Azernews.Az

The development is a new situation for Baku, which in previous years was regularly among the top-five recipients of investment in CIS, according to Kalman Kalotay, one of the experts who developed UNCTAD's World Investment Report 2007: Transnational Corporations, Extractive Industries and Development.
Kalotay said that over the previous years more than 95 percent of foreign direct investment inflows in Azerbaijan were channeled into the oil and gas industry, including building the Baku-Tbilisi-Ceyhan (BTC) pipeline. However, the completion of its construction means that "the country can no longer have those hundreds of millions of dollars".
Similar FDI fluctuations have also been seen in Kazakhstan, and are usually tied to the completion of or lack of new projects. Kalotay suggests that Azerbaijan may need to diversify its economy in order to lure investment to new sectors.
"In the case of Azerbaijan, the situation is even more delicate, because in Kazakhstan, in addition to oil and gas, there are also the mining resources and then the metallurgy. As for Azerbaijan, those investment opportunities don't exist," he said.
The report also revealed that transition economies of the CIS and South-East Europe are seeing the highest-ever levels of FDI. Investments in these nations jumped by 68% in 2006 to $69 billion, marking the sixth consecutive year of growth and recording a significant leap over the two previous years.
FDI inflows were concentrated in five nations: Russia, Romania, Kazakhstan, the Ukraine, and Bulgaria. Together, they accounted for 82% of total incoming FDI to the region. Inflows to the largest economy, the Russian Federation, more than doubled to a record $29 billion, despite an apparent tightening of national legislation on extraction contracts and on foreigners' access to natural resources.
Flows to Romania and Bulgaria grew significantly in 2006 because they were to join the European Union on 1 January 2007. Romania was the second-largest FDI recipient in the region, with most of its inflows linked to privatization. While oil and gas projects led FDI inflows to an unprecedented level in Kazakhstan (more than $6 billion), a reduction of privatization-related FDI combined with the abolition of incentives in special economic zones may have contributed to decreased inflows to the Ukraine.
Developed countries remained the main investors in the region, although the share of developing-country TNCs in cross-border merger and acquisitions, led by Chinese firms, rose to 16% in 2006 from a mere 1% in 2005.
FDI outflows from South-East Europe and the CIS in 2006 increased to $19 billion from $15 billion in 2005.
In some natural-resource-based economies of the CIS, such as Russia, Kazakhstan, and Uzbekistan, states have continued to increase their control of strategic industries. By contrast, the business climate for foreign investors has improved in non-strategic industries, UNCTAD said.