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Investment In Russian Investment In Russian IndustryIndustry
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
36,5 47,777,8
124,5
182,2
303
394,3
2001 2002 2003 2004 2005 2006 2007(05)
Gold and Forex Reserves, USD bn, as year-end
Structure of Accumulated Foreign Investments, %
29
24,824,6
21,6
manufacturingextraction of natural resourceswholesale and retail tradeother 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 InvestorsAbout Current Investors More than two-thirds of their companies have global sales More than two-thirds of their companies have global sales
over $1 billion, including 24% that have sales over $50 over $1 billion, including 24% that have sales over $50 billion.billion.
51% of the companies that responded are head-quartered 51% of the companies that responded are head-quartered in the U.S., 36% are in Western Europe, 4% are in Asia.in the U.S., 36% are in Western Europe, 4% are in Asia.
31% entered the Russian market before 1991; 23% 31% entered the Russian market before 1991; 23% entered within the past eight years.entered within the past eight years.
In 2006, 58% invested over $10 million each in the In 2006, 58% invested over $10 million each in the Russian market, including 38% that invested $50 Russian market, including 38% that invested $50 million/more.million/more.
More than two-thirds (70%) say they invested more in More than two-thirds (70%) say they invested more in Russia in 2006 than in 2005. Russia in 2006 than in 2005.
Investment climate in Russia over past yearInvestment climate in Russia over past year
47%
28%
25%
Russian Economic Policies and Laws that Encourage Foreign Investment
Current Investors Potential Investors
Headed in the right directionDifficult to sayGotten off track in past year
26%
41%
33%
Russia’s Integration Into Russia’s Integration Into The Global EconomyThe Global Economy
Current Investors Potential Investors
2%
32%28%
38%
6%
31% 30%33%Well integrated
(8-10 ratings)
Integrated (6-7)
Somewhatintegrated (5)
Isolated (0-4)
* zero-to-ten scale
56%
26%
10%
7%
Majority Satisfied With Investment In RussiaMajority Satisfied With Investment In Russia
Company’s Level of Satisfaction with Decision to Invest in Russia
Current Investors
High(8-10)*
Medium(6-7)*
Low (0-4)*
Mixed (5)*
* zero-to-ten scale
Return On InvestmentReturn On Investment
52%
24%
17% 18%
39%
29%
Higher than averageAbout averageLower than average
Assessment of Russia’s Return on Investment, as Compared with Emerging Markets in General
Current Investors Potential Investors
Key Economic FactorsKey Economic Factors
35%
53%
55%
67%
59%75%
Current investorsPotential investors
Russia’s Top Economic Strengths
Increasing consumer purchasing power
Growing GDP
Skilled, well-educated
labor force
Messages About Russia’s AdvantagesMessages About Russia’s Advantages
67%65%
43%71%
51%84%
90%89%
Current investorsPotential investors
Extremely/Quite Persuasive Reason For Investing
Large consumer market with expanding credit, increased saving, rising income; in top third in per capita GDP
Stable economy with sustained GDP growth, expanding consumer credit, trade surplus, inflation under 10% in 2006
Current foreign investors rate highly as place to invest, with good returns/profits and strong/growing market for goods/services
Highly educated work force, high productivity from executive professionals to skilled laborers
Investment RisksInvestment Risks
39%
53%
6%
59%
25%
14%
Higher than averageAbout averageLower than average
Assessment of Investment Risks in Russia, as Compared with Emerging Markets in General
Current Investors Potential Investors*2% not sure for both
Negative Investment FactorsNegative Investment Factors
Major FactorsCorruptionBureaucracy andred tape
65%58%
Current Investors
CorruptionBureaucracy and red tape
65%51%
Potential Investors
Medium FactorsInconsistent applicationof legislationLicensing/administrativeproceduresRule of law and judicial system
37%
35%
26%
Security and protectionof property rightsInconsistent applicationof legislationLack of enforcement andprotection of businessrights
35%
27%
27%
27%57%
16%
Media Coverage Is HavingMedia Coverage Is Having A Negative ImpactA 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
More reassured
More concernedNo impact
16%
61%
23%
Confidence In Russia’s PotentialConfidence In Russia’s Potential
69%
16%
39%
22%
Confidence in Russia’s Ability to Become One of the Premier Countries in the International Market
Current Investors Potential Investors
High level of confidence (5-7)*
Low level of confidence (1-3)*
*one-to-seven scale
ConclusionsConclusions1. 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
ConclusionsConclusions
2. 2. The State has to make more The State has to make more consistent and strong effortsconsistent and strong efforts in in addressing corruption and addressing corruption and bureaucracybureaucracy
ConclusionsConclusions
3. Re-energize joint efforts of3. Re-energize joint efforts of investors and government investors and government in encouraging FDIin encouraging FDI