RJR in Russia, not deterred by economy

[Robert Weissman <rob@essential.org>]

Subject: Financial Times, London, 8.18.98; 300 million dollar RJR Plant

FOREIGN INVESTMENT: Views vary in wake of rouble's fall
By Astrid Wendlandt in Saint Petersburg

R.J.Reynolds, the US tobacco company, this week formally opened an expanded 
$300m cigarette factory, saying the rouble's problems could not undermine 
its commitment to the Russian market.

"This is not going to affect our long-term plans," said Steven Goldstone, 
chief executive of RJR Nabisco, R.J. Reynolds' parent company.

But workers at the St Petersburg plant said cigarette orders had gone down 
in recent months, adding that production of three Russian brands had 
stopped altogether since the beginning of the year.

Other members of the foreign investment community in Moscow said they would 
adopt a cautious attitude in the wake of the rouble's fall.

"I am convinced that those who are already at the door will not come in 
before the end of the year," said Seppo Remes, representative of Neste, the 
Finnish oil company, and chairman of the European Business Club, an 
informal grouping of investors in Moscow.

To date, most foreign direct investment has been concentrated in the 
consumer goods industry, while investment in heavy industry has been 
limited. The fall in the rouble is likely to make investors more cautious 
still, analysts said. But the change is likely to favour Russia's oil and 
gas market, which produces most of the country's exports.

"We are now going to have investors thinking two or three times before they 
proceed with their investment," said Bruce Macdonald a member of the board 
of the American Chamber of Commerce in Moscow. Last year, Russia received 
$10.4bn in foreign direct investment according to data from the French 
embassy in Moscow.

Russia's recent economic problems have already had negative consequences on 
the foreign direct investment, which fell by 14.5 per cent in the first 
quarter of 1998 in comparison with last year's figure, according to 
official statistics, which do not give absolute figures.

This year, Fiat and Renault, the Italian and French car makers have delayed 
their local production and assembly projects. Last June, Philips, the Dutch 
electronics company, announced it was withdrawing from its joint venture in 
Voronezh in the south of Russia.

"Conservative money has not arrived yet [in Russia]," said Tanya Monhagan, 
head of the Russia and CIS department of the International Chamber of 
Commerce.

Mr Remes said the rouble's fall was expected to benefit foreign investors 
in Russia's oil and gas industry but could seriously hit those exporting or 
producing consumer goods due to the fall in purchasing power.

At present, the US provides more foreign direct investment to Russia than 
any other country, followed by the UK and Switzerland.