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Investors see bright future for Russia
Foreigners like working in Russia
Foreign investors view Russia as the most promising investment market, showed an opinion poll conducted by Russia’s Consultative Council for Foreign Investment. The country’s image created by the western media does not correspond to reality: according to respondents, it is easier to work in Russia than it seems from abroad. Showing confidence in Russia’s new government, investors expect it to carry out structural reforms.
The Consultative Council for Foreign Investment was set up in 1994 for a dialog between the Russian government and foreign investors. The heads of 51 companies took part in the poll, including Alcoa, BP, British American Tobacco, Ford, Sun Group, Ernst & Young, Telenor, and Coca-Cola.
The survey results were presented by Ernst & Young during the XII Saint Petersburg Economic Forum, which opened on Saturday. According to Thierry Malleret, the author of the research and Managing Partner at Rainbow Insight, foreign investors working in Russia estimate real risks of operating on the local market much lower than they had expected before starting business in Russia. They are also quite optimistic about their future in Russia, putting it as the top of the list of the world’s most attractive markets over the next five to ten years. China was ranked second, followed by India and Brazil. The United States did not make it into the top five. Russia’s opportunities are unlimited, as well as the possibilities of using them, one respondent said.
The investment situation differs with different industries: the closer to strategic industries, the more difficult to work, Malleret says. At the same time, foreigners welcomed Russia’s new bill on foreigners’ access to strategic industries, which was signed into law last month. The law defines 42 industries as strategic, up from 16 industries in 2005. But investors see it as an overall tendency towards protectionism. Few governments in the world allow foreigners to invest in their oil sector, Malleret remarked. Even in the absence of such laws governments use other methods to regulate foreign investment.
Some respondents noted that economically developed countries often ban acquisitions by foreign companies for reasons having nothing to do with national security. One example is Japan’s rejection of a bid by Britain’s Children’s Investment Fund to buy a controlling interest in the energy company J-Power.
The law brings clarity, defines the rules of the game, and now everything will depend on how it will be implemented, Malleret believes. Meanwhile, raw material industries remain quite attractive to foreigners. According to Alexander Ivlev, a partner at Ernst & Young, the top five most attractive industries include car making, retail, banking sector and food production.
Problems faced by the Russian economy remain the same as indicated in last year’s research: corruption, insufficiently transparent legislation, administrative barriers and an inefficient judicial system. It is these issues that should take priority for Russia’s new government, respondents reckon.
Russia’s new system of power will help enhance the country’s investment climate, they hope. Many of them are convinced that the Medvedev-Putin tandem will work, but about a third of respondents do not think so. Dual powers cannot last long, they say. In May, President Dmitry Medvedev announced measures to boost the development of small and mid-sized businesses in Russia. Their implementation will be a litmus test for foreigners showing the ability of the new authorities to implement significant structural reforms. Analytical department of RIA RosBusinessConsulting
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