Russia has achieved significant progress in attracting direct, foreign investments in recent years. Even in the height of the crisis, major foreign companies continued working and trading in the Russian market. Why does Russia have an advantage over other competing countries? Alexander Ivlev, the Country Managing Partner for the Russian Federation at Ernst&Young company, explained some of the factors to WEJ reporter.
Alexander, many experts believe that, because of the widely publicized administrative problems in Russia, such as heavy bureaucracy and corruption, investors are hesitant to enter the Russian markets. Do you agree to this point of view?
I would not say that Russia is terribly far behind other developing countries when it comes to attracting investments. But pretending that everything here is perfect is not the right approach either. There are many issues in Russia that affect the decisions made by foreign investors planning on entering the country’s mp style=However, this isnarket, and these issues are not just limited to corruption or bureaucracy. Many of our problems are related to the lack of infrastructure and qualified personnel as well. But Russia can make up for its deficits with its many advantages, so there is some balance in the end.
What advantages would you say Russia has?
One example is the tax system – according to international experts, the tax burden in Russia is lighter than in the countries of Brazil, India, or China. Russia also has a very advanced and developed system dealing with customs legislation, as well as an effective banking system. The margin of profit is also higher in Russia than it is in other countries, especially when it comes to the operational activity of foreign countries. And that is an indisputable advantage.
Do investors appreciate advantages like these?
When planning long-term investments, many large investors choose Russia because they are looking for predictability and stability - both of which are easy to find. And when you have stability in both the economics and politics of a country, you cannot fail to attract investors. The middle class in Russia is also growing fairly quickly, which offers a number of additional advantages. Overall, the Russian Federation offers far more opportunities for businesses to improve their operations and their performance than other countries.
But globally, Russia is still not the leading country in terms of foreign investments.
This is true – China and India are the current global leaders, but I would say that Russia is on the right track and can catch up to them easily.
What can you tell us about Russia’s current dynamics?
In 2010, Russia ranked fourth among European countries in terms of attracting foreign investments, and over the past five years, the number of investment projects that have attracted foreign direct investments in Russia has more than doubled. Moscow is now ranked seventh in the list of most investment-attractive European cities, and it continues to climb upward. So I would definitely say we are moving in the right direction.
So we need to start talking more and be heard, is that correct?
Yes! Russia needs to brag a little more about the achievements and successes other foreign investors have seen here. We offer many more opportunities than other competing countries, and investors need to know that. We also need a more structured approach in how we present ourselves in the global market, which is one problem we need to put a lot of effort into. But generally speaking, things in Russia are not bad at all!
Text: Anastasia Yakovleva