- 92% of international companies that took part in the survey consider Russia as a strategic market.
- 53% of the survey participants said that they planned to increase their presence in Russia in the near future.
- The USA, Germany and Kazakhstan are the most important economic partners for businesses in Russia.
- Support for victims of coronavirus is a priority for 76% of international companies.
The Russian market has a strategic meaning for the foreign investors. These is the key finding of the new survey “The outlook for international business in Russia”. The survey was done by EY for the Foreign Investment Advisory Council in Russia (FIAC) with the support of the Ministry of Economic Development of the Russian Federation.
This survey, which was conducted in August-September 2020, involved questioning 62 foreign companies, 49 of which are FIAC members. The participants of the survey represent all sectors of the economy. The average Russia-related revenue of participants in the survey was USD 1,1 billion in 2019. The average staff size is 3100 people.
Alexander Ivlev, CIS Managing Partner: “The survey results shows, that Russia is a strategically important market for foreign investors. The pandemic, the volatility of commodity prices and macroeconomic instability have done little to change this perception. The proportion of companies that regard Russia as a strategic market remains consistently high and has grown compared with last year.”
Over half of the survey participants (53%) said that they planned to increase their presence in Russia in the near future. Those most likely to report such plans were Asian companies and companies in the energy and natural resources sector, which are attracted by the large resource base, the gradual recovery of commodity prices and, in the case of Asian companies, the absence of tough sanction restrictions. The launch of new products and services is the principal way of developing business in Russia for 56% of survey participants. A further 42% of international companies reported plans to expand manufacturing.
The biggest investors are companies in the energy and natural resources sector, where one company accounted for almost USD 9 billion of direct investments. Over the next five years, international companies that took part in the survey plan to invest USD 5 billion in Russia. However, many companies were unable to give an exact figure owing to the uncertainty caused by the pandemic and the resulting need to revise their plans.
The respondents view the USA, Germany and Kazakhstan as the most important economic partners for businesses in Russia. 16% of companies said that the USA remained a key partner in Russia. 10% of the respondents identified Germany as being of key importance for Russian business. The importance of Kazakhstan was noted by 10% of international companies.
The majority of survey participants (53%) do not plan to expand their presence in the regions. But regional expansion plans vary greatly according to industry. The majority of manufacturers of industrial products and consumer goods, which are already well represented outside Moscow, plan to hold off on regional expansion for the time being.
Frequent changes in the law are cited by half of participants in the survey as having a negative effect on Russia’s investment attractiveness. This is one of the key problems encountered by large foreign businesses in the country in terms of the legal environment. The high level of administrative barriers (39%) and the mismatch between the law and current conditions (34%) are other problems cited by the respondents.
Alexander Ivlev says, “The international companies that took part in the survey identified labor relations, taxation, and financial regulation as the three best developed areas of Russian legislation. The survey participants point to the following examples of positive changes in the regulatory environment in Russia: the regulatory guillotine and the abolition of obsolete regulations, the development of labor legislation, and in particular the experiment involving the use of electronic digital signatures in personnel documents; the emergence of a special tax regime for self-employed people; the development of legislation on the protection of capital investments.”
Support for victims of the pandemic is a priority for foreign businesses
76% of survey participants said that their company had given material assistance to medical, public-funded, charitable and social organizations in Russia in connection with the pandemic. Material assistance included donations of money, purchases of medical equipment and devices, or the supply of the company’s own products free of charge. The 20 companies that disclosed the exact amount spent on such support gave material assistance totaling USD 15.5 million to Russian organizations.
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EY works together with companies across the CIS and assists them in realizing their business goals. 5,500 professionals work at 19 CIS offices (in Moscow, Ekaterinburg, Kazan, Krasnodar, Novosibirsk, Rostov-on-Don, St. Petersburg, Togliatti, Vladivostok, Almaty, Atyrau, Nur-Sultan, Baku, Bishkek, Kyiv, Minsk, Tashkent, Tbilisi, Yerevan).
The Foreign Investment Advisory Council in Russia (FIAC) was established in 1994 as a result of the combined efforts of the Russian government and foreign businesses. Over the years, it has made a major contribution to improving the investment climate in Russia. Chaired by the Prime Minister of the Russian Federation, FIAC brings together the executives of 53 major international companies and banks. Four more companies hold observer status.
Throughout the year, FIAC is focused on key Russian sectors and industries covered by specialized working groups.
FIAC’s activities are coordinated by an Executive Committee chaired by the Russian Minister for Economic Development. Annual plenary sessions bring together members of the government and global CEOs of member companies to discuss priorities in investment policy, legislative amendments to resolve current issues, and measures to improve the investment climate that recognize the interests of all parties involved.