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In accordance with the Federal Law of July 9, 1999 №160-FL On Foreign Investment in the Russian Federation “foreign investment” means the investment of foreign capital in an object of entrepreneurial activity in the territory of the Russian Federation in the form of objects under the civil law owned by the foreign investor unless trading in such objects under the civil law is prohibited or limited in the Russian Federation under federal laws, including money, securities (denominated in foreign currency and the currency of the Russian Federation), other property, exclusive rights to the results of intellectual activities having pecuniary value (intellectual property) as well as services and information [1].

Investments of foreign capital may be in the following items of business activity in the territory of Russia:

• movable and immovable property (buildings, structures, equipment and other tangible assets);

• enterprises fully owned by foreign investors (branches of foreign legal entities on the territory of Russia);

• securities (stocks, bonds, shares, equity investments, and others.);

• property rights (including the right to use land and other natural resources) acquired independently by the foreign investor, and with the participation of legal entities and citizens of Russia;

• the rights of intellectual property, often referred to as intellectual property rights;

• the right to engage in economic activities, conferred by law or contract.

Forms of investment of foreign capital in these objects can be:

- investments in the form of public borrowing of the Russian Federation, its constituent national debt;

- investments in the form of contributions to the share capital of Russian enterprises;

- investments in the form of investments in securities of Russian issuers;

- foreign loans;

- financial credits to Russian enterprises;

- international leasing.

In international practice, there are three basic forms of foreign investment:

1. Foreign direct investment (FDI) - investments of foreign investors, giving them the right to monitor and participate in the management of the enterprise (business organizations) in the territory of another state.

2. Foreign portfolio investments - investments of foreign investors in foreign securities in order to obtain or increase income in the form of dividends, interest or exchange the difference in prices. This includes investments of foreign investors in stocks, bonds, promissory notes and other debt instruments, government and municipal securities.

3. Other foreign investment include:

• trade credits (advance payment of imports or exports and loans to pay for imports and exports);

• other (except commercial) loans from foreign investors;

• loans from international financial institutions - the World Bank, the International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD), etc .;

• bank deposits - foreign currency accounts of foreign investors in the banks of the recipient;

• bilateral investment loans [15].

Because of the fact that foreign direct investment is a priority for the host country, they should be considered in more detail.

Foreign direct investment (FDI) is investment of capital in the name of obtaining long-term interests and represents the main form of export of private venture capital, providing effective control and entitling immediate disposal of a foreign company. The International Monetary Fund (IMF) gives the following definition: "FDI - investments made for the participation in the profits of enterprises operating in foreign territory, with the aim of investors is to directly participate in the management of the enterprise." According to the classification by UNCTAD (United Nations Commission on Trade and Development) to FDI are those foreign investments that provide long-term relationship between the partners and involve them in the continuous involvement of the entity from one country (the foreign investor or parent company) with its control over the economic organization based in a country other than the seat of the investor.

FDI has the following characteristics:

• investors usually deprived of the possibility of rapid withdrawal from the market;

• big degree of risk and the big sum than in portfolio investment;

• higher term investment, so they are preferred by importers of foreign capital.

The main methods of FDI are:

- the creation of their own overseas branch or enterprise wholly (100%) owned by the investor (investing "from scratch");

- purchase or acquisition of foreign operations;

- financing activities of foreign affiliates, including those due to intra-corporate loans and credits granted to the parent company to its foreign affiliates;

- the acquisition of land use rights (including rental), natural resources and other property rights;

- the acquisition of the rights to use certain technologies, know-how;

- acquisition of shares in the authorized capital of a foreign company, provides investors with the right to control the activities of the enterprise (such participation is sometimes called majoritarian);

- reinvestment of profits earned by investors in the host country of a branch or a joint venture.

In different countries, the share of giving right of control is defined in different ways. By definition, the IMF, foreign investments are considered to be direct if the foreign owner owns at least 25% of the share capital. According to US law, the share is not less than 10% in the European Union (EU) - 20-25%, and in Canada, Australia, New Zealand - 50%.

The Law "On Foreign Investments in the Russian Federation" refers to FDI "the acquisition by a foreign investor of at least 10 per cent stake, stakes (contribution) in the authorized (aggregate) capital of a commercial organization set up or being set up on the territory of the Russian Federation in the form of an economic partnership or company under the civil legislation of the Russian Federation; the investment of capital in the fixed assets of a branch of a foreign legal entity being set up on the territory of the Russian Federation; the pursuance of financial leasing (leasing) of the equipment having a customs value of at least 1 million rubles by a foreign investor as lessor" [1].

The main ways of attracting FDI in the Russian economy are:

- The creation of joint enterprises (including foreign investors through the sale of large blocks of shares in Russian joint-stock companies);

- Registration in the territory of Russian enterprises fully owned by foreign investors;

- Attracting foreign capital on the basis of a concession or production sharing agreements;

- The creation of special economic zones (SEZ) aimed at the active involvement of foreign investors in certain regions of the country.

FDI has the highest value for the host country because of the following options:

“1. Allow the financial resources to cover the deficit of domestic companies and firms in the accelerated and large-scale renovation of the production base. All other foreign investments are mainly speculative in nature and therefore they are money "short", do not allow to implement such a task. FDI is a good additional source of funds for renovation and expansion of fixed capital investment projects and programs for the revival and growth of the economy, the saturation of the domestic market competitive goods and services.

2. Provide borrowing qualified management, because together with the financial resources to a foreign investor,the experience to manage the activities of the investee enters to the country. FDI is not only a source of funds for the implementation of new technology, but also the use of modern management and marketing techniques. Being aimed at specific targets, they suggest training effective management and development of market mechanisms.

3. Activate the investment process due to inherent in any investment multiplier effect, contribute to the development and consolidation of the experience of the functioning of the market economy inherent "rules of the game", which leads to an influx of foreign capital, gives the investor confidence in the return on investment with reasonable profits and accelerates the formation in the country's investment climate, favorable for both foreign and domestic investors.

4. Speed up the process of integrating the regional and branch economy into the world economy, the development of effective integration processes, favor the use of the advantages of the international division of labor and cooperation, finding a niche in the world economy and the market, accelerate the development of industries and regions, promote the equalization of this development, because the ability to attract foreign capital is any entity (municipality) of the Russian Federation and any enterprise in the country.

5. Contribute to the growth of employment and improvement of social and economic stability of the country (region), because stable working place, which is not characteristic of other types of foreign investment.

6. Unlike loans and the credits, an invenstition doesn't lay down additional burden on an external debt and even promote receiving means for its repayment.

7. Stimulate the development of production of import-substituting and export of products with high added value. Only FDI realize a problem of restructuring of economy of the country recipient consisting in transition from raw branches to processing and from simple types of production to difficult” [12].

Foreign direct investment flows are characterized by the economic condition of the world. According to UNCTAD, in 2013 FDI flows increased by 9% to 1.45 trillion. USD in all major economic groups: developed countries, developing countries and countries with economies in transition. Contrary to forecasts, in 2014 the world volume of FDI was reduced by 8% to 1,26 trillion US dollars in comparison previous year. The main reasons for the decline in FDI flows: the fragility of the world economy, political uncertainty and geopolitical risks [25].

Table 1.1 The countries that attracted the largest amount of FDI between 2001 and 2013, (in bln. dollars)

Traditionally, the leading countries in attracting FDI in its economy are the industrialized countries, major developing countries, international financial centers.

FDI inflows to developing countries is 54% of the global FDI flows (Figure 1.1), but the growth rate is reduced to 7% compared with an average annual growth rate of 17% over the past 10 years. The highest FDI inflows observed in the developing countries of Asia, where it is significantly higher than in the EU, which has traditionally accounted for the largest share of global FDI flows.

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