In your opinion, what should be the three priority measures to take to improve Russia's investment climate?
Source: Ernst & Young 2012 Russia attractiveness survey.Total respondents: 208.
62% of respondents think Russia’s accession to the WTO boosts investment appeal.
The majority of investors continue to believe that Russia’s attractiveness will improve in the medium term. However, only 57% are optimistic about Russia’s future attractiveness, compared with 70% last year.
It appears that confidence has fallen as a result of instability in global markets and the Eurozone crisis.
Thirty percent of respondents say that Russia’s attractiveness will remain the same in the medium term, while only 7% are pessimistic about Russia’s future
How to meet investors’ expectations
1. Create an investor-friendly environment
Russia offers investors a high-growth economy, a large domestic market and highly skilled labor at moderate cost. But its enduring reputation for difficult business conditions deters investors.
Doing business in Russia is fraught with challenges associated with corruption, government bureaucracy, complex regulatory requirements and a lack of transparency.
Investors highlight the following top three ways to enhance Russia’s investment appeal:
- Improve the effectiveness of the rule of law (53%)
- Reduce bureaucracy (47%)
- Improve transparency of business regulations (37%)
2. Reduce Russia’s dependence on oil and gas
Overdependence on the oil and gas sector is among of the biggest challenges that the Russian economy faces today.
As a result of this focus on oil and gas, there is a large mismatch in Russia between the attention that other strategic industries receive from investors and their real potential.
Among the most attractive sectors, investors highlight ICT (20%), agriculture (13%), consumer goods (13%) and transport and automotive (11%) as the keys for growth in the next couple of years.
3. Create a favorable environment for R&D and innovation
Inadequate infrastructure and a lack of government incentives are two of the hindrances that are holding back innovation and R&D in Russia.
According to the GE Global Innovation Barometer 2012 survey, more than 87% of the top Russian managers surveyed highlight weak government and private sector support for innovative companies, as well as the poor quality of the regulatory environment.
4. Improve Russia’s education system
Although one of Russia’s strengths is its higher education and a larger proportion of Russian high school students go on to tertiary education than in any OECD economy, only 7% of respondents believe Russia will have one of the best education and higher learning systems in 2020.
What can be done to improve this perception?
- Increase government spending on all levels to improve the quality of teachers, infrastructure and the overall standard of education
- Bring industry and academia closer together by encouraging collaboration
- Develop universities of a global standard