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Theoretical and Applied Economics
Reference:

Direct German investments in the Russian economy: regional cross-section

Popova Evgeniya Mikhailovna

Senior Educator, the department of World Economy, Entrepreneurship and Humanities, Chita Institute (Branch) of Baikal State University

672000, Russia, Zabaikal'skii krai, g. Chita, ul. Anokhina, 56

p_e_m_2013@mail.ru
Other publications by this author
 

 
Nikitina Tatyana Viktorovna

Doctor of Economics

Professor, Director of International Centre for Financial Markets Research, Saint Petersburg State University of Economics

191023, Russia, g. Saint Petersburg, ul. Nab. Kanala Griboedova, d. 30-32, liter A

t_nikitina2004@mail.ru
Other publications by this author
 

 

DOI:

10.25136/2409-8647.2022.1.37585

Received:

20-02-2022


Published:

03-04-2022


Abstract: Economic relations between Russia and Germany are developing in the context of such global challenges as the aggravation of the international political situation, the introduction of anti-Russian sanctions, the economic recession against the background of the Covid-19 pandemic. The subject of this study is the regional peculiarities of the placement of German capital on the territory of Russia. The object of the study is 55 subjects of the Russian Federation, which are recipients of direct German investments. The authors focus on studying the dynamics, species and geographical structure of accumulated direct German investments in the context of individual subjects and federal districts. The article assesses the level of differentiation of direct German investments within individual federal districts, calculates sub-federal investment positions, identifies trends in investment cooperation between Russian and German enterprises carried out within the framework of special economic zones. It is established that the factors contributing to the placement of German capital in European Russia are the preferential localization of special economic zones in this part of the country, as well as the conclusion of special investment contracts on the basis of already functioning production facilities. According to the results of the study, the authors summarize that the current regional structure of German investments does not contribute to the achievement of such a task provided for by the Spatial Development Strategy of the Russian Federation as the reduction of interregional socio-economic imbalances. The scientific novelty of this study is to develop recommendations for expanding investment cooperation between Russia and Germany in the Far East, special attention is paid to the role of state institutions. The authors substantiate that the implementation of investment projects for the production of wind power units and assemblies, solar panels, as well as the construction of wind and solar power plants in the Far East should be considered as a promising area of cooperation between Russia and Germany.


Keywords:

investment cooperation, direct investments, federal district, region, Russia, Germany, special economic zones, innovative technologies, localization of production, priorities of economic policy

This article is automatically translated.

Introduction. The starting point of a qualitatively new stage of economic partnership between Russia and Germany can be considered the end of the 1990s, when the old model of economic relations between the two countries, based mainly on increasing mutual trade, showed the limitations of the current trajectory of development of bilateral cooperation. Then, in terms of cost and of the lack of domestic investment resources, lack of experience of doing business in a market economy gained particular importance to the task of bringing the German capital and technology in the national economy [1, p. 58]. Passed more than 20 years and today, despite all the challenges, the financial and economic crisis, Western sanctions, the pandemic COVID-19, Germany remains a key strategic partner of Russia in the field of investment cooperation.

This thesis is confirmed by the results of research conducted by Russian scientists. Belov V. B., head of Center for German studies, Institute of Europe Russian Academy of Sciences, in his work concludes that despite the deep crisis of political trust, the imposition of sanctions, pandemic measures, the German entrepreneurs were able to adapt to these negative trends, the company has ceased its investment activity [2, p. 25]. As rightly pointed out by V. B. Belov, mainly from the Russian market goes representative offices and branches of companies from Germany, which has not been active. These conclusions come Tarnowska and E. V. Shcherbinin A. D., which emphasize that German companies that have been working in the Russian market, sanctions and political problems are not a decisive factor in the collapse of its business in Russia [3, p. 69]. German investors note the improvement of the investment climate, the Russian market remains attractive because of its high capacity.

Also, the authors identify as a significant factor contributing to the inflow of direct German investments in the domestic economy, the implementation of the new instrument of state support of large investment – special investment contract (hereinafter SPIK). This tool is like never meets the requirements of the time, namely, its relevance due to the sanctions restricting foreign trade, and a growing global trend towards protectionist policy, which has also been observed in Russia. Ratner V. A., Andreeva E. L., in terms of statistics, the arguments in favor of the fact that the reduction of the inflow of direct German investments in the domestic economy took place before the imposition of sanctions [4, 20]. In addition to the sanctions, there are such factors as the impact of the global financial and economic crisis and the shift in investment priorities in developing countries. The authors indicate that in the circumstances of the German company are forced to increase the localization of its production in Russia to recover lost markets because of trade restrictions. We share this point of view, I would like to emphasize that the localization of production in Russia is expanding potential markets, due to the existence of the EAEU.

Having studied the works of domestic scientists devoted to the investment of German capital in the Russian economy in the context of global challenges, found that in the author's research focuses on Russian tendency of attracting German investment, an assessment of the significance of the largest investment projects, this is regional in scope of direct German investments. The authors ' study fills that gap. The relevance and practical significance of the study of regional peculiarities of the placement of German capital in the Russian economy is that it will allow to consider the regional structure of the German investment through the prism of achieving the strategic goals of spatial development of the national economy and to identify new opportunities for further expansion of investment cooperation.

The purpose of this study is based on complex analysis of regional structure of German investments in the Russian economy, to identify the factors that limit the capacity development of investment cooperation between Russia and Germany, and to determine the prospects of deepening the cooperation between Russian and German businesses in the investment field.

To achieve this goal it is necessary to solve the following tasks:

– to analyze the dynamics, species and geographical structure, the degree of differentiation of German direct investment in the regions and Federal districts;

– calculate sub-national investment position and to determine which regions of the Russian Federation are net creditors (net borrowers) against Germany;

– to systematize the information on the distribution of resident participation of German capital on special economic zones operating in the Russian Federation, to identify key trends;

– to find out whether the investment projects implemented by enterprises with German capital in Russian regions, the strategic priorities of the state economic policy;

– to identify bottlenecks and constraints in the implementation of investment projects with the participation of German capital in the Russian regions, including areas that offer preferential treatment to the implementation of entrepreneurial activities;

– make recommendations for the expansion of investment cooperation between Russia and Germany, focusing on the prospects for the Eastern expansion of German investments.

Methodology chronological framework and empirical base of research. Analysis of investment cooperation between Russia and Germany in the context of individual Russian regions and Federal districts were based on the statistics presented on the official website of the Bank of Russia from 01.01.2015 to 01.01.2021 G. the methodology applied by the regulator to account for the FDI (foreign) investment, is the principle of assets/liabilities. Under this method, direct investments, including equity and debt instruments as well as return of investment and investment between related parties are recorded cumulatively on a specific date. The inflow of foreign direct investment in the Russian economy (the direct investor purchasing stocks and shares in the authorized capital of an enterprise of direct investment, financial aid, loan) has the effect of an increase in liabilities. The outflow of direct investment (repurchase the company's own equity securities, selling direct investor equity securities to a third party, loan payments) leads to a decrease in liabilities. In the end, if in the reporting year there is a net inflow of direct investment (the difference between the inflow and outflow plus), the obligations of the Russian regions to non-residents increased and the volume of foreign investment is increasing. On the contrary, in the case of net outflows in direct investment (the difference between the inflow and outflow of a negative value), the obligations of the Russian entities to non-residents reduced, which is reflected in the decrease in the volume of accumulated foreign investment.

The analysis of the dynamics, species and geographical structure, the degree of differentiation of German direct investment in the regions and Federal districts. Over the past six years, the volume of German investments in the Russian economy increased by 44%, or $ 4.7 billion., on January 1, 2021 $ 15.4 billion. (see Fig. 1). While 83% of the total volume of accumulated direct investment is investment of Russian companies.

Fig. 1. Dynamics of the volume of accumulated direct German investments in the Russian Federation, billion dollars. (compiled by the author according to the Bank of Russia) [5]

The analysis showed that in each Federal district there are subjects that act as recipients of German direct investment. Against this backdrop stand northwestern Federal district, where more than 90% of the subjects are recipients of the German capital, and the far Eastern Federal district, where only 36% of the subjects were able to attract German investment in the regional economy (see table. 1).

 

Table 1. The volume of accumulated direct German investments in the context of Federal districts

Federal district

The proportion of subjects recipient of the German investment from the total number of subjects included in Federal district, %

The volume of accumulated direct investment in terms of "equity participation" as 01.01.2021, mln.

The volume of accumulated direct investment in terms of "debt" as 01.01.2021, mln.

The proportion of the total volume of accumulated direct investment in total GRP Federal district, %

Central

67

10090,59

1654,09

2,6

North-West

91

898,73

339,42

0,87

Volga

57

730,79

573,19

0,68

Ural

83

723,47

Of 32.93

0,42

North Caucasus

57

0,37

17, and 21

0,05

South

63

273,82

3,13

0,31

Siberian

70

40,38

Of 30.29

0,06

Far East

36

0,15

0

0,0002

Source: compiled by the author based on the data of the Bank of Russia [5].

According to the results of the analysis of the volume of accumulated direct investments, first in the context of individual subjects, and then federal districts, it was concluded that the zone of concentration of German capital in the domestic economy is the territory of the Central, North-Western and Volga Federal districts. Together, these three districts account for 93% of the total volume of accumulated direct investments. To obtain more objective results of the study, an additional calculation was made of the specific weight of the volume of accumulated direct investments in the total GRP of the federal districts. The data presented in Table 1 confirm that the above-mentioned federal districts are the absolute leaders in attracting German investments.

Macroeconomic analysis uses stock and flow variables. The indicator "volume of accumulated investments at a certain date" refers to stock variables, which, in turn, are influenced by flow variables. In the context of our study, such indicators as annual net inflow and net outflow of direct investments act as flow variables. Tables 2 and 3 summarize the values of the annual net inflow and outflow of direct German investments, as well as the resulting balance of investment flows separately according to the indicators "equity participation" and "debt instruments". The resulting balance is the sum of annual net inflows and net outflows of investments for 2015-2020.

 

Table 2. Net inflow/outflow of German direct investments in terms of "equity participation" for 2015-2020, USD million.

Federal districts

2015

2016

2017

2018

2019

2020

The resulting

balance of investment flows for 2015-2020

Central

133,48

2711,52

1487,6

-753,1

2292,06

-842,97

5028,29

North-West

-245,48

272,89

-30,98

17,11

180,22

-10,1

183,66

Volga

-36,25

228,84

87,15

-121,3

250,86

-144,29

265,01

Ural

-927

72,37

-28,15

432,09

-0,08

218,24

-232,53

North Caucasus

-0,26

0,81

0,09

0,9

15,78

-18,06

-0,74

South

6,33

-40,37

72,36

-27,06

72,89

116,63

200,78

Siberian

5,8

25,59

3,81

-2,45

5,16

-0,92

36,99

Far East

-0,11

0,15

0,05

-0,4

0,01

0,01

-0,29

Source: compiled by the author based on the data of the Bank of Russia [5].

 

Table 3. Net inflow/outflow of German direct investment in terms of "debt instruments" for 2015-2020 million.

Federal district

2015

2016

2017

2018

2019

2020

The resulting balance of investment flows for 2015-2020

Central

-144,79

14,09

414,92

-572,04

-146,52

-398,31

-832,65

North-West

-31,67

78,55

112,33

-121,3

48,56

-71,78

14,69

Volga

21,66

196,77

-31,91

-144,53

-80,93

224,3

185,36

Ural

13,22

-164,9

3,31

-3,77

-0,8

Of 16.13

-136,81

North Caucasus

29,83

7,64

-11,29

-1,99

1,81

-8,79

17, and 21

South

-43,9

6,48

21,23

-40,93

-11,92

15,96

-85

Siberian

2,37

15

2,74

3,03

-9,57

11,66

25,33

Far Eastern

-0,02

0,61

0,14

-0,1

-0,9

0

-0,27

Source: compiled by the author based on the data of the Bank of Russia [5].

Table 2 shows that in the analyzed period of time in most Federal districts observed net inflow of German investments in the form of investments in the authorized capital of Russian companies. The most large-scale inflow of direct investment is observed in the Central, Volga and southern Federal districts. These three Federal district, the most significant share of German investments in the structure of the accumulated foreign direct investment (see table. 4). One of the key factors that forced the influx of German capital in the regional economy of the Russian constituent entities, which are included in the data of the Federal district, made the practice of concluding special investment contracts with companies from Germany [6, p. 108]. With German companies, the Ministry of industry and trade of the Russian Federation in 2016 concluded the first Spica.

 

Table 4. The share of German investments in the total volume of accumulated FDI, %

Federal district

Value

Volga

11,2

South

4,1

Central

4

North-West

3,5

North Caucasus

2,7

Ural

1,1

Siberian

0,2

Far East

0,0002

Source: compiled by the author based on the data of the Bank of Russia [5].

While in the Urals Federal district, seizures of the German capital from regional companies outpaced the respective expenses, as a result, for the past six years, the cumulative investment in terms of "equity participation" fell on 232,53 million dollars. In addition, enterprises are located in the regions of the Urals and Central Federal districts, faster repay earlier loans than were issued new loans that had resulted in a negative value, the resulting balance and decrease in the value of liabilities in terms of "debt" (see table. 3). In contrast, the regions that form part of the Volga, Siberia, the North Caucasus and North-Western Federal districts, and increasing levels of debt to German residents.

Previously it was stated that the German investments are unevenly distributed across Russia. A high degree of differentiation accumulated direct investment is observed within the individual Federal districts, which is a consequence of differences in the socio-economic situation in the regions and their investment climate. To determine the level of differentiation of accumulated direct German investments within the individual Federal districts, were calculated coefficients of variation (the sum is uniform if the value of the coefficient does not exceed 33%).

 

Table 5. The coefficient of variation characterizing the degree of differentiation of accumulated direct German investments in the Federal districts, %

Federal district

Coefficient

North-West

255

Central

221

North Caucasus

168

Ural

167

Volga

144

South

127

Siberian

126

Far East

104

Source: compiled by the author based on the data of the Bank of Russia [5].

The calculations have led to the conclusion that the most uneven German investment distributed among the entities included in the County-the leaders in the volume of attracted investments (Central and North Western). This is due to the preferential concentration of German investments in Moscow, Saint-Petersburg and the Moscow region. However, a considerable variation in the volume of German investments demonstrate the regions included in the Volga Federal district, which also includes the three flagships. This is confirmed by the lower value of the coefficient of variation (see table. 5). In the Volga Federal district the first position in terms of attracting German investment is Nizhny Novgorod oblast, Republic of Tatarstan and Samara oblast.

The conducted research allowed to make one important conclusion: over the last 20 years has reduced the proportion of German investment in Moscow, and, consequently, increased the proportion of regions in the structure of the German capital raised in the Russian economy. If in 1999-2000 to Moscow accounted for almost 70% of the total volume of German direct investment in 2020 Moscow's share decreased to 48% [1, p. 61]. The extension of the geographical location of the German capital in the domestic economy encouraged the activities of such organizations as the Union of the German economy, the Eastern Committee of German economy, the German-Russian investment Agency, as well as institutions for the development of interregional cooperation of Russia and Germany (the Association "Volga-don", "Brand pool", the Agency "Vostok-Zapad"). The main aim of these institutions was to provide German companies from the Federal state of North Rhine-Westphalia information, consulting and organizational support for the localization of production and the development of the Russian market. Currently, one of the key roles in the promotion of German companies on the Russian market and coordination of investment cooperation plays a Russian-German chamber of Commerce.

In addition, during this period, conducted business forums in Russia and Germany, in which representatives of business communities of the two countries presented specific investment projects and established direct ties. Sustainable development of interregional cooperation of Russia and Germany is confirmed by the fact that following the completion of the Russian-German year of the regional-municipal partnerships in Krasnodar open and closed in Berlin (2017/2018) that was signed more than 30 of the German-Russian partnership agreements [7]. Currently, about a third of Russian regions have agreements with German cities and Federal States, it is worth noting that, as it moves to the East dramatically reduced the density of interregional relations with legal registration in the form of formal contracts, which are administrative territorial units [8, p. 147].

Assessment of regional investment positions. The subject of this article is limited to the study of trends in direct investment, which carry the German-residents in the economy of Russian regions. However, to ensure a more integrated nature of the conducted research, we consider it appropriate to compare the German direct investment localized in separate regions of foreign assets in Germany that are owned enterprises functioning in the relevant Russian actors. It is necessary to define sub-Federal net investment position: if the requirements for German residents exceed obligations to them, the region is a net creditor in relation to Germany. In the case that obligations to the German non-residents more than demand, the region is a net borrower in relation to Germany. To calculate the sub-national investment position data were used for total assets and liabilities as at 01.01.2021 From 55 regions, acting as its object of study, 27 subjects of the Russian Federation are net creditors with respect to Germany, 28 regions of the Russian Federation – net borrowers. Additional analysis is conducted in the context of Federal districts, allowed to conclude that the geographical distribution of the regions-net creditor and regions-net borrowers (see table. 6).

 

Table 6. The geographical distribution of regions-net creditor and regions-net borrowers in relation to Germany, %

Federal district

The proportion of subjects-net creditor against Germany

The proportion of subjects-net borrowers in relation to Germany

Central

17

83

North-West

40

60

Volga

38

62

Ural

80

20

North Caucasus

50

50

South

40

60

Siberian

86

14

Far East

100

0

Source: compiled by the author based on the data of the Bank of Russia [5].

Regions-net borrowers mainly concentrated in the Central, Volga, North-Western and southern Federal districts. In the Urals, Siberian and far Eastern Federal districts dominated regions-net creditors. However, the first line by the amount of net investment position among the regions of the creditor is Saint Petersburg, foreign assets of which exceed the corresponding liabilities for 935 million dollars. The leader among the regions of the borrowers in the amount of net investment position acts Nizhny Novgorod oblast whose commitments to Germany than the corresponding requirements on 748 million. Nizhny Novgorod oblast is a pioneer in the development of investment cooperation, cooperative relations of the Nizhny Novgorod region and the Federal state of North Rhine-Westphalia is an example of effective inter-regional cooperation between the two countries. The prevalence in the European part of Russia regions-net borrowers due to a more favorable investment climate and territorial proximity to Germany. Another factor contributing to the location of the German capital in European Russia, stands the preferential localization of special economic zones (hereinafter-SEZ) in this part of the country.

The German capital in the SEZ. According to the Association of clusters and technology parks and special economic zones of Russia, Germany is in third place in terms of accumulated foreign investment in the SEZ (on 31.12.2020 G. 23.9 billion RUB, or 10%), losing to the Netherlands and Cyprus (see Fig. 2).

 

Fig. 2. Structure of accumulated foreign investments resident countries as 31.12.2020 g. [9, 20]

However, studies show initiated by the IMF, the phantom "circular" investment constitutes more than 23% of the total volume of accumulated foreign investment in Russia [10]. Given that Cyprus and the Netherlands are quasifermi, there is reason to assume that part of the investment made in the territory of these countries are domestic in origin, and means Germany has a more significant share in the structure of foreign investment here. The results of monitoring of residents registered in the SEZ were made the following conclusions. First, the German company prefer SEZ of industrial production and technology and innovation, today 16 enterprises with German capital have the SEZ resident status (see table. 7).

 

Table 7. The distribution of resident participation of German capital on special economic zones operating in the constituent entities of the Russian Federation

Special economic zone

SEZ residents with the participation of German capital (subsidiaries and joint ventures)

Industrial SEZ

The SEZ "Alabuga" (Republic of Tatarstan)

? "Knauf Siling solyushnz"

? OOO "P-D Tatneft-Alabuga Steklovolokno"

? OOO "SARIA Bio-industries Volga"

The SEZ "Lipetsk" (Lipetsk region)

? OOO "OBO Bettermann"

? OOO "vissmann Lipetsk"

? OOO "Bayer Elec Prodakshn"

? OOO "LANXESS Lipetsk"

? OOO "Biblica"

SEZ "Stupino" (Moscow oblast)

? OOO "Phoenix Contact"

The SEZ "Togliatti" (Samara oblast)

?ÎÎÎ "edsha tol'yatti"

?ÎÎÎ "Mubea Suspension Components Rus"

Technology development special economic zones

The SEZ "Dubna" (Moscow oblast)

?ÀÎ "AKVANOVA RUS"

?ÎÎÎ "FRERES"

?ÀÎ "Monobrachial"

The SEZ Innopolis (Republic of Tatarstan)

?ÎÎÎ "OUN"

SEZ "Tomsk" (Tomsk oblast)

? OOO "MOJE Keramik-Implant"

Source: compiled by the author based on [11].

Secondly, the main share of resident participation of German capital accounts for the SEZ "Alabuga", the SEZ "Lipetsk" and the special economic zone "Dubna", due to their high investment attractiveness. Data SEZ occupy the first position in the National rating of investment attractiveness of the SEZ Russia [9, p. 28].

Third, many residents of the industrial SEZ uses environmentally friendly technology and spetsializiruyutsya on recycling and waste. Here are some examples. OOO "Biblica" (the German company GK Energy GmbH) started the production processing of agricultural crops in German pyrolysis technology, which allowed to process husk charcoal and heating oil. OOO "SARIA Bio-industries Volga" (Saria Bio Industries) is engaged in the production macaroni flour, flour pen, flour blood and fat of the animal fodder, as a raw material used skins, horns, hooves, feathers, blood, meat waste (see table. 8).

 

Table 8. General characteristics of investment projects implemented by the residents of the SEZ with the participation of German capital

The resident of the SEZ

Characteristics of the investment project

OOO "Biblica" - Russian-German enterprise (partner: GK Energy GmbH)

Project: processing of agricultural crops in German pyrolysis technology.

Production capacity:processing 30 tons of husks per year, which happens about 10.5 thousand tons of activated carbon and 13 thousand tons of fuel oil.

Investment amount:RUB 2.2 billion.

Export: 80% of products are exported to Europe.

OOO "SARIA Bio-industries Volga" (a subsidiary concern Saria Bio Industries)

Project: production macaroni flour, flour pen, flour blood and fat of the animal feed. As raw materials, hides, horns, hooves, feathers, blood, meat scraps.

Production capacity: 115 thousand tons of forage for livestock in the year.

Total investment: about 3 billion rubles.

Export: 1709,4 million rubles According to the Association of clusters and technology parks and special economic zones of Russia is a key resident for the volume of export in the period 2018-2020

OOO "MOJE Keramik-Implant" - Russian-German enterprise (partner MOJE Keramik-Implantate GmbH)

Project: manufacture of ceramic endoprosthesis of joints and bones of the upper limbs.

Production facilities:8 thousand implants per year.

Investment volume:120 million rubles .

Export: 80% - for export to India, USA, China, Brazil, Japan, etc.

NanoBrahiTek JSC is a Russian-German enterprise (Eckert partner & Ziegler BEBIG GmbH) 

Project: production of micro sources and components for brachytherapy procedures for oncological diseases.

Investment volume:688 million rubles.

 

FRERUS LLC is a subsidiary of the German corporation Fresenius Medical Care

Project: creation of its own production base for the production of modern innovative equipment for renal replacement therapy, including artificial kidney devices and dialysis filters.

Production facilities:5 million dialyzers and 1 thousand "artificial kidney" devices per year.

Investment volume: 1.6 billion rubles.

Source: compiled by the author based on [12],[13],[14],[15].

The strategic importance of the implementation of these projects in Russia is due to the fact that the processing of organic waste is an important component of the country's food security. Fourth, innovative technologies in the field of medicine and pharmaceuticals are a priority area of activity for residents with the participation of German capital who are registered in the SEZ of a technical and innovative type. For example, the Russian-German company MOYE Ceramic-Implant LLC is engaged in the production of implants made of zircon-oxide nanoceramics. JSC "NanoBrahiTek" has established the production of micro sources and components for brachytherapy of oncological diseases.  A subsidiary of the German Fresenius Medical Care corporation, FRERUS LLC, is implementing a project to produce innovative equipment for renal replacement therapy in Russia (see Table 8).

Thus, the creation of special zones in Russia with preferential treatment of entrepreneurial activity has acted as a significant driver stimulating the influx of German capital and innovative technologies into the domestic economy. The study concluded that investment cooperation between Russia and Germany contributes to the achievement of such sustainable development goals as "Industrialization, innovation, infrastructure" (Goal No. 9) and "Responsible consumption and production" (Goal No. 12). Joint investment projects implemented by Russian and German enterprises in special economic zones correspond to such strategic priorities of the state economic policy as ensuring the country's food security, increasing the production of high-tech products, the use of innovative technologies in industry, import substitution and increasing the share of Russian goods with high added value on world markets. The conclusions formulated above are confirmed by the results of research initiated by Russian scientists, who also emphasize the strategic importance of German investments for the economic development of Russia [16, p. 99].

Nevertheless, there are a number of factors that hinder the attraction of German investments in the SEZ. First of all, these are organizational and managerial problems, a complex procedure for obtaining resident status that requires coordination at several levels of government. It is no coincidence that the results of the annual survey conducted by the Russian-German Chamber of Commerce show that it is bureaucratic barriers that occupy the first positions in the ranking of factors that have the greatest negative impact on German businesses in Russia. In our opinion, the importance of the bureaucratic factor is reinforced by the unstable institutional environment and weak market conditions. However, there is every reason to believe that in the near future this deterrent factor will be leveled, which means that more favorable conditions will be created for the influx of German investments into the SEZ. In early February 2022 The Government of the Russian Federation has approved amendments to the federal law "On Special Economic Zones in the Russian Federation" prepared by the Ministry of Economic Development [17]. Now, to obtain the status of a resident, it is enough to provide a passport of an investment project instead of the previously required business plan. In addition, the candidacy of a resident will be considered only by the relevant executive authorities of the region without additional coordination with the expert council. Such a flexible mechanism will significantly speed up the decision-making process for the investor.

Discussion of results and recommendations. Despite the negative trends observed in recent years in the field of economic cooperation between Russia and Germany: decline of the foreign trade turnover, leaving companies with German capital from the domestic market – the volume of accumulated direct German investments in the analyzed period of time demonstrates the growth. As rightly noted by the head of the Russian-German chamber of Commerce Matthias Shepp, "a number of German companies is reduced, but the quality of their activities in Russia is still high". The results of a survey initiated by the Russian-German chamber of Commerce in June 2021, confirms that the investment cooperation between Russia and Germany are steadily growing. Almost half of German companies are going in the coming year to make additional investments into the Russian economy [18]. There are a number of good reasons:

– the priority of the economic feasibility of the investment projects on the territory of Russia, the political turmoil. The results of the aforementioned survey, 93% of German companies working in Russia, believe that the removal of anti-Russian sanctions [18];

– macroeconomic factors: the devaluation of the ruble and the existing non-tariff measures reduce the attractiveness of imports and updates the economic incentives for the localization of production in Russia;

– long-lasting and effective experience on the Russian market, organized system of functioning of the various institutions that contribute to the development of business contacts between Russian and German enterprises, the development of the Russian market. In December of 2020 has created a new Institute of the Russian-German economic Council, in the area of responsibility includes the facilitation of the implementation of the joint flagship projects in the field of hydrogen economy, agriculture, healthcare and digitization [19].

At the same time, there are a number of factors limiting the potential for investment cooperation between Russia and Germany. In addition to the previously mentioned red tape, anti-Russian sanctions and measures pandemic, there is another factor that causes suspicion among German investors and limiting the investment activity of the enterprises with the participation of German capital. This is an insufficient level of state support for the economy during coronaries. 65% of respondents are members of the Russian-German chamber of Commerce are not satisfied with the measures of state support [20, p. 16]. So the number of German companies that have received the status of the backbone enterprises, could not qualify for state support due to the fact that more than 50% of its share capital owned by a parent company that is not a resident of the Russian Federation. In an interview with Mattias shapp said that German companies have accepted this condition as discriminatory measures [21]. Considering recent events, namely the extension of anti-Russian sanctions, the devaluation of the ruble, it can be assumed that in the near future the government will develop new tools for stimulating economic policy. Therefore, in our opinion, it makes sense to correct such conditions, given the socio-economic importance of foreign enterprises or to create a separate set of measures for the major players of the Russian market, to prevent the outflow of the German capital from the Russian economy.

We now turn to the main conclusion obtained from the results of the study. Study of regional structure involved in the Russian economy of the German investment showed that the German capital is unevenly distributed across Russia and mainly concentrated in the European part of the country. The most "deprived" from the point of view of the volume of accumulated direct investment is the far Eastern Federal district. Thus, the current regional structure of the German investment does not contribute to one of the main objectives of the Strategy of spatial development of the Russian Federation until 2025, namely, reduction of differentiation of socio-economic development of territories. Current location of German capital in Russia is an additional factor that deepens interregional socio-economic inequality. As the strategic objectives of spatial development of Russia declared the priority development geostrategic territories, which primarily related to the far East [22]. Therefore we propose to consider the existing possibilities for the expansion of investment cooperation between the Russian and German business in the far East.

When analyzed the inflow and outflow of German investments in the context of Federal districts, it was concluded that the most significant tributary falls on Central, Volga and southern Federal districts. As the driver, stimulating the influx of German capital in these regions of the country, gave preferential treatment offered under the SEZ and Spiked. However, in the far East there is an alternative preferential regimes, we are talking about the territories of advanced socio-economic development (hereinafter TOSER). In an ADZ are given good tax benefits, as well as a number of important administrative preferences. One of the major drawbacks of the SEZ and Spiked are high minimum investment, which limits the attraction of investments of small and medium-sized businesses. In turn, in an ADZ minimum investment is 500 thousand rubles, which creates opportunities for small and medium businesses to establish production in an ADZ. In addition, the implementation of investment projects in the ADZ can be an interesting German investors proximity to the markets of the Asia-Pacific region. According to the IMF forecast, in 2021, the economy of the Asia-Pacific region grew by 6.5%, Asia Pacific remains the fastest growing region in the world [23].

Unlike the SEZ, an ADZ is a relatively new tool to stimulate investment activity. So it makes sense to benefit from the experience of the functioning of the SEZ. In 2011, a study was conducted on the subject of why a foreign investor is not in the SEZ, it was found that one of the main reasons were lack of information about the capabilities of the domestic economic zone and lowest level of direct communication. Therefore, monitored the site of the Russian-German chamber of Commerce, which showed that information about ADZ presented, however, in General, which is clearly insufficient. To attract German investment in an ADZ need to build a direct communication with potential residents through meetings, seminars and forums. In our view, the key role here belongs to the Agency Far East on attraction of investments and support of export, in the area of responsibility includes the study of investment opportunities and offer these opportunities to Russian and foreign investors. This institution is necessary to intensify cooperation with the Russian-German chamber of Commerce as a powerful economic and lobbying organization. A very promising tools for the establishment of direct contacts and discussion of specific investment opportunities in the ADZ are:

– establish working groups from among the representatives of the Agency and chamber of Commerce, carrying out analytical activities in the field of comprehensive studies of the potential markets, resource base, financial capability, and also involved in the search of Russian and German companies, which could be of interest developed by them investment proposals;

– use the services of the Russian-German chamber of Commerce at the organization's presentations: VTP has its own online platform, assists in the preparation and promotion of marketing materials and channels VTP provides simultaneous interpretation, creates VR content.

During the Eastern economic forum held in Vladivostok in September 2021, the representatives of the Russian-German chamber of Commerce and the Union of German economy in Russia paid special attention to the discussion of investment projects in the field of "green" technologies, waste management, solar and wind power [24]. The survey, initiated by the Russian-German chamber of Commerce, showed an increase of the interest of German companies to renewable energy. If in 2017, 20% of the members of the chamber considered renewable energy as a promising industry in 2020 for 35% of the respondents attributed to the renewable energy sectors with high growth potential [20, p. 18]. This may be due to the implementation of measures of state support and increase the capacity of solar and wind generation in Russia. It is worth noting that among the leading regions in terms of implemented projects in the framework of the existing support mechanism for renewable energy sources are represented by the regions of the far Eastern Federal district. The analysis showed that the far East lags behind other regions in the country in terms of input production capacity, especially wind power stations. Although it is in the far Eastern Federal district the need for alternative energy is highest, and most importantly, solar and wind resources allow it to develop. Estimates of JSC "RAO ES of the East", the construction of wind and solar power plants are economically justified in 178 settlements of the Far East. This will allow you to achieve annual savings of diesel fuel in the amount of 46 thousand tons., or 2 billion rubles. [25].

Thus, economic and geographic features of the Far East pose a serious prerequisites for the formation of long-term green energy market, as there is a high demand for renewable energy. At the same time, Germany has a lot of experience in the manufacture of equipment and the construction and operation of wind and solar power (the proportion of "green" energy is about 17% in the country). Therefore as a promising area of cooperation between Russia and Germany should be considered in the implementation of investment projects for the production of components and assemblies of wind turbines, solar panels, and construction of wind and solar power plants in the Far East.

For the German partners in the Far East can be attractive because of its high capacity, which allows you to fully work the effect of economies of scale, which ultimately manifests itself in getting a price competitive advantage. In addition, on the territory of the Far East concentrated isolated power system. In the framework of the existing measures of state support for the objects that generate renewable energy in geographically isolated power systems, benefit the sale of electric energy. That is, the formation of the scheduled hourly chart of electricity production by members of the retail market for the coming day, the subject of operational dispatch management includes the first volume of production of electrical energy in wind (and solar) power plants [26, p. 135]. It is also one of the incentives for investments in renewable energy in the far East.

The strategic importance of these projects lies in the fact that new investors will contribute to the development of competition in the Russian market of renewable energy, and thus reduce the cost of equipment and amount of the tariffs. However, it is fair to say that the probability of expanding investment cooperation between our countries in this field largely depends on the activity and initiative of the state structures, including at the regional level. A key role in attracting German investment in the economy of the regions of the Far East belongs to the Ministry of the Russian Federation for development of the Far East and the Arctic and JSC "development Corporation of the Far East and the Arctic."

References
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First Peer Review

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The list of publisher reviewers can be found here.

The subject of the study. Based on the title of the article, the subject of the study should be the regional peculiarities of investment cooperation between the Russian Federation and Germany in the context of global challenges. At the same time, the content of the article allows us to conclude that it reflects not the regional aspect of cooperation, but only the contribution of German capital to the development of Russian regions (including in special economic zones). Due to the fact that cooperation involves mutual participation, a question arises regarding the participation of Russian capital in the development of German lands. It is recommended to correct either the title of the article or its content. Research methodology. The research methodology is based on the author's use of economic, statistical and mathematical methods. In particular, the author analyzes the dynamics, species and geographical structure of German direct investments in the context of regions and federal districts of the Russian Federation. The author also calculated the coefficient of variation characterizing the degree of differentiation of accumulated direct German investments in the federal districts of the Russian Federation. The relevance of the study is confirmed by the multi-vector importance of strengthening socio-economic ties between states. Germany is one of Russia's key economic partners, and therefore a comprehensive study of all aspects of their interaction is of interest both for economics and for practitioners who carry out their activities both in public authorities of the Russian Federation, subjects of the Russian Federation, and in commercial organizations and interstate associations. Scientific novelty. The content of the article suggests that scientific novelty is generally absent due to the fact that the calculations of economic indicators carried out by the author are not accompanied by interpretations with access to specific problem areas, the identification of opportunities for further increasing cooperation between Germany and Russia, as well as the formulation of author's recommendations for solving the identified problems. Style, structure, content. The style of presentation is predominantly scientific. The structure of the article is well-structured, includes an introduction, the main part (detailed into several sub-paragraphs), discussion of the results and conclusions. However, the purpose formulated by the author in the introduction raises questions. In particular, it seems necessary to adjust it in order to form prerequisites for the emergence of scientific novelty. The current formulation determines exclusively the study of well-known facts, judgments, and data. The adjustment of the goal should be accompanied by the addition of research tasks devoted to identifying problems and substantiating the author's recommendations for their solution. Of particular interest in the content of the article are the results of determining the distribution of residents of special economic zones of the Russian Federation with the participation of German capital. It should be agreed with the author that this has a huge strategic development for the Russian Federation. However, what are the problems? What are the obstacles to further increase of German capital in Russian economic zones? What does the author propose to do for this? Unfortunately, at the moment, the results of the study are not accompanied by the formation of problem areas of economic cooperation between Russia and Germany, and, accordingly, the development of recommendations for their solution. Moreover, the bias stated in the title to take into account "global challenges" is missing from the text of the article. The challenges themselves are formulated in one sentence at the very beginning of the article (financial and economic crises, Western sanctions, the COVID-19 pandemic), but they do not find any further development in the text of the article. The author must ensure that the content of the article corresponds to its title. Incorrect words and phrases were also identified. For example, when describing German investments in the Russian economy, the adjective "German" is used, not "German". Additionally, it is recommended to abandon the abbreviation "RF" and use one of the two options fixed in the Constitution of the Russian Federation for the name of our state. Bibliography. The bibliographic list compiled by the author consists of 14 sources. At the same time, it seems that it is insufficient due to the following reasons: 1) only 5 sources are scientific publications; 2) only 1 scientific publication is foreign (and when studying issues of economic cooperation, a comprehensive assessment of the results of research conducted by other authors is very important); 3) there are no foreign statistical databases in the list of sources (Germany, Eurostat, IMF, etc.). The elimination of these comments allowed It would be better for the author to delve more deeply into the issues under consideration and strengthen the breadth and validity of conclusions and proposals. Appeal to opponents. The use of sources from the list of references is accompanied by references to them. However, the author does not hold any discussion. There is also no comparison of the research results obtained by the author with the results obtained by other authors when studying the same issues. It seems that such a comparison would significantly improve the quality of the article and would allow the author to more clearly identify the scientific novelty. Conclusions, the interest of the readership. Taking into account the above, it should be noted that there is a potential reader's interest (both in the scientific community and in practice) in this article. However, the article may be recommended for publication after correcting the substantive and technical shortcomings identified during the review.

Second Peer Review

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The list of publisher reviewers can be found here.

The reviewed material is devoted to the study of the regional characteristics of foreign direct investment from Germany to the Russian Federation. The research methodology is based on the generalization of scientific publications on the research topic and the analysis of data from the Central Bank of the Russian Federation on direct German investments in the Russian economy in the context of federal districts and regions of our country. The authors of the article position the relevance of the research as filling a gap in the study of the regional cross-section of direct German investments in the all-Russian trends in attracting German investments. The article assesses the importance of the largest investment projects. The scientific novelty of the results of the presented study, according to the reviewer, corresponds to the goal pursued in the article and consists in identifying factors that limit the development of the potential of investment cooperation between Russia and Germany, in determining the prospects for deepening cooperation between Russian and German businesses in the investment sphere based on a comprehensive analysis of the regional structure of German investments attracted to the Russian economy. The following sections are highlighted in the article: Introduction; Methodology, chronological framework and empirical base of the study; Analysis of dynamics, species and geographical structure, degree of differentiation of German direct investments by regions and federal districts; Assessment of sub-federal investment positions; German capital in SEZ; Discussion of results and recommendations; Bibliography. The introduction notes that Germany has remained Russia's strategic partner in the field of investment cooperation for many years, reflects the relevance of the research, its purpose and the tasks being solved. The next section outlines the time interval of the analyzed data, shows their source, explains that direct investments, including equity and debt instruments, as well as reverse investments and investments between related parties, are reflected in the reports of the Central Bank as a cumulative total for a certain date, outlines the procedure for converting initial data to obtain information on net inflows and net outflows of direct investments. The article shows the dynamics of the volume of accumulated German direct investments in the Russian Federation from 2015 to 2021, analyzes the volume of accumulated German direct investments by federal districts, and determines the net inflow/outflow of German direct investments in terms of "equity participation" and "debt instruments" for 2015-2020 by federal districts, the share of German investments in the total volume of accumulated foreign direct investment by districts is reflected, the geographical distribution of regions-net creditors and regions-net borrowers in relation to Germany is shown, as well as the distribution of residents with the participation of German capital in special economic zones operating in the subjects of the Russian Federation. Such a representative empirical base allowed the author to conduct a thorough discussion of the results of the analysis and offer recommendations. The bibliographic list of the article includes 26 titles, there are references to the sources cited in the text, the presence of which indicates an appeal to opponents. The presented material corresponds to the subject of the journal "Theoretical and Applied Economics", contains the results of a thorough analysis of data on German investments, as well as recommendations aimed at overcoming the negative trends that have been observed in recent years in the field of economic cooperation between Russia and Germany. The article is recommended for publication.