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04013
Analysis of the investment attractiveness of the
South of Russia
Elena Nikolaevna Karpova1,Marina Viktorovna Charaeva1,*,Yuliya Sergeevna Zharkova2,
Namsa Aleksandrovich Sharinov1, and Tatyana Valerievna Gaponenko3
1Southern Federal University, Faculty of Management, Rostov-on-Don, Russian Federation
2Rostov State University of Economics, Faculty of Economics and Finance, Rostov-on-Don, Russian
Federation
3Don State Technical University, Faculty of Innovative Business and Management, Rostov-on-Don,
Russian Federation
Abstract. The article examines the factors of investment attractiveness in
the regions of Southern Russia and evaluates their impact on the dynamics
of investment in fixed capital. It has been established that the analyzed
regions have a sufficiently high level of investment attractiveness and a
favorable investment climate. In general, there are positive trends in the
dynamics of investments in fixed assets in the regions of the South of
Russia. The authors also consider the most common rating methodologies
for assessing the investment attractiveness of Russian regions, presented by
the Agency for Strategic Initiatives and the National Rating Agency. In
general, the ratings assigned according to these methodologies show a
consistent trend, except for the values related to the Republic of Kalmykia
and Rostov Oblast. This may be due to differences in the set of evaluated
factors and expert assessments. The obtained results led to the conclusion
that despite the complex geopolitical situation and the influence of external
crisis factors, the regions of Southern Russia have maintained their
investment attractiveness due to a flexible regulatory framework in the
field of investments and existing measures to support business.
Keywords: Factors of investment attractiveness · Investment in fixed
capital · Rating evaluation.
1 Introduction
In the face of the modern challenges and threats encountered by the Russian economy, the
question of increasing investment activity by both state and private investors becomes
particularly acute. In turn, investors make decisions on capital investment in specific
objects based on rating assessments of the investment attractiveness of Russian regions.
The issues related to the content and evaluation of regional investment attractiveness are
addressed in the works of L.G. Akhtarieva [1], N.I. Yashina, S.P. Borisova, V.S. Novikova
[14], M.B. Trachenko, V.A. Dzioev [11], V.V. Litvinova [5], I.S. Glebova, S.S. Berman,
R.R. Galiakhmetov [16], V. Chobanyan [15], where the authors provide their own
*Corresponding author: mvcharaeva@mail.ru
© The Authors, published by EDP Sciences. This is an open access article distributed under the terms of the Creative Commons
Attribution License 4.0 (https://creativecommons.org/licenses/by/4.0/).
E3S Web of Conferences 533, 04013 (2024) https://doi.org/10.1051/e3sconf/202453304013
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viewpoint on the essential characteristics and justify the integral indicators used to evaluate
the investment attractiveness of regions. By summarizing the approaches presented in these
works, we come to the conclusion that the investment attractiveness of a region is a
comprehensive characteristic of the region in terms of its profitability, risk minimization,
prospects, and the efficiency of investment.
2 Materials and Methods
The aim of the conducted research is to analyze the investment attractiveness of the regions
in Southern Russia during the period of 2019-2022, identify the main trends in the dynamics
of investment in fixed capital, and summarize the results of rating evaluations obtained
using various methodologies.
The methodological framework is based on the use of general scientific and specific
methods of scientific cognition, including abstraction, structural-functional and
economic-statistical analysis, and graphical interpretation. The research employed
theoretical methods such as studying and analyzing contemporary works on the research
problem, as well as empirical methods such as statistical methods of data processing and a
scenario-based approach. This allowed for the substantiation of conclusions and the
argumentation of the work's positions.
3 Results
The term "Southern Russia" is not a precisely defined geographic concept. The following
constituent entities of the Russian Federation are territorially considered part of Southern
Russia: the Republic of Adygea, the Republic of Kalmykia, Krasnodar Krai, Rostov Oblast,
the Republic of Crimea, and the federal city of Sevastopol.
In our opinion, it is necessary to conduct a comparative analysis of the investment
attractiveness separately among the republics that are territorially part of Southern Russia
and separately between Rostov Oblast and Krasnodar Krai.
Fig. 1. Dynamics of investment in fixed capital in the Republics of Adygea, Kalmykia, and Crimea
for the period of 2019-2022, million rubles. Sources: [3, 9, 12, 13]
As can be seen from the data presented in Figure 1, the Republic of Crimea had the
highest volume of investment in fixed capital among the Republics of Adygea, Kalmykia,
and Crimea throughout the analyzed period.
By the end of 2022, investments in the Republic of Crimea increased by 30.5%
compared to the previous year, which is one of the highest indicators among the regions in
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Southern Russia. However, the overall trend shows a negative dynamic, with a decrease in
investment volumes from 2019 to 2022 by 9,701.6 million rubles or 95.66%.
The Republic of Adygea ranks second among the analyzed regions in terms of
investment in fixed capital (Figure 1). From 2019 to 2022, the volume of investments in the
Republic of Adygea increased by 3,165 million rubles or 7.3%. In 2022, the main share of
investments was directed towards construction of buildings and structures - 24.7 billion
rubles (53.2%), acquisition of machinery, equipment, and vehicles - 18.6 billion rubles
(39.9%), and housing construction - 2.5 billion rubles (5.3%) [4].
The Republic of Kalmykia occupies the third place among the considered regions of the
Russian Federation in terms of investment volume in fixed capital, where the volume of
investments increased by 1,372 million rubles or 10.7% from 2019 to 2022 (Figure 1). The
main areas of investment are the food industry, the service sector, and healthcare. Some
projects are financed by the Development Fund of the Republic of Kalmykia.
Next, let's conduct a comparative analysis of the dynamics of investment in fixed capital
in the most economically significant regions of Southern Russia - Krasnodar Krai and
Rostov Oblast (Figure 2).
Fig. 2. Dynamics of investments in fixed assets in the Krasnodar Territory and the Rostov Region in
2019-2022, million rubles Sources: [10, 12]
In 2022, for the second consecutive year, the Krasnodar Krai became the leader in the
Southern Federal District (SFD) in terms of the total amount of investments. The region
accounted for 41.5% of the investment portfolio of the district. In 2022, the region had 125
large-scale investment projects (over 300 million rubles) in the implementation stage. Their
total value was estimated at 2.1 trillion rubles, which is 11.9% higher compared to 2021.
There were 483 large-scale investment projects (with a value exceeding 100 million rubles)
in the active implementation stage, with a total amount of approximately 2.6 trillion rubles
[6].
Despite the impact of negative factors associated with the imposition of restrictive
measures due to sanction pressures, the economy of the Rostov Oblast remained stable by
the end of 2022. The volume of private investments in fixed capital in 2022 amounted to
337,235.8 million rubles. Thirty-seven organizations took advantage of tax benefits on
property and corporate profit tax within the framework of 44 investment agreements [8].
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4 Discussion
The southern region of Russia is a vast territory with significant investment potential.
However, it is not among the leading investment-attractive regions of Russia. The factors
contributing to the investment attractiveness of the southern region of Russia are not only
relevant in the short term but also in the long-term perspective. The natural and climatic
conditions play a direct role in attracting investments in the recreational and agricultural
sectors of the economy. Additional factors contributing to the investment attractiveness of
the southern region of Russia include industrial, transportation, energy, and infrastructure
sectors, as well as the construction industry and labor resources.
By analyzing the investment attractiveness of the aforementioned regions, it is possible
to identify common factors among the republics.
Table 1. Factors of investment attractiveness of the regions of the South of Russia
Factors of investment attractiveness of
the Republics of Adygea, Kalmykia,
Crimea
Factors of investment attractiveness of
the Krasnodar Territory and the Rostov
Region
favorable climatic conditions
favorable geographical and geopolitical
location
fertile land
agroclimatic potential
industrial reserves of a number of minerals
recreational potential
favorable tourist and recreational resources
good transport infrastructure
availability of a regulatory framework that
ensures investment attractiveness
high availability of labor resources
availability of a regulatory framework that
ensures investment attractiveness
Source: Compiled by the authors
Currently, there are several methodologies used by Russian rating agencies to assess the
investment attractiveness of regions: the ratings of the National Rating Agency, the Agency
for Strategic Initiatives, and the rating agency Expert RA.
The Agency for Strategic Initiatives (ASI) evaluates ratings based on 70 indicators
across four dimensions: regulatory environment, institutions for business, infrastructure and
resources, and support for small and medium-sized enterprises. ASI assigns ratings
annually (since 2019) to the best-performing regions. The absence of a region in the rating
table indicates that it did not make it to the top 20 in terms of investment attractiveness. The
results of the investment attractiveness assessment of the southern region of Russia for
2020-2022, according to the methodology of the Agency for Strategic Initiatives (ASI), are
presented in Table 2.
Table 2. Rating of investment attractiveness of the regions of the South of Russia according to
the methodology of the Agency for Strategic Initiatives
Region
2020 year
2021 year
2022 year
Republic of Adygea
Not in the ranking
11th place
13th place
Republic of
Kalmykia
Not in the ranking
12th place
Not in the ranking
Krasnodar Territory
6th place
7th place
8th place
Rostov region
Not in the ranking
12th place
Not in the ranking
Republic of Crimea
Not in the ranking
11th place
7th place
Source: [1]
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As can be seen from the presented data, only the Krasnodar Krai remained in the
ranking throughout the examined period. However, every year it has been descending one
place in the ranking. In 2022, the Republic of Crimea surpassed it, taking the 7th position
and rising by 4 positions. In 2021, the 12th place was shared by the Republic of Kalmykia
and the Rostov Oblast, but they couldn't make it to the ranking in 2022. The Republic of
Adygea lost 2 positions in 2022, shifting to the 13th place.
The investment attractiveness of a region is determined in the study conducted by the
National Rating Agency (NRA) as a combination of factors that affect the feasibility,
efficiency, and level of investment risks in the region. These factors serve as the active
background for all investment projects implemented in the region and influence the risk and
profitability of these projects. The investment attractiveness of a region is composed of
several factors, each of which can be assessed using a specific set of indicators. The NRA
methodology considers a set of 57 indicators that make up 7 factors of regional investment
attractiveness: geographical location and natural resources, labor resources of the region,
regional infrastructure, the regional market (potential regional demand), production
potential of the regional economy, institutional environment and socio-political stability,
financial sustainability of the regional budget and regional enterprises.
The results of applying the methodology of the National Rating Agency for assessing
the investment attractiveness of regions are presented in Table 3.
Table 3. Rating of investment attractiveness of the regions of the South of Russia according to the
methodology of the National Rating Agency
Region
2020
2021
2022
Republic of Adygea
IC5 (enhanced)
IC5 (confirmed)
IC5 (confirmed)
Republic of Kalmykia
IC9 (confirmed)
IC9 (confirmed)
IC9 (confirmed)
Krasnodar Territory
IC4 (downgraded)
IC3 (enhanced)
IC4 (downgraded)
Rostov region
IC4 (confirmed)
IC4 (confirmed)
IC4 (confirmed)
Republic of Crimea
IC8 (confirmed)
IC7 (enhanced)
IC6 (enhanced)
Source:[7]
Throughout the entire period under investigation, the Krasnodar Krai was the only
region with high investment attractiveness in 2021. In 2022, its attractiveness decreased to a
moderate level. The Republic of Adygea and the Rostov Oblast maintained their investment
attractiveness at an average level from 2020 to 2022. The Republic of Crimea has been
increasing its investment attractiveness during the examined period, rising by 2 positions in
2022 and transitioning from a moderate level to an average level. The Republic of
Kalmykia shows low attractiveness.
Summarizing the results of the rating assessments, it can be concluded that consistent
trends are confirmed for the Republic of Adygea, Crimea, and the Krasnodar Krai. The
disparities in the assessment of Kalmykia and the Rostov Oblast, despite being in the same
direction, may be attributed to the different weights assigned to individual indicators in the
overall assessment, diverse expert evaluations of factors, and the use of different source
data within the same direction.
5 Conclusion
Thus, we come to the conclusion that the complex geopolitical and external economic
situation had little impact on the investment attractiveness of the Southern region of Russia.
The limited amount of available statistical and survey data for 2022 does not allow for a
complete picture of the interrelation between the investment attractiveness of regions and
their vulnerability to crisis phenomena. However, preliminary analysis indicates that
regions with varying levels of investment attractiveness can be affected by turbulence: high
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investment attractiveness does not guarantee stability, while low attractiveness does not
necessarily mean an inevitable deep decline. Although the causes of the crisis for regions
are external and beyond the control of regional administrations, they will have to find
unconventional solutions to support investors.
References
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