Prospects for investment development in Russia and the Muslim world

Shabanova Lyudmila Borisovna Doctor of Economics Professor, the department of Hotel and Tourism Business, Kazan Innovative University named after V. G. Timiryasov 420000, Russia, respublika Tatarstan, g. Kazan', Al'berta Kamaleeva, 34, kv. 44 shaban-50@mail.ru Other publications by this author

Morozova Irina Gennadievna PhD in Economics Docent, the department of Marketing of Economics, Kazan Innovative University named after V. G. Timiryasov 420111, Russia, respublika Tatarstan, g. Kazan', ul. Moskovskaya, 42 igmorozova@ieml.ru Other publications by this author

 Introductory part.

Currently, there is no single approach to understanding the definition of "investment" in the economic literature, and therefore, it is impossible to give an unambiguous definition of this concept in economic theory. The situation is also aggravated by the division of economics into blocks of microeconomics and macroeconomics ^[1].

One of the most successful definitions is given by I.Y. Lukasevich. He believes that from the point of view of macroeconomics, investments are part of the total expenditures redirected to the creation of new means of production, the increment of inventories of inventory, the construction of infrastructure facilities, etc. This is, in general, a part of the gross domestic product, not used (saved) in the present time period, but aimed at increasing the cost of capital in a market economy ^[2].

It is customary to allocate gross and net investments at the macroeconomic level. Gross investment is the sum of depreciation charges for the year and net investments, which, in turn, increase the amount of fixed capital. Further, net investment is defined as the difference between gross investment for the year and depreciation ^[3].

The total value of gross investment is an important indicator of economic development. If gross investments do not exceed depreciation deductions, then the size of social reproduction is reduced. In the case of equality of indicators, simple reproduction occurs. If the condition of excess of gross investments over depreciation deductions is met, social reproduction acquires the character of expansion ^[4].

The results of the study. In the context of the development of international relations and international cooperation, it becomes impossible to base the definition of investment only on the concept of the gross domestic product of a certain country. The reason is the emergence of foreign direct investment (FDI), which are directed, as a rule, to the real sector of the economy and become capital-forming ^[5].

Foreign direct investment, when combined with the value of gross investment of a particular country, a priori provides predominance over depreciation charges, pushing the expansion of social reproduction.

Currently, the vast majority of countries in the world are striving to attract foreign direct investment. The Russian Federation was no exception, the movement of foreign investments of which is shown in Table 1.

Table 1

Movement of foreign direct investments of the Russian FederationIndicator

Source: World Investment Report 2021 ^[6]

In 2020, the Russian Federation was an investment-attractive country, with incoming direct investments in which amounted to about $ 450 million. The financial situation of the country was characterized by stability, which also made it possible to invest more than $ 350 million in foreign countries. Thus, incoming and outgoing flows sought general equality, while ensuring an increase in social reproduction in the Russian Federation.

Despite the overall investment attractiveness, the rate of inflow and outflow of foreign direct investment in the range of 2017-2020s decreased. If almost $ 26 million was attracted to the country in 2017, in 2020 this figure was only $ 9.7 million, which is 62.7% less than in 2017. The most significant decline affected 2020, which was due to the global economic downturn against the background of COVID-19.

The current economic situation is even more aggravated. Political disagreements with the countries of the United States and Europe, as well as the consistent introduction of new packages of sanctions against Russia, inevitably push the Russian Federation to abandon the existing investment relations with the countries of Europe and the United States in favor of the countries of Asia and the Middle East.

Analysis of foreign direct investment of the Russian Federation. Over the period from 2017 to 2020, there has been a decrease in foreign direct investment in the economy of the Russian Federation. In 2020, 141 projects involving foreign direct investment were implemented, while in 2017 this figure was 238 projects. Compared to 2019, the number of foreign investments (FDI) decreased by 26%.

However, despite the deterioration of the overall situation and the decline in investment attractiveness, Russia has taken the eleventh position among the countries most attractive for investment from European states.

Table 2

Number of projects involving foreign direct investment in the Russian Federation2017

Source: EY European Investment Monitor 2020 ^[7]

Among the leading countries investing in the Russian economy, Germany, China and the USA took the first three places.

Among the countries with a Muslim economy, Turkey came in 9th place, having invested in 4 projects in the territory of the Russian Federation in 2020, which indicates a slight use of the direction of interaction with the countries of the Islamic economy in international cooperation.

Figure 1. Leading countries investing in the Russian economy ^[8]

The most attractive industry in terms of industry for investment in Russia is manufacturing. In 2020, 107 projects were implemented in the production sector. Germany, China, Italy and the USA preferred to invest in production; 20 projects, 13 projects, 13 projects and 11 projects, respectively.

Table 3

Source: EY European Investment Monitor 2020 ^[7]

The agri-food sector is also the leader of foreign direct investment. This dynamic has been maintained for the last three years.

Table 4

Number of investment projects implementedSector

Source: EY European Investment Monitor 2020 ^[7]

50% of Germany's foreign direct investment was directed to the agro-industrial sector, as well as more than half of the foreign direct investment of American companies.

Unlike the USA and Germany, China adhered to the position of investing in high-tech areas. The largest number of projects supported by China's direct investments in 2020 were implemented in the electronics sector, and a year earlier – in the software and IT services industries.

Analysis of the investment attractiveness of the Republic of Tatarstan. In 2020, the Republic of Tatarstan took the third place in the list of regions of the Russian Federation most in demand among foreign investors - 10 implemented projects with foreign direct investment, which is 11% higher than in 2019. Moscow, the Moscow Region, St. Petersburg and the Leningrad Region traditionally retain their leading positions.

Figure 2. Distribution of FDI by regions of the Russian Federation in 2020.The volume of private investment in the Republic of Tatarstan in the first half of 2021 increased 1.3 times compared to the same period last year, the share of foreign direct investment amounted to 7.8%

Table 5

Investments in RT following the results of the 1st half of 2021

The main shareholder of the republic is China, Turkey (Turkish Airlines, KOLUMAN, ENKA) and the United Arab Emirates (FlyDubai) are actively represented among investors from the OIC countries.

On November 11, 2020, the project for the production of premium cars "Aurus" in the republic on the territory of the special economic zone (SEZ) "Alabuga" was approved. The total amount of private investment in the project amounted to 6.6 billion rubles. Only one of the Arab funds invested 110 million euros in production. This was the first project involving investments from the United Arab Emirates.

Currently, serious efforts are being made in the Republic of Tatarstan to develop investment infrastructure, which includes special economic zones, industrial parks, technoparks and industrial sites.

The investment infrastructure of Tatarstan is represented by sites of different levels — brownfield with existing infrastructure, and greenfield with the possibility of building infrastructure at the request of the investor. The number of sites is growing and changing. To date , their composition is as follows:

· the territory of advanced socio-economic development (TOSER) Mendeleevsk;

· TOSER Nizhnekamsk;

· TOSER Zelenodolsk;

· TOSER Chistopol;

· TOSER Naberezhnye Chelny;

· Special Economic Zone (SEZ) "Alabuga";

·          SEZ "Innopolis". ^[9]

Investment attractiveness is also supported by the creation of benefits and preferences for investors, as well as administrative state support. So in 2011, the Investment Development Agency of the Republic of Tatarstan was established, and in 2018 – the Investors Club of the Republic of Tatarstan. In September 2011, the Investment Development Agency of the Republic of Tatarstan joined the World Association of Investment Agencies (WAIPA), becoming the first representative of Russia to join WAIPA ^[10].

The role of the countries of the Muslim world in the development of foreign direct investment of the Russian Federation. Currently, the countries of the Muslim world are playing an increasingly important role in the system of international economic relations. With the growing number of Muslims, their influence on the state of the world economy will only increase. In a relatively short period of time, the countries of the Islamic world have managed to create their own economic model, which has received its name – the "Islamic economic model". The key point of the Islamic economic model is the focus on solving social issues, isolation from usury in its classical sense, leveling risks in large business. In the conditions of the crisis phenomena of 2020-2021, the Islamic economic model has already demonstrated its viability, attractiveness and desire to develop mutually beneficial investment activities.

A special role in the development of investment activity can be played by Russia, which is home to more than 20 million people who profess Islam.

Already now the Russian Federation has friendly political ties with the countries of the Muslim world, in addition, elements of the Islamic economic model have been introduced in Russia, primarily Halal products ^[11]. There are also good prospects for the regions of Russia with a Muslim population: the Republic of Tatarstan, the Republic of Bashkortostan, the Chechen Republic, the Republic of Dagestan and others. A favorable environment has already formed in these regions for establishing close contacts with the countries of the Muslim world.

The Republic of Tatarstan plays an important role in the development of economic relations between Russia and the states of the Islamic world, on the territory of which a positive practice of intercultural and interfaith interaction of peoples has historically been formed. Expansion of relations with companies from the Muslim world is possible through the use of the mechanisms of the FEZ "Alabuga". Being one of the innovative leaders of Russia, Tatarstan has the necessary resource opportunities for the development of scientific and technical cooperation with Muslim countries in the field of high technologies. Tatarstan has ample opportunities to establish cooperation with partners from Muslim countries in the tourism sector.

The implementation of joint projects in the field of innovation and digital transformation can become a mutually beneficial and promising area of investment cooperation between Russia and the countries of the Muslim world. Official delegations of a significant number of countries of the Islamic world attended the Kazan Summit KAZANSUMMIT 2022 "Russia – the Islamic World" held in May 2022 as guests. During the sessions, the attention of the participants also touched upon such issues as the development of medicine, the financial sector and the food industry.