Lyubimtseva_S_N__Koreneva_V_N_L_93_Kurs_angli

Investment is closely associated with other aspects of economic order such as the role of financial centres, labour migration, and the regime of international trade prevailing at the time.

Technological advances, the removal of exchange controls and financial deregulation have all contributed to the expansion of international capital flows. As a result foreign investment has become a fundamental feature of international economic development.

There are two main channels for international investment: foreign direct investment (FDI) and foreign indirect investment, or portfolio investment.

Foreign direct investment (FDI) occurs when citizens of one nation (the "home" nation) acquire managerial control of economic activities in some other nation (the "host" nation). Setting up a foreign operation through a joint venture, establishment of a foreign branch or the purchase or formation of a foreign subsidiary are examples of foreign direct investment.

Firms controlling activities in several nations have become known as "multinational enterprises" (MNSs), "transnational corporations" (TNCs) and, more recently, "global corporations".

The reasons why effects of FDI are generally assessed as positive can be summarized as follows: first, FDI speeds the international diffusion of new technologies and other efficiency enhancing intangible assets, such as organizational skills. Then, FDI in many national markets will stimulate competition among firms.

The process of supplying capital to a foreign institution, through a loan or purchase of stock, without sharing in the institutions management is foreign indirect investment.

In financial circles, individuals or households that own securities are known as individual investors. Along with them, there are institutional investors.

Institutional investors are a group of investors who have funds to invest as a consequence of the conduct of their business. The group includes insurance companies, banks, investment trusts, financial and industrial companies.

The past 30 years have witnessed a concentration of financial power in the hands of institutional investors. In 1990 they controlled over $6 trillion hi assets, the majority invested in common stock and corporate and government bonds.

An investor, when confronted with a list of investment possibilities, will want to assess the risks and general advantages and disadvantages connected with putting his or her money into this or that security. To receive higher return, investors must be prepared to accept a higher level of risk. Trying to limit or minimize the risk investors construct and diversify portfolios and spread their foreign investments among a number of different countries.

Institutional investors have contributed to development of new types of investment management techniques, sophisticated portfolio monitoring, have pioneered the application of quantitative security valuation techniques, such as dividend discount models.

In spite of the existing obstacles, recent years have seen a growing interest of foreign investors in the Russian market.

B. DIALOGUE

INVESTMENT CLIMATE

Russian: How do you assess the investment climate in your country?

Foreigner. As quite favourable. Foreign investments have been flowing into our country at an accelerating rate since we started our transition to a market economy.

R.: Who invests capital in your country?

F.: Both foreign companies and individuals. The US heads the list of the major investors. The investment policy pursued by the government focuses on foreign direct investments, I mean setting up joint ventures and establishing foreign branches or subsidiaries.

R.: What is the major reason for this striking growth of foreign investments?

F.: Investors are willing to invest because of two reasons: increase in the middle class that is driving economic development, and the decrease in politically motivated interference in the free market. R.: Do you think the situation will continue?

F.: Definitely, the government have announced plans to privatize the banking, insurance, power, oil, steel and telecommunications industries, which is sure to encourage still more capital inflows.

R.: We know that your investment policy envisages setting up special economic zones as an additional vehicle for attracting foreign funds. Has anything been done in this direction yet?

F.: Our National Technology Park has been designated for this purpose. There are highly trained workers, scientific and production facilities in this locality.

R.: Will the local companies benefit from this?

F.: Of course. The benefits will include exemptions from all real estate taxes, as well as several options for the reduction of income taxes.

R.: It's been very interesting, thank you.

VOCABULARY LIST

A. investment activity инвестиционная деятельность capital expenditure капиталовложения, вложение капитала

physical productive assets материальные, производственные фонды real investment инвестиции в реальный (основной) капитал

tangible assets материальные активы embrace v охватывать

capital gains прирост капитала user п пользователь

investor n инвестор

labour migration миграция рабочей силы prevailing adj превалирующий, преобладающий exchange control валютный контроль

financial deregulation сокращение объема вмешательства государства в финансовую сферу international capital flows движение иностранного капитала

international investment иностранные инвестиции

foreign direct investment (FDI) прямые иностранные инвестиции foreign indirect investment непрямые иностранные инвестиции portfolio investment портфельные инвестиции

managerial control административный контроль operation n (зд.) организация, хозяйствующая единица joint venture совместное предприятие

foreign branch заграничное отделение

multinational enterprise многонациональная компания transnational corporation транснациональная корпорация

"global" corporation «глобальная» корпорация speed v ускорять

diffusion n распространение skill(s) n навык(и)

sharing (in) участие (в)

individual investor частный инвестор institutional investor институциональный инвестор

investment management управление портфелем ценных бумаг technique(s) прием(ы), технологии

quantitative security valuation количественная оценка инвестиционных активов dividend discount models модели дисконтирования финансовых потоков (дивидендов) obstacle n преграда, препятствие

В. investment climate инвестиционный климат flow v течь

at an accelerating rate все увеличивающимися темпами middle class средний класс

interference n (зд.) вмешательство envisage v предусматривать designate v определять, обозначать real estate tax налог на недвижимость option n выбор, право выбора

EXERCISES

Ex. 1. Answer these questions:

A. 1. What is investment?

2.Define the difference between real investment and financial investment.

3.In what ways can financial resources be raised?

4.Why does FDI take place?

5.What institutions handle investment in stocks and shares?

6.What role do institutional investors play?

7.How do investors make their choice of investment possibilities?

B. 1. How does the foreigner characterize the investment climate in his country?

2.What country heads the list of the major investors?

3.Why are foreign investors willing to invest in the country?

4.What are the focal points of the country's investment policy? Ex. 2. Give derivatives of:

investment nfinance ndeposit nadvance nchannel nmanager ncontrol nshare nown vcontribute vapplication nrisk nallocate vgovernment nsecurity nadjustment nassess vpolicy nborrow v

Ex. 3. Find English equivalents for the following Russian phrases from the text:

A. инвестиции представляют собой вложение капитала; реальные инвестиции связаны с

материальными активами; финансовые инвестиции связаны с приобретением ценных бумаг;

депонирование средств в банках; пользователи; миграция рабочей силы; режим международной торговли, существующий в определенный момент; успехи в области технологии; отмена валютных ограничений; сокращение объема вмешательства государства в финансовую сферу; расширение международных финансовых потоков; основная черта международного экономического развития;

прямые иностранные инвестиции; портфельные инвестиции; приобретать управленческий контроль;

организация совместных предприятий; иностранное отделение фирмы; организация иностранного филиала фирмы; многонациональная компания; ускорять распространение новых технологий;

организационные навыки; участвовать в управлении; частные и институциональные инвесторы;

способы управления портфелем ценных бумаг;

B. переход к рыночной экономике; в центре инвестиционной политики, проводимой правительством,

находится ...; рост среднего класса; политическое вмешательство; объявить о планах проведения приватизации; политика предусматривает; быть освобожденным от налогов.

Ex. 4. Say in a few words what the main text is about. Use the opening phrases from Ex. 4 (Unit 1). Ex. 5. Sum up the content of the dialogue. Use the phrases from Ex. 5 (Unit 1).

Ex. 6. Read the dialogue, translate the Russian remarks into English and act it out:

Russian: Известно, что ваше правительство успешно проводит политику привлечения прямых иностранных инвестиций в страну, т.е. создания совместных предприятий, организации филиалов иностранных фирм и их дочерних предприятий. Каковы основные причины осуществления такой политики?

Foreigner: We look upon FDI as a major vehicle for the transfer of skills and diffusion of modern technology. Foreign investors have their own interests, of course.

R.: Безусловно, иностранных инвесторов привлекает ваша дешевая рабочая сила, сырьевые ресурсы,

достаточно развитая транспортная инфраструктура. Хотя работа иностранных фирм,

осуществляющих прямые инвестиции в вашу страну, связана с высоким финансовым риском. F.: You are absolutely right. High inflation and interest rates, weak national currency present serious financial risks. I must say, however, that many people in my country are very critical about multinational enterprises.

R.: Мне хорошо понятно такое отношение к иностранным корпорациям. В моей стране также многие утверждают, что иностранные корпорации, вкладывающие капитал в нашу экономику,

заинтересованы только в наших природных богатствах и в дешевой рабочей силе. F.: By the way, how do you assess the investment situation in your country?

R.: Ситуация достаточно сложная. Прямые иностранные инвестиции в нашу страну сокращаются. В

условиях высокой инфляции и неопределенности в налоговой сфере инвестиции становятся неэффективными для иностранных инвесторов. Наши местные инвесторы также не вкладывают капиталы в реальный сектор.

F.: What about portfolio investments?

R.: В условиях финансового кризиса мы должны развивать наш рынок государственных облигаций и корпоративных ценных бумаг, чтобы он стал привлекательным для иностранных инвесторов. Кстати,

наши крупные государственные компании уже планируют выпуск как акций, так и облигаций. F.: Let's hope that nonresidents will be interested in buying them.

Ex. 7. Work on vocabulary and grammar.

a)Study the key words of the unit in the dictionary at the back of this book: investor, investment, assets, capital, risk, call options, put options.

b)Think of word combinations with these nouns: investor, investment, accounts, securities, yield.

c)Think of the verbs most commonly used with:

portfolio, intermediary, risk, loans, purchase, contributions, funds, money. d) Match the verbs from (a) with the nouns from (b) below:

Ex. 8. a) Supply the articles where necessary.

b)Write down 3-5 questions about the text.

c)Say what advantages individuals have when they invest in investment companies. Investment Companies

Investment companies are ... type of financial intermediary. They obtain money from investors and use it to purchase financial assets such as stocks and bonds. In return, the investors receive certain rights regarding ...

financial assets that the investment company has bought and any earnings that it may generate. In ... simplest and most common situation, the investment company has only one type of investor – stockholders.

For an individual there are two advantages of investing in such ... companies instead of investing directly in the financial asset that these companies own. Specifically, the advantages arise from (1) economies of scale and (2) professional management. In describing these benefits, let's consider ... individual with moderate financial resources who wishes to invest in ... stock market.

In terms of economies of scale, the individual could buy stocks in odd lots and thus have ... diversified portfolio. However, the brokerage commissions on odd lot transactions are relatively high. Alternatively, the individual could purchase round lots, but would only be able to afford ... few different securities. Unfortunately, the individual would then be giving up ... benefits of owning a well-diversified portfolio. In order to receive the benefits of both diversification and substantially reduced brokerage commission, the individual could invest in the shares of... investment company. This is because economies of scale make it possible for an investment company to provide ... diversification at ... lower cost per dollar of investment than would be incurred by a small individual investor.

In terms of professional management, the individual investing directly in the stock market would have to go through all... details of investing, including making all buying and selling decisions as well as keeping records of all transactions for tax purposes. In doing so, the individual would have to be continually on the lookout for mispriced securities in ... attempt to find undervalued ones for purchase, while selling any that

were found to be overvalued. Simultaneously, the individual would have to keep track of ... overall risk level of the portfolio that did not deviate from some desired level. However, by purchasing stock of an investment company, the individual can turn over all of these details to ... professional money manager.

Investment companies have ... problems but potential advantages to be gained from ... investing in an investment company still outweigh any disadvantages, particularly for smaller investors.

Words you may need:

generate v (зд.) изыскивать, получать

economies of scale экономия, обусловленная ростом масштаба производства odd lot неполный лот

round lot полный лот (партия ценных бумаг)

incur v терпеть убытки, принимать на себя расходы to keep records регистрировать, вести запись

to be on the lookout быть настороже

mispriced securities ценные бумаги по заниженной или завышенной цене to keep track (of) отслеживать

deviate v отклоняться

money manager менеджер, занимающийся покупкой и продажей ценных бумаг

Ex. 9. a) Supply the prepositions where necessary.

b)Write down 3-5 questions about the text.

c)Explain how most dynamic institutional investors today – pension funds and mutual funds – work. The most dynamic institutional investors today are pension funds and mutual funds. Pension funds are a relatively recent phenomenon, which emerged ... the early 1950s.

Pension funds are retirement plans funded ... corporations or government agencies for their workers. Pension funds pool the contributions of employees and invest these funds ... various types of financial assets, such as corporate securities or real estate. Pension funds are often managed ... bank trust departments and life insurance companies.

Mutual funds have been even more impressive than pension funds.

Mutual funds are corporations which accept money ... savers and then use these funds to buy stocks, longterm debt instruments issued ... businesses or government units. These organizations pool funds and thus reduce risks ... diversification. They also achieve economies ... scale, which lower the costs of analyzing securities, managing portfolios, and buying and selling securities. Different funds are designed to meet the objectives of different types of savers. Hence, there are bond funds ... those who desire safety, stock funds ...

savers who are willing to accept significant risks ... the hope of higher returns, and still other funds that are used as interest-bearing checking accounts (the money market funds). There are hundreds ... different mutual funds ... dozens of different goals and purposes.

Words you may need:

mutual funds взаимные фонды

real estate недвижимость

to accept risks принимать риски

money market (mutual) fund взаимный фонд денежного рынка

interest-bearing checking account текущий счет, на который начисляется процент

Ex. 10. a) Open the brackets putting the verbs in the correct form.

b) Say what you think about the decision of the companies to invest in Russia. 3 Food Giants Build Local Yogurt Plants

Foreign oil companies may pull out of Russian projects and several automobile joint ventures have been postponed, but international food processing companies feel now is the time to move production to Russia. Three major Western food producers – Germany's Ehrmann, the Netherlands' Campina and France's Danone

– (to press) ahead with their plans to build yogurt factories in Moscow suburbs.

"The August [Rouble devaluation] made us realize all the more how important to is to have our own production here," said Christof Muller, head of Ehrmann's Moscow office.

The German company (to begin) building a dairy plant near the town of Ramenky, a 40-minute drive southwest of Moscow, a few weeks after the financial crisis (to break) out in the middle of August. Estimated to cost around 70 million Deutsche marks ($40.9 million), the factory is to start production next fall. It (to have) the capacity to process 300 tons of milk a day into yogurt, sour cream, kefir and other products, Muller said.

The milk (to come) from local farms, while fruit for the yogurts will initially be imported frozen from Germany, he added.

According to the Ehrmann representative, the company (to import) 43,000 tons of yogurt to Russia, which, by company estimates, (to account) for 25 per cent of the local market.

Muller (to say) the yogurt market could easily double, in the next two or three years. "There (to be) no fear of surplus production," he said.

"The market is far from saturated and there (to be) still plenty of room for expansion," he added. Another reason Ehrmann (to build) a local production facility is stiff competition from Russian yogurt producers, such as Moscow's Wimm-Bill-Dann. Muller said the idea (to be) to combine Ehrmann's quality "with a Russian image."

Campina, a Dutch yogurt maker, is scheduled to begin work in May on its dairy plant at Stupino, 120 kilometers south of Moscow, (to say) a company executive who wished to remain anonymous.

The plant, which (to cost) more than $40 million to build, is expected to be completed in a year's time. It (to produce) about 84,000 tons of yogurt a year, the executive said.

The French company Danone (to start) work on its dairy plant near the town of Chekhov, 60 kilometers south of Moscow, several months ago, and will have invested around $2 million in the project by the year's end.

According to foreign analysts, the companies (to have) good reasons to establish operations in Russia: cheap labour and raw materials, first of all.

"But some of the calculations made before the crisis – payback periods of investment, volumes and prices – may have to be reviewed," the analysts say.

Words you may need:

payback period срок окупаемости

Ex. 11. a) Fill each gap with a suitable word from the box. b) Comment on the type of investment in this deal.

boardhugestrengthenbenefitproviderapprovalpraisebuydealusedprojects Norwegians to Buy 25% of Vimpelcom

State-owned Norwegian telephone company Telenor said Tuesday that it will_______a 25 per cent stake in Russian cellular phone provider Vimpelcom for $160 million.

"Russia is a _______ market for mobile telephony and an important part of Telenor's international growth strategy," Tormod Hermansen, president and CEO of Telenor, said in a statement. "Vimpelcom fits well with our existing Russian investments."

The_______would mark Telenor's entrance into the Moscow mobile phone market. It already owns stakes in the St. Petersburg mobile phone company North West GSE, Extel in Kaliningrad and Stavtelesot in Stavropol.

The companies said the $160 million will be_______to develop Vimpelcom's cell phone licenses, fiber optic network, Internet services and other telecommunication_______ "We believe that the infusion of capital into the company at this time will_______the company's competitive position in the Russian cellular market, Vimpelcom's President said in a statement.

Under the terms of the deal, Vimpelcom will hand over a 25 per cent plus one share stake to Telenor. Vimpelcom said it expects to________from Telenor's experience in penetrating and developing the global telephone market, and the Norwegian provider will in return get access to the Russians' extensive engineering expertise.

Vimpelcom, the first Russian firm to be listed on the New York Stock Exchange in 1996, posted a net profit of $61 million on turnover of $306 million last year.

The company, however, is suffering as the financial crisis shrinks its customer base.

The company, though, remains a favorite with stock analysts, who ________ it as one of the most transparent and well-managed in Russia.

Vimpelcom had 110,140 subscribers in the Moscow area at the end of 1997, the most recent figures available.

Telenor is a ________ of fixed, mobile, satellite and Internet services and is based in Oslo, Norway. Telenor has 1.5 million cell phone clients in Norway, or 75 percent of the market.

Telenor also operates mobile telephone networks in a number of countries including Norway, Germany, Ireland, Greece, Bangladesh and Ukraine. It came to Russia shortly after the first mobile phone license was granted to the Leningrad region in 1991.

The deal between Telenor and Vimpelcom is subject to the ________ of Vimpelcom shareholders and Russian federal authorities, including the State Anti-Monopoly Committee, the Federal Securities Commission and the Central Bank.

Vimpelcom said it plans to hold an extraordinary shareholders' meeting in late January at which its

________ of directors will recommend the terms of the alliance. Words you may need:

stake n доля

CEO (Chief Executive Officer) главный исполнительный директор (корпорации, компании) infusion n вливание

post v делать проводку, заносить в бухгалтерскую книгу shrink v (зд.) уменьшать, сокращать

DISCUSSION

Ex. 12. Read and discuss the texts.

recession of the early 1990s. However, in 1997 investment (gross fixed capital formation) at constant 1995 prices increased by 6.1%, the fastest rate of growth since 1988. Business investment rose by 8.8%, with private sector investment in dwellings up by 7%, although investment by general government fell by 9.1%. During the second quarter of 1998 overall investment at 1995 prices was 5.7% higher than a year earlier, with a stronger rise in business investment (7.1%) and a sharp rise in investment by general government (of 26.1%).

Business investment has been helped by the high level of inward investment. In recent years, the UK has received the greatest share of inward investment into the European Union, including over 40% of Japanese investment and about 40% of US investment.

Words you may need: gateway n ворота merger n слияние

acquisition n приобретение legacy n наследство, наследие

gross fixed capital formation валовые вложения в основной капитал dwellings n жилье

Ex. 13. Read the dialogue, sum up its content and act it out.

Foreign Investments in Russia

Foreigner. Speaking about investment you often say "capital investment". Do you use the two words interchangeably?

Russian: Yes, investment is rather a new word for Russian economy. Under centrally planned economy we used the term "gross capital investments" meaning all spendings for reproduction of fixed assets, including spendings for their full recovery.

F:. I see. What does the term "investment", the way you use it now, embrace?

R.: Capital expenditure on property, tangible and intellectual assets, including entrepreneurial activities, with a view to income, capital gains or social benefits.

F.: Thank you for this clarification. But whatever term is used, you are not happy about the volume of foreign investment in Russia. It remains very small relative to the size of the economy and attractive opportunities available, doesn't it?

R.: Yes, in spite of the country's vast market, cheap labour and enormous mineral resources, foreign investors are not very active in this country.

F.:The reasons are only too well known, I'm afraid. They are: unstable macroeconomic environment, political uncertainties, and the lack of clarity and consistency in the legal and fiscal treatment of foreign investment.

R.: You are right. Unfortunately, all this has dampened interest among potential foreign investors towards Russia. But we need foreign investments badly. Our government is trying to attract investors, to facilitate foreigners' entry into Russian business.

F.: Well, but it's a fact that there are still many restrictions affecting foreign investors here. They range from minor restrictions to total interdiction. For example, foreign investors can own land only through joint ventures.

R.: That can't be denied. But the government is encouraging foreign participation, for example, in the