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Peter D. Hart Research Associates, Inc.
1724 Connecticut Avenue, N.W.
Washington, D.C. 20009
202-234-5570
202-232-8134 FAX
During April and May 2007, Peter D. Hart Research Associates, Inc., conducted
surveys among 106 current foreign investors in Russia and 51 potential Russian
investors. Qualitative research in the form of a focus group and in-depth individual
interviews were conducted following the survey to inform the findings.
The
quantitative and qualitative research was conducted on behalf of the Foreign
Investment Advisory Council of Russia to understand current opinions about the
investment climate in Russia. This is the third consecutive year that FIAC has
commissioned research on this topic.
1) Return On Investment Trumps All. The investors in Russia are exceptionally
delighted with their return on investment. Even against an increasingly competitive
global market, Russia measures up as equal to or better than the competition. But
even among those who do not have the direct experience of investing in Russia, the
perception is that the return on investment is strong. Current investors definitely
have a more positive outlook on Russia’s economic climate than their potential
counterparts. Despite agreement on ROI (return on investment) as an attraction,
more than half of current investors rate Russia’s return (compared with emerging
markets in general) as “higher than average,” compared with 18% of potential
investors saying the same. Nearly half (47%) of current investors likewise feel that
Russia’s economic policies are headed in the right direction in terms of encouraging
foreign investment. The one element that is less encouraging with both current and
potential investors is that Russia’s level of integration into the global economy is
perceived as low. Few see Russia as well integrated, and most see it more in the
midrange as “somewhat integrated.”
2) Current Investors’ Experiences Generate Strong Endorsements. Current
investors’ first-hand experiences have been overwhelmingly positive.
Their
counterparts (potential investors) do not have the direct experience, and need
information and reassurance to become investors. Eighty-two percent (82%) of
investors report a positive level of satisfaction with their decision to invest in Russia
(including a robust 56% reporting a high level of satisfaction—a rating of 8 to 10 on a
ten point scale). They cite Russia’s increasing consumer purchasing power, growing
gross domestic product, and skilled, well-educated labor force as Russia’s top
economic strengths. They also assess Russia’s macroeconomic situation, access to
qualified personnel, and general investment climate as the factors most contributing to
a positive investment climate. Both potential and current investors agree that
Russia’s “large consumer market with expanding credit, increased saving, rising
income, and high per capita GDP” is a persuasive reason to invest (both near 90%
endorse this). The current investors are far more likely to agree that the Russian
economy is stable, and to be persuaded by other points such as positive investor
endorsements and the strength of Russia’s skilled labor force. Current investors can
provide a great selling tool to potential investors.
3) Russia Still Has Challenges To Address. The ROI may be good, but the feeling
is also that the risks of investment in Russia are high. Fully 39% of current investors
report the risks to be higher than average. Nearly three in five potential investors
Peter D. Hart Research Associates, Inc.
concur. Both groups of investors agree that Russia could do more to recruit and
attract new foreign investment. Fully 66% of current and 41% of potential investors
say Russia does “little” to attract foreign investment.” These represent opportunities
lost, but the clear challenge remains what earlier surveys have pointed out, corruption
represents the most important negative for the country to deal with. Fully, 65% of
both groups cite this. Just following this, bureaucracy is the second highest negative
investment factor, selected by a majority of both groups. Inconsistent application of
legislation, licensing/administrative procedures, rule of law/judicial system, property
rights protection, and business rights protection all are additional negatives that are
cited. Finally, the international media coverage has had a dampening effect on
perception of Russia’s investment climate.
4) The Potential For Russia To Be An Economic Leader Is Exceptionally
Strong. The survey’s bottom line is not just the current perceptions, but also the
projected attitudes on what Russia can achieve. Despite this negative media coverage
and the negative investment factors listed earlier, investors—particularly current
investors—are optimistic about the Russian market. Nearly seven in 10 current
investors have high confidence in Russia’s ability to become one of the premier
countries in the international market. Among potential investors, nearly 40%
subscribe to this feeling. The bottom line is that Russia has much to build on, but to
take full advantage, it must better convey its assets, and deal with the concerns about
corruption and bureaucracy.
5) Conclusions And Recommendations.
 Proactively tell Russia’s positive story. Russia has many strengths that appeal
to investors, but the research suggests that the case for Russia is largely an untold
story. Russia’s key strengths should be woven together into a compelling story,
and a coordinated effort to tell this story will be critical. Those key strengths
include:
 Russia’s economic success makes a strong case with investors, including
sustained GDP growth, expanding consumer credit, a trade surplus, and
inflation under 10%.

Russia’s consumer market and increased consumer purchasing power are
seen as key economic strengths by both groups of investors.
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Peter D. Hart Research Associates, Inc.

Russia’s labor force is recognized by both current and potential investors as
being skilled and well educated.

Russia’s natural resources are universally recognized by current investors as
being more available than nearly all other markets. Russia’s cheap energy
and raw materials are a top draw for potential investors.

The State has to make more consistent and strong efforts in addressing
corruption and bureaucracy. Most current investors believe Russia is behind
other emerging markets when it comes to government policies that are friendly to
foreign investment, and concerns about corruption, bureaucracy, and selective
interpretation/application of laws are diminishing the attractiveness of the country’s
core assets. The good news is that it is in the government’s power to change
policies that create these negative attitudes.

Re-energize joint efforts of investor and government in encouraging
foreign direct investment. There is a marked gap between what current
investors know from experience and what potential investors perceive. Current
investors express moderate to high levels of satisfaction with their company’s
decision to invest in Russia, and they are bullish about its ability to become one of
the premier countries in the international market. Potential investors are less
certain about Russia and need both more reassurances and more facts. Let
current investors provide both of these with their positive stories about the
country’s sustained economic growth, skilled labor force, and increasing consumer
purchasing power.
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