Having rich natural resources, capacious rising internal market, well-educated and cost-competitive production personnel, the Russian Federation becomes more and more attractive to foreign investors.
Russia managed to avoid long-lasting influence of global economic crisis. Due to good condition of dynamically developing economy and accumulated gold-cum-currency reserves, Russia shows the highest stability parameters with respect to possible future international financial and economic crises. The important aspect of expansion of business activities is stability of investment climate in Russia and increasing level of investment protection.
Prices for raw materials, diversification of real economy and efficiency of reforms introduced in the country exert positive influence on growth rate of the economy. After global world crisis, the interest in Russian market remains at a high level. Already in 2010, foreign investment share in capital assets of enterprises with foreign capital participation practically reached precrisis level and made 18.8% (before crisis about 20%). In the same year, the participation of foreign capital in main assets of enterprises of foreign and joint forms of properties in Russia was 13%.
In Russia, investors are attracted by unusual combination of promising investment opportunities characteristic both for Asian and European markets. The country is ranked as the 4th in Europe with respect to investment attractiveness. Foreign funds are invested in such areas as agriculture, fishery, forestry, power sector, woodworking, mining operations, coke and petrochemicals production, chemical industry, finished metal products, machinery and equipment, processing facilities, food industry, textile and clothing plants, leather and shoe manufacture, publishing and printing activities, metallurgical industry, building and construction, wholesale and retail trade, hotel and restaurants, transport and communication, health care and education, scientific research and developmental works, financial activities, culture and sport, etc.
For the first ten years of this century, the total investment volume in main assets of Russia increased by 8 times and it continues its growth. Foreign companies, that understand Russian economy and business specifics in the country, find very profitable investment trends and often, having experience in in investments in Russia, are interested in increase of investment volumes – around 70% of foreign companies having business in Russia intend to expend their activities. As per data of Ernst & Young’s European Attractiveness Survey, since 2005 attractiveness of Russia has practically doubled in the eyes of investors.
Cost-competitive labour in Russia (average wage being USD 760 per month advantageously differs from those in many European countries) and developing logistic network are considerable advantages for foreign investors. Skilled personnel resources are available near main foreign markets, hence it is economically expedient for companies to manufacture products in Russia and send them to nearby market outlets. At the same time, there is an attractive opportunity to produce consumer goods in Russian and sell them to the growing Russian middle class. The consumer market in Russia is steadily expanding. For the last five years, 32% of investment projects belong to sales and marketing. High share of investment projects in production area as well as sales and marketing, including services, evidently testifies to the effect that investors are interested in growing consumer market of Russia. Today, practically any area of business activity within the framework of meeting consumer demands promises potential investors the prospects no less attractive than trade in power resources, thereby the highest investment flows are in automobile and food industries. High economic growth is registered in power sector, communication technologies and processing industry. High rise is experienced in retail industry of net hypermarkets.
Another fast-developing sector is finance and banking. This activity area in Russian regions is practically limitless. For the first ten years of the XXIst century, the fund volumes of foreign banks involved in Russian investment projects increased by more than 20 times. It is of interest that the share of foreign bank credits attracted for Russian long-term investment projects is five times higher than that for short-term projects.
The highest leadership of the country and the Russian government are interested in introduction of state-of-the-art efficient industries and take measures to improve business conditions in the country and create climate favourable for development of high-technological industries. For this purpose an access is open for foreign investors to strategic industries, like power and telecommunication sectors as well as acquisition of control over private banks. In August 2011, based on the decree of the Government of the Russian Federation, created was “the Agency of strategic initiatives for promotion of new projects”, the chairman of the supervisory council of the Agency being the President of the Russian Federation. In pursuance of the assignment of the Chairman of the Government of the Russian Federation, the Agency implements the National entrepreneurship initiative aimed at improvement of investment climate in the Russian Federation.
To attract investors in priority industries, the state creates special territories – special economic zones with special legal status and favourable investment regime. The residents of such zones have a number of benefits, among which are special administrative regime (reduction of administrative barriers), relieved approach to real estate objects, special tax treatment (including reduction of income tax rates, exemption from land and transport taxes), customs-free zone regime (materials and equipment imported to the zone are free from customs duties). Today, Russia has 19 special economic zones of four types: industrial, technological, tourist and logistic.
The fact that Russia has become a member of the World Trade Organisation (WTO) is a good sign for investors, since this improves the investment attractiveness of the Russian Federation. The investment climate will be positively affected by increase in transparency of economy and level of economic freedom, growth of corporative management level, harmonization of norms and rules with WTO standards, predictable rules of the game and growth of competition. WTO membership is a convincing evidence of Russia’s endeavour to transparency and reforms.
While elaborating a business strategy with respect to Russia, foreign businessmen should take into consideration that out of total number of projects more that 50% are implemented in regions. Out of them, Moscow particularly is ranked as the 7th in the list of European cities most favourable for investors in respect of number of projects financed by foreign direct investments and its rating grows. Now investors consider the capital of Russia as one of the most important trends for investments in Europe. Investment attractiveness of Moscow also grows due to availability of two special economic zones nearby.
Finally, it is important to indicate that the Near East and Malaysia takes a special place on the scale of foreign political priorities of the Russian Federation. One of the priority directions of the foreign policy of the Russian Federation remains support of Russian business in this region and attraction of Malaysian and Near Eastern partners to the Russian market.