian firms.

Overall, FDI flows to transition economies are expected to continue to grow, reflecting a more investor-friendly environment, WTO accession by the Russian Federation, and new privatization programmes, the report says.

Full Report -
Overview -

Figure 1 - Top five recipients and sources of FDI flows in transition economies, 2010 and 2011
(Billions of dollars)

a) Inflows

b) Outflows


Source: UNCTAD, World Investment Report 2012.
Note: Countries ranked on the basis of the magnitude of 2011 FDI flows.

End Notes
  1. The World Investment Report 2012: Towards a New Generation of Investment Policies (WIR12) (Sales No. E.12.II.D.3, ISBN-13: 978-92-1-112843-7) may be obtained from United Publications Sales and Marketing Office at the address mentioned below or from United Nations sales agents throughout the world. Price: US$ 95 (50% discount for residents of developing countries, and 75% discount for residents of least developed countries). This price is for a copy of the printed Report and an accompanying CD-ROM. Customers who would prefer to purchase the Report or the CD-ROM separately, or obtain quotations for large quantities should consult the sales offices. Orders or queries should be sent to: United Publications Sales and Marketing Office, 300 E 42nd Street, 9th Floor, IN-919J New York, NY 10017, United States. tel.: +1 212 963 8302, fax: +1 212 963 3489, e-mail:,

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