INCREASING INVESTMENT ATTRACTIVENESS OF CIS (EX-USSR) COUNTRIES Two decades ago, the Soviet Union broke up and allowed fifteen of its republics to gain independence. The former republics were facing a significant backlash from investors because of their association with the Soviet Union. However, some of the republics adopted various policies that have enhanced their investment attractiveness over the years (United Nations Conference on Trade, 2009, p. 13). The measures include: A. Transitioning from communist economies to market economies After breaking from the USSR, some of the republics such as Estonia adopted a free market policy thus becoming the richest of the CIS countries (Russia and CIS, 2015, p.
7). Free market attracts investors because it allows investors to invest any amount of money they want into the economy. It also encourages high-profit margins and the product of high-quality products. Investors are also attracted to free markets because such markets promote the efficient allocation of resources (Emerging Europe Monitor Russia and CIS, 2014, p. 8). It gives investors that they will achieve maximum returns from their investments. B.
Trade Partnerships with European Nations Estonia joined the European Union on May 2004. Its membership has prompted an investment boom in the country (BBC News Europe, 2011, p. 1). Global European electronics and telecommunication companies have established strong trade relations with Estonia because of its membership of the European Union. The trading partnership with the European Union has enhanced the reputation of CIS as countries committed to the economic development of Europe thus attracting investors. C. Tax Reforms Immediately after breaking from the Soviet Union, six of the former republics adopted flat tax rates.
CIS countries such as Slovakia and Estonia introduced a flat tax on both personal and corporate income thus accelerating economic growth. For instance, Estonia recorded an economic growth rate of between 7 and 10 percent during the 2000s (Goyette, 2011, p. 1). The economic growth of these republics encouraged foreign direct investments. Investors were confident that their investments would yield a positive return in the long run. D. FDI incentives and Free Zones Azerbaijan announced the establishment of a free economic zone to boost investments in the country.
The country is also negotiating with world trade organization (WTO) for its accession to the organization. A successful accession into WTO will boost the country’s competitiveness in the global market. Russia signed an agreement with former CIS nations to enhance the scale of trade among member countries. More investors are entering the Russian market because of the available opportunities in the other CIS countries (Emerging Europe Monitor Russia and CIS. , 2014, p. 11). E. Economic and Social Stability Kazakhstan has a stable social and economic environment, which have attracted major foreign investments in recent years.
According to Ernst & Young, Kazakhstan’s stable and steady economic growth makes the country among the fastest growing economies in the world. Since 2011, Kazakhstan’s gross domestic product has more than doubled, and economists predict that the country will experience the same trend in the next few years. In fact, the country attracted modest foreign direct investments in 2012 at a time when world saw a sharp decline. ReferencesRussia and CIS. , 2015. Emerging Europe Monitor: Russia & CIS, 19(1), 1-12.United Nations Conference on Trade. , 2009.
World Investment Report. New York: United Nations. Belderbos, R., Fukao, K., Ito, K., and Letterie, W., 2013. Global Fixed Capital Investment by Multinational Firms. Economica, 80(318), 274-299. Emerging Europe Monitor Russia and CIS. , 2014. Emerging Europe Monitor: Russia & CIS, 18(8), 1-12. BBC News Europe. , Aug. 18, 2011. Former Soviet republics: Winners and losers. London: BBC News. Retrieved from http: //www. bbc. co. uk/news/world-europe-14489883 Goyette, B., Nov. 8, 2011. Flat Taxes Are Big in the Former USSR. Have They Worked? New York: ProPublica. Retrieved from http: //www. propublica. org/article/flat-taxes-are-big-in-the-former-ussr. -have-they-worked