Corruption as a factor of FDI

Scientific Study from the year 2009 in the subject Politics - International Politics - Region: Russia, grade: -, - (Geneva University), course: Economic Development, language: English, abstract: In this paper I would like to examine Russian economic situation through the variable of Investment, and more precisely the Foreign Direct Investment (FDI). I would like to investigate whether the low of FDI in Russia, is due to a high level of Corruption, as it is one of the factors of the Investment Climate. First of all I shall present the main variables involved, secondly investigate the existing studies on FDI and corruption and finally apply this theory to Russia in order to verify my hypothesis. FDI has played an important role in development and increasing productivity of other emerging economic powers such as China. In Russia however FDI has been relatively low. Since the recovery after the 1998 financial crisis - growth rates averaged at 7% of GDP in the period of 1997-2008, and it is forecasted to be 6%, or three times the GDP in most European countries. The growth of Russia's output is primarily driven by private consumption. It is provided by the use of the existing industrial capacity, rather than through new ones. The investment rate in Russia's economy remained essentially stable, at 20-25% of GDP but the FDI stuttered at 1% of GDP. However, after Russia has received Moody's Investment grade rating the investment has been growing faster and playing a bigger role in the economic growth. Indeed, FDI has been a substantial part of total investments in the country, in particular in some strategic sectors, like the hydrocarbon industry. Nevertheless FDI remains low in Russia due to its unattractive Investment Climate that consists of many variables such as Stability, Infrastructure, Labor cost, Market size, Transparency of legal system and Corruption. In this paper I would like to examine the significance of Corruption is as a factor for FDI.