How foreign companies evaluate the Russian market

A clear verdict – falling both positively and negatively – is how member businesses of the Committee on Eastern European Economic Relations and the German-Russian Chamber of Commerce (AHK) evaluate the business climate in Russia in 2013 according to a recent survey. International Trade News lays out the arguments on both sides

ADVANTAGES:

 

Securing growth and profit
The companies surveyed see opportunities for growth and profit as the greatest advantage of the Russian market. They are followed by the market’s great consumer demand, and in third place, its perceived low tax burden.

Where the action is: the energy, automobile and construction industries
The energy market – including electricity, oil and gas – is an unchallenged market primed for the future. Industry leaders also expect strong chances for growth in the coming years in the automobile industry and in construction.

Business situation looking slightly up
Compared with 2011/2012 figures, the business situation is improving for many survey respondents. Roughly 13% describe their situation for 2012 as being ‘very good.’ Just a year before, only 10% evaluated it in such a way. At mere 3% (in 2011, 9%) said their situation was ‘bad.’

Hungry for investment
The survey’s respondents want to invest in new employees and facilities. Almost two thirds (65%) plan new hires. Roughly half (49%) are pursuing con-crete investment plans, which they estimate at about 800 million EUR. Since just a third of businesses provided concrete sums, the total amount being invested is assumed to be in the billions.

Russia’s joning into the World Trade Organization shaking up business
Over three fourth of respondents expect Russia’s joining into the World Trade Organization to invigorate Russia’s business climate in 2013.

Top locations Moscow and St. Petersburg
A ranking of Russian business locations with the best investment climates: Moscow, St. Petersburg, Tatarstan, Krasnodar (in the Olympics region) and Nizhnij Nowgorod.
                                          
DISAVANTAGES:

The industrial ‘Mittelstand’ does not exist in Russia
Russia’s midsize businesses are still not a motor for industrialization, which also has negative consequences for foreign businesses. An estimated three fourths of all medium-sized Russian firms are considered part of the service industry or come from trade.

Supply structures are weak
German investors complain about the lack of supply structures for midsize firms in Russia.

Acute lack of skilled professionals
Russian businesses and foreign investors alike are suffering from an acute lack of highly specialized skilled professionals – especially outside of metropolitan areas.

Exasperating bureaucracy
Bureaucratic structures can create time-wasting barriers to investment projects. One example here is the very long process to obtain permits.

Corruption
Businesses see bureaucratic hurdles as the second greatest hindrance to investment. On the Corruption Perception Index of 2012, put together by Transparency International, Russia is far down the list – at 133rd place.

|International trade news|