Release of the SKOLKOVO - CPII 2007 ranking of Russian multinational enterprises.

Moscow and New York, December 10, 2007

The first-ever survey conducted by SKOLKOVO Moscow School of Management and the Columbia Program on International Investment (CPII) in New York of Russian multinational enterprises (MNEs), released today, reveals a dramatic transnationalisation of Russian firms.

Its principal findings include: Russia's Top 25 MNEs - ranked by foreign assets - have $59 billion¹ in assets abroad (table 1), have nearly $200 billion in foreign sales (including exports) and employ 130,000 people abroad. Foreign assets, sales and employment each have more than doubled since 2004. Foreign assets are concentrated in Europe. Four oil/gas firms, led by Lukoil and Gazprom, and nine metals/mining firms, led by Severstal and Rusal, together account for 78% of the total foreign assets of the Top 25.

The Top 25 have played a key role in making Russia the third largest outward investor among emerging markets in 2006 in terms of foreign direct investment (FDI) outflows, and the second largest in terms of outward FDI stock. Like their competitors from other countries, Russian firms invest abroad to acquire a portfolio of assets in different locations, which are increasingly important as a source of their international competitiveness.

"Russian companies started to establish foreign affiliates much later than their competitors", notes. However, the top multinationals are quickly expanding their role - with all the accompanying risks, opportunities and new requirements both for their business and economic policy." – Valery Sorokin, Director of the SKOLKOVO Research Centre.

SKOLKOVO Moscow School of Management, an innovative business school founded by 14 major companies and private individuals, and the Columbia Program on International Investment, a joint Columbia Law School - Earth Institute venture at Columbia University, collaborated on the ranking of Russian MNEs. This exercise is part of a global effort to rank emerging market MNEs. A ranking list for Brazil was published on December 3, 2007 (see http://www.cpii.columbia.edu/), and ranking lists from China, Hong Kong (China), and South Africa are to be released soon.

Table 1. SKOLKOVO-CPII ranking of the Top 25 Russian multinationals, in terms of foreign assets, 2006 (Millions of US$)

Source: SKOLKOVO-CPII survey of Russian multinationals. 

The profile of the Top 25

• The foreign assets of the Top 25 Russian multinationals represent 38% of Russia's total outward FDI stock.
• Russian multinationals have yet to outgrow their foreign counterparts:
• Only two have over $10 billion in foreign assets, and only four employ over 10,000 people abroad (annex table 1).
• Only one would make it into the top ten MNEs from developing countries.²
  
• Russian multinationals are expanding at an astonishing rate: In two years, their aggregate foreign assets grew 2.5 times, to nearly $60 billion, and their foreign sales (incl. exports) and foreign employment more than doubled to $200 billion and 130,000 people respectively (table 2).

Table 2. Snapshot of Russia's 25 largest MNEs, 2006 (Billions of US$ and thousands of employees)

Source:  SKOLKOVO-CPII ranking of Russian multinationals.

• These growth rates far outpace those of the world's 25 leading multinationals (whose foreign assets showed zero growth in 2005 vs. 64% growth for Russia's Top 25), and even those of the top 25 multinationals from developing countries (only +20% in 2005)³. This means that Russian global players are catching up with international competitors quickly.
• In most cases, international expansion does not impede domestic investment, growth or employment: The Top 25's domestic assets and domestic sales have both grown by around 60% from 2004 to 2006, and their domestic employment by 20%.
• Most of the investment from Russia is being made by private companies. (Only five out of the Top 25 companies, accounting for about 27% of the aggregate foreign assets, are majority-owned by the state.)
  
• The foreign affiliates of Russia's global players are concentrated in Europe (now 63% of their aggregate foreign assets), as revealed by the Regionality Index (annex table 2). However, they are moving from these well-known markets to Asia, Africa and the Americas.
• Reflecting the country's resource endowments, Russian multinationals belong to extractive industries: 53% of the aggregate foreign assets of the Top 25 belong to four oil & gas companies and 25% to nine metal & mining firms (annex figure 1). This compares to 59% and 13%, respectively, for 2004 (for the same 25 companies).
• Telecom & retail companies are also present and expanding dynamically. They now own 8% of the Top 25's aggregate foreign assets, and shipping operators own 11% (annex figure 1), compared to 6% and 19% in 2004.
• Seventeen of the Top 25 are headquartered in Moscow (annex figure 2).
• The Top 25 now have 630 foreign affiliates (annex figure 3) in 70 countries, for an average of 25 affiliates and an average of 9 countries (annex table 1). Lukoil is present in 43 countries (with 182 foreign affiliates), followed by Gazprom in 32 (with 105 foreign affiliates).
• Russian multinationals are young: Out of the Top 25, 18 established their first foreign affiliate after 1999.
• The aggregate Transnationality Index⁴ of the Top 25 has risen from 27% to 30%; this relatively slow growth rate reflects the fact that domestic operations have also grown rapidly.
• Nine of the Top 25 are also listed on the London Stock Exchange, and two additional ones are on the New York Stock Exchange; eight companies are not listed anywhere.

The whole picture

As a result of the dynamic expansion of Russian multinationals, FDI outflows from Russia rose from very little in the early 1990s to $18 billion in 2006, making Russia the third largest outward investor from emerging markets that year in terms of outflows (after Hong Kong (China) and Brazil) (annex figure 4). Outflows are predicted to stay above $20 billion over each of the next four years.⁵

As a result, the stock of outward FDI has risen from US$20bn in 2000 to US$157bn in 2006 (annex figure 5), making Russia the second largest emerging market in terms of outward FDI stock (behind Hong Kong (China)). The outward FDI stock is expected to continue to rise significantly.

A good part of Russia's outward FDI takes the form of cross-border M&As (annex table 3), notably in the metals & mining sector. But there are also significant greenfield investments, especially in the metals industry (annex table 4).

Karl P. Sauvant, Executive Director of the CPII, points out that this is a part of a global trend: "While there was always some FDI from emerging markets, it was a negligible trickle. This has been changing rapidly in recent years: last year, emerging market MNEs invested some $210bn abroad - roughly five times the world total 25 years ago."

¹ The following RUB/USD exchange rates, based on XE.com Universal Currency Converter (http://www.xe.com/ucc/), were used throughout:  26.3255 (2006); 28.7415 (2005); 27.7696 (2004).
² See UNCTAD, World Investment Report 2007 (Geneva: UNCTAD, 2007). Data for 2005 are the latest available.
³ See UNCTAD, op. cit. Data for 2005 are the latest available.
⁴ The Transnationality Index is a composite ratio calculated by averaging the relative shares of foreign assets, foreign employees and foreign sales as a percentage of their respective totals. See UNCTAD op. cit..
⁵ World Investment Prospects to 2011: Foreign Direct Investment and the Challenge of Political Risk, at http://www.cpii.columbia.edu/.

Additional links:

Full version of the Review: Top 25 Rankings (PDF, 300 Kb)

For further information please contact:

Emerging Markets Global Players Project
The SKOLKOVO-CPII 2007 Ranking of Russian Multinational Enterprises was conducted in the framework of the Emerging Markets Global Players Project, a collaborative effort led by the Columbia Program on International Investment.  It brings together researchers on FDI from leading institutions in emerging markets to generate annual ranking lists of emerging market MNEs. The MNE ranking for Brazil was released on December 3, 2007 by Fundação Dom Cabral (FDC) and CPII. The next rankings will be released for China and Hong Kong (China) by Fudan University, and for South Africa by the University of Pretoria. Watch http://www.cpii.columbia.edu/ for further information or contact This email address is being protected from spam bots, you need Javascript enabled to view it .

Five Diamond Conference Series
Given the importance of the international expansion of companies from the BRIC countries, SKOLKOVO Moscow School of Management, together with Columbia Program for International Investment, Fudan University, Fundação Dom Cabral, and the Indian School of Business, will organize a series of conferences to explore further that phenomenon. The first Five Diamond conference took place in New York City on April 28-29, 2008. For more information, please contact This email address is being protected from spam bots, you need Javascript enabled to view it .

SKOLKOVO Moscow School of Management
The Moscow School of Management SKOLKOVO is a joint project by 14 major companies and private individuals - Russian and international business leaders. Through sharing practical knowledge, SKOLKOVO educates managers and entrepreneurs to help them set up and run their own businesses and contribute to the development of the Russian economy. For more information, see http://www.skolkovo.ru/.

Columbia Program for International Investment
The Columbia Program on International Investment (CPII), headed by Dr. Karl P. Sauvant, is a joint undertaking of the Columbia Law School and The Earth Institute at Columbia University. It seeks to be a leader on issues related to FDI in the global economy. The CPII focuses on the analysis and teaching of the implications of FDI for public policy and international investment law. Its objectives are to analyze important topical policy-oriented issues related to FDI, develop and disseminate practical approaches and solutions, and provide students with a challenging learning environment. For more information, see http://www.cpii.columbia.edu/.