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Investment In Russian
Industry
Deputy Minister for Economic Development and Trade of
the Russian Federation A. Sharonov
Average Annual Growth Rates for the Period, %
2001-2005
2006-2010
Gross domestic
product (GDP)
6.1
6.3
Capital investments
9.9
12
Gold and Forex Reserves, USD bn, as year-end
394,3
303
182,2
124,5
77,8
36,5
47,7
2001
2002
2003
2004
2005
2006
2007(05)
Structure of Accumulated Foreign Investments, %
21,6
29
24,6
24,8
manufacturing
extraction of natural resources
wholesale and retail trade
other activities
Federal Law No. 65FZ of May 1, 2007
“Concerning Changes in Federal Law on Technical Regulation”:
- obligates making use of international standards when
developing draft technical regulations;
- specifies a procedure for technical regulations approval;
- singles out 17 priority regulations to be adopted before
January 1, 2010.
Improving legislation on the use of natural resources:
- newly amended Water and Forestry codes have been adopted
and taken effect from 2007;
- a draft law ”Concerning Amendments to RF Law on
Subsoil Resources” is being finalized;
- amendments to draft laws regulating specific use
of subsoil plots in internal sea waters, territorial seas,
and continental shelf areas are to be drafted during 2007;
- a concept of the Ecological Code of the Russian Federation
is being elaborated;
- industry regulatory acts have been drafted.
Lowering administrative barriers in the economy administrative regulations:
- define timelines for and sequence of steps in making
decisions by executive bodies when responding to enquiries of
individuals and legal entities or in executing powers assigned
therewith;
- adoption of administrative regulations will help to make
responsibilities of executive bodies more clear and
straightforward, and introduce efficient controls and evaluation
of their performance;
- administrative regulations will be conducive to the creation of
single information environment under the ‘electronic
government’ program
In 2006, 170 administrative regulations were elaborated;
in 2007, it is planned to work on more than 300 documents
Improvement of tax system will contribute to investment appeal of
the economy:
- reduced tax burden on the economy;
- tax incentives for investments and innovations;
- better tax administration;
Improvement of customs system by way of harmonizing Russian
legislation with international conventions:
- improve regulation of transit procedure;
- introduce a single form of a customs document;
- get prepared for the introduction of ‘authorized consignee’
Foreign Investment Advisory Council (FIAC)
in Russia – working groups:
- State Regulation;
- Tax & Accounting;
- Financial Institutions & Capital Markets;
- Food & Agriculture;
- Natural Resources;
- Industry, Construction and High Tech;
- Image of Russia;
- PPP in Transportation Sector Task Force;
- Customs Task Force.
created
in 2007
About Current Investors
 More than two-thirds of their companies have
global sales over $1 billion, including 24% that
have sales over $50 billion.
 51% of the companies that responded are headquartered in the U.S., 36% are in Western Europe,
4% are in Asia.
 31% entered the Russian market before 1991; 23%
entered within the past eight years.
 In 2006, 58% invested over $10 million each in the
Russian market, including 38% that invested $50
million/more.
 More than two-thirds (70%) say they invested more
in Russia in 2006 than in 2005.
Investment climate in Russia over past year
Russian Economic Policies and Laws
that Encourage Foreign Investment
Current Investors
Potential Investors
26%
25%
33%
47%
28%
41%
Headed in the right direction
Difficult to say
Gotten off track in past year
Russia’s Integration Into
The Global Economy
38%
32%
28%
Well integrated
(8-10 ratings)
31% 30%
33%
Integrated (6-7)
Somewhat
integrated (5)
2%
Isolated (0-4)
6%
* zero-to-ten scale
Current Investors
Potential Investors
Majority Satisfied With Investment In Russia
Company’s Level of Satisfaction
with Decision to Invest in Russia
Current Investors
Low (0-4)*
7%
Mixed (5)*
10%
High
(8-10)*
56%
Medium
(6-7)*
26%
* zero-to-ten scale
Return On Investment
Assessment of Russia’s Return on Investment,
as Compared with Emerging Markets in General
52%
39%
Higher than average
About average
29%
Lower than average
24%
17%
Current Investors
18%
Potential Investors
Key Economic Factors
Russia’s Top Economic Strengths
Current investors
Potential investors
75%
Increasing consumer
purchasing power
59%
67%
Growing GDP
55%
Skilled,
well-educated
labor force
53%
35%
Messages About Russia’s Advantages
Extremely/Quite Persuasive Reason For Investing
Current investors
Potential investors
Large consumer market with expanding credit, increased saving,
rising income; in top third in per capita GDP
89%
90%
Stable economy with sustained GDP growth, expanding consumer
credit, trade surplus, inflation under 10% in 2006
84%
51%
Current foreign investors rate highly as place to invest, with good
returns/profits and strong/growing market for goods/services
71%
43%
Highly educated work force, high productivity from executive
professionals to skilled laborers
65%
67%
Investment Risks
Assessment of Investment Risks in Russia, as
Compared with Emerging Markets in General
Higher than average
About average
53%
59%
Lower than average
39%
25%
14%
6%
Current Investors
Potential Investors
*2% not sure for both
Negative Investment Factors
Current Investors
Potential Investors
Major Factors
Corruption
Bureaucracy and
red tape
65%
58%
Corruption
Bureaucracy and
red tape
65%
51%
37%
Security and protection
of property rights
Inconsistent application
of legislation
Lack of enforcement and
protection of business
rights
35%
Medium Factors
Inconsistent application
of legislation
Licensing/administrative
procedures
Rule of law and
judicial system
35%
26%
27%
27%
Media Coverage Is Having
A Negative Impact
How has what you have heard or read about Russia in the media in the
past 12 months made you feel about the country’s investment climate?
Current Investors
Potential Investors
16%
23%
61%
57%
27%
More reassured
No impact
More concerned
16%
Confidence In Russia’s Potential
Confidence in Russia’s Ability to Become One of
the Premier Countries in the International Market
69%
High level of
confidence (5-7)*
Low level of
confidence (1-3)*
39%
*one-to-seven scale
22%
16%
Current Investors
Potential Investors
Conclusions
1. Proactively tell Russia’s positive story.

Promote the country’s economic success

Promote the consumer market

Promote the labor force

Promote the availability of country’s energy
sources for growth and production
Conclusions
2. The State has to make more
consistent and strong efforts in
addressing corruption and
bureaucracy
Conclusions
3. Re-energize joint efforts of
investors and government
in encouraging FDI