Russia is proving to be resilient in the current climate, according to our latest survey. Looking to the future, Russia’s entry into the World Trade Organization (WTO) and the diversification of its FDI portfolio are expected to increase the country’s investment appeal.
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3. Positioned for growth
Ernst & Young's 2012 attractiveness survey
Russia
Contents
3 Foreword
4 Executive summary
8 An optimistic outlook
9 Global economic outlook
10 Global FDI market: dynamic and demanding
12 Russia takes a step forward
13 Russia in the global context
16 Russia’s world-class natural resources
17 Russia’s attractiveness: strengths and areas for improvement
22 Russia’s industrial progress
23 FDI in Russia in 2011: larger projects
24 Russia’s performance in the enlarged Europe
24 Activities: manufacturing
26 FDI sectors: diversification is underway
28 Little change in FDI sources
30 Russia’s top regions for FDI
32 2013: plans for investment
34 How to meet investors' expectations
35 Expectations from investors
37 Russia needs to create an investor-friendly environment
40 Reducing Russia's dependence on oil and gas
42 Sector opportunities
44 Methodology
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 1
4. Viewpoint
Improving investment opportunities
Igor Shuvalov, First Deputy Prime Minister of the Russian Federation
It might not be quite fair to assess Russia’s attractiveness The Foreign Investment Advisory Council (FIAC) brings
ourselves, as it is foreign investors who must have their say. together more than 40 major global companies operating in
Of course, international ratings show that we still have a lot to Russia. The Council provides an important and useful forum
do. For example, although we have climbed up four positions to handle issues related to investment activities in Russia.
in the World Bank’s Doing Business ranking, we are still
120th. Another example is the persistent outflow of capital A few examples of what it has managed to do include:
from Russia, with the Bank of Russia estimating an outflow • The Council made a decisive contribution to the drafting
of US$80b in 2011. And what is private capital outflow? of recently adopted amendments to the Law on Migration
It is, in fact, a real indication of the quality of the investment Registration of Foreign Citizens and Stateless Persons
climate. So there is plenty of room for improvement. in the Russian Federation. The law creates favorable
conditions for highly skilled foreign professionals and their
The Council provides families to enter and live in Russia.
• FIAC was actively involved in developing the Law on
an important and useful
Customs Regulation, which greatly simplified customs
forum to handle issues procedures.
related to investment • FIAC took part in drafting a law providing easier access
activities in Russia. to Russia's strategic industries for foreign investors.
• FIAC working groups put forward proposals to improve
However, I can say that all these years we have remained administrative and customs regulations (veterinary
consistent and resolute, albeit not always as fast as we would control, food regulations and technical regulations).
like, in removing obstacles hindering the inflow of foreign • Finally, in 2011, the Council prepared a list of projects
capital into our country. We have improved our laws in line to be implemented in Siberia and the Far East.
with global best practices and worked to make the system
for passing court rulings more transparent. Let me also Russia is a net exporter of capital. Last year, according to
mention the "humanization" of the Criminal Code, especially the Bank of Russia, our country — I mean the private sector,
with regard to economic crimes, and the introduction of the state and households — invested US$76b in other
tax incentives for investors in a number of sectors. A most countries on a net basis, i.e., net of investments in Russia.
important achievement in this area is the accession to the Money is thus not the main reason why we need foreign
World Trade Organization (WTO). Finally, the Customs Union investors. It is no secret that, in terms of their legal status,
significantly increased the size of the domestic market. many foreign investments are, in fact, made with money
As a result, we have a positive trend: the net inflow of foreign that was previously taken out of Russia. We therefore need
direct investments (FDI) amounted to US$53b in 2011. real foreign investors to signal that the situation in Russia
has improved and there are proper conditions for investment.
Since the autumn of 2010, when I started working as an And there is one more important thing. Foreign investments
ombudsman, we have reviewed around 100 complaints are primarily associated with innovative technologies,
from foreign investors. We have managed to resolve most managerial experience, modern standards of production
of the issues and find positive solutions. Investors most and market relations — and this is exactly what our economy
often complain about administrative barriers. really needs today.
2 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
5. Foreword
Foreword
Jay Nibbe Alexander Ivlev
Area Managing Partner EMEIA — Markets Country Managing Partner
Ernst & Young Russia, Ernst & Young LLC
The global economy faces many challenges. In Europe, recession Our panel of investors confirms that Russia has world-class
has returned to many economies, the Eurozone crisis continues features: an abundance of natural resources, a huge domestic
and global economic power shifts from west to east and north market and a very skilled labor force. They also note that
to south. In recent months, rapid-growth economies have Russia has made a step forward in the global competition
slowed, in some cases notably, as a result of the financial crisis. to attract FDI.
Despite this fact, many developing economies demonstrate However, our survey also underlines some critical challenges
robust growth, and the group of 25 rapid-growth markets for Russia: investors’ confidence in the future attractiveness of
(RGMs) that we monitor is expected to achieve overall GDP Russia has declined and they repeated their concerns about the
growth of 5.9% in 2013 and 6.5% in 2014. country’s uncertain investment climate and innovation capacity.
Russia has proved to be resilient, experiencing growth in 2011 This report is designed to help the Russian Government remove
and 2012. An increase in consumption, a strong labor market barriers to future growth and help business leaders make smart
and an increase in investments have been the prime drivers of investment decisions. In the report, we look at the perceived
this growth. Oil prices have supported the sustained expansion attractiveness of Russia and changes in FDI behavior, and
of the Russian economy. we propose actions and identify opportunities to address the
challenges that our country is facing.
Russia, like other countries, is facing the challenges of
increasing global competition, in which investment and Russia, with its great development potential, is now exploring
technology play crucial roles in diversification and creating new ways to compete and to lead.
sustainable growth. Our survey shows that foreign investors
are more demanding than they used to be: they now value As we present our second edition of the Russian attractiveness
efficiency and transparency of the operating environment survey, we would like to thank all the decision-makers and
as much as they do market opportunities. Ernst & Young professionals who have taken the time to share
their insights with us.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 3
6. Executive summary
Executive summary
The global context Investors’ perception
An optimistic outlook Russia takes a step forward
• The global economic outlook is optimistic • Russia has joined the competition
The global economy started to show signs of recovery in 2011. The world is converging. China’s lead as the investment destination
It was weak and unbalanced, but there was optimism. As a result of with the best image is widening and Europe’s attractiveness has
the financial crisis, the growth trajectories of rapid-growth economies halved since 2006. With 19% of international investors perceiving
have declined – some notably. However, many developing economies Russia as one of the most attractive global regions in 2012,
demonstrated robust growth, and the group of 25 RGMs that we it has unquestionably joined the competition for FDI. The country’s
monitor at Ernst & Young should recover to achieve overall GDP attractiveness has grown by eight percentage points over 2011,
growth of 5.9% in 2013 and 6.5% in 2014. the largest increase of any region.
• Global FDI has increased • Russia is attractive by nature
Despite the economic and financial crisis, global FDI increased by According to our panel, Russia’s world-class features, such as its
16% to reach US$1.5t in 2011, exceeding the pre-crisis level. In natural resources (43% of respondents), domestic market (19%)
comparison, Russia’s inflow of foreign investments (FDI) increased and strong labor force, all support its leading role in the global
by 22%. According to the United Nations Conference on Trade and recovery.
Development (UNCTAD), investors were motivated by the continued
growth of local consumer markets and manufacturing opportunities. • Russia has balanced labor costs and skills
The country’s cost-competitive and skilled labor force improves its
• Investors are more demanding attractiveness. Nearly 56% of respondents described the availability
Business leaders are re-evaluating their selection criteria: at the top of skilled labor as a positive factor for investing in Russia; low labor
are now market appeal (40% of investors) and the stability of their costs were mentioned by 61% of investors.
investment destination (36%).
• Concerns remain about Russia’s operating environment
Investors’ concerns relate to the political, legislative and
administrative environment of Russia, with 62% highlighting this
Reality factor as a challenge. Other factors that make Russia less attractive
to foreign investors are its infrastructure and limited incentives for
#1 In 2011, Russia was the most attractive destination sustainable development.
for FDI in Central and Eastern Europe.
42% of investment projects are located in Moscow and
St. Petersburg.
22% inflow in terms of value resulted in a 4% increase in job
creation in 2011.
8 of the top 10 sources of FDI originate from Europe,
with over 300 FDI projects between 2007 and 2011.
51% of FDI in Russia has gone into manufacturing,
with over 400 FDI projects, the fourth-largest in Europe — while 9%
was directed to the business services sector.
4 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
7. Reality check A look into the future
Russia’s industrial progress How to meet investors’
expectations
• Russia attracted fewer, larger projects • Expectations from investors
The number of FDI projects declined by 36% in 2011, even though Although a majority (57%) of investors remain optimistic about
Russia led Central and Eastern Europe (CEE) at attracting FDI. Job Russia’s attractiveness in the medium term, the level of confidence
creation grew by 4% in 2011. Labor-intensive industrial activities has dropped from 70% last year.
increased the average number of jobs created per project to 65 in
2011 from 40 in 2010. • Russia needs to create an investor-friendly environment
Russia’s uncertain business climate deters investment from foreign
• Manufacturing is still central to Russia’s appeal companies. Investors chose the more effective rule of law (53%),
Manufacturing activity is key to Russia’s attractiveness, accounting for reduced bureaucracy (47%) and an improvement in the transparency
51% of investment projects and 92% of job creation between 2007 of business regulations (37%) as the top three ways to enhance
and 2011. The industrial sector was another high performer, with Russia’s investment climate.
automotive attracting 90 projects and machinery and equipment
recording 62 projects. The food sector was the second-largest • Russia’s FDI portfolio is diversifying
number of projects (86), and business services also grew in FDI. Nearly 39% of investors expect the mining, oil and gas sector
to attract the most FDI in the next two years. Information and
• Russia’s diversification is under way, driven by expansion in communication technologies (ICT) was named second-most often
business services by investors (20%), followed by energy and utilities, agriculture,
FDI activity in Russia’s business services sector has been growing consumer goods and automotive. The country’s focus on oil and gas
in recent years. It accounted for 9% of the total FDI projects in creates a large mismatch between the attention that other strategic
2011, higher than its 5% share in 2010 and above its average of 6% industries in Russia received from investors and their real potential.
between 2007 and 2011. When financial services and the software
industry are included in the business services category, this figure
rises to 14% of the projects between 2007 and 2011, compared with
the automotive industry’s 12%.
• Little change in FDI sources
The United States remains Russia’s primary investor with 122 FDI
projects between 2007 and 2011 (16% of the total), but 8 of the top
10 source countries are from Europe. European countries established
over 300 FDI projects in Russia from 2007 to 2011, 44% of the total.
FDI into Russia from emerging countries remained low between 2007
and 2011. India and China each accounted for less than 2% of FDI Perception
projects in Russia. Brazil established just two projects in the country.
These economies also made a minor contribution to employment
generation.
8 percentage point increase of international
investors who find Russia attractive compared to 2011,
the largest increase of any region.
• FDI is regionally concentrated
Russia’s two largest cities – Moscow and St. Petersburg – account for
42% of the projects. The Kaluga and Nizhny Novgorod regions are 39% of business leaders expect the mining, oil and gas sector
also attractive investment destinations. to attract the most FDI in the next two years, with 20% for the
ICT sector.
• 2013: strong plans for investment
Investors already present in Russia continue to demonstrate their 62% of investors believe Russia’s accession to the WTO will
confidence in the Russian market. Nearly 80% of these investors plan increase the country’s attractiveness for investment.
to increase or maintain their operations in the country. There is a wide
gap in plans between the companies that already have operations in
Russia and those that are not yet established. Seventy percent of the 62% of respondents consider that the country’s political,
companies that are not established in Russia have no plans to invest legislative and administrative environment needs improvement.
in the country in the next year. This is, however, 16 percentage points
lower than 2011, signaling an improvement in potential investors’
perceptions of the Russian economy as an investment destination.
78% of respondents already present in Russia plan to maintain
or expand their operations in the country.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 5
8. Executive summary
6 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
9. Viewpoint
Growth is not only possible, but inevitable
Kirill Dmitriev, Chief Executive Officer, Russian Direct Investment Fund
Russia has a unique opportunity to attract a record level US$1.5t, foreign investors have become increasingly
of FDI. First, Russia really delivers: in 2011 we had a interested in Russia. According to the survey, in April 2012,
budget surplus, the lowest inflation in 20 years and one 48% of FDI funds expressed the intention to expand their
of the lowest levels of state debt (11% of GDP compared dealings in Russia and the Commonwealth of Independent
with some 80% in Europe and over 100% in the US). Russia States (CIS) compared with just 25% in October 2011.
has the fourth-largest international reserves in the world There are many factors that appeal to investors in
(around US$500b) and impressive 4.3% GDP growth. Such Russia, including the country’s strong macroeconomic
results can performance, the threefold growth of the Russian middle
cause a twinge class over the last five years and prospects of lowering
There are of envy in other export barriers as Russia prepares to join the World Trade
many factors countries, Organization.
that appeal including
to investors most of the Coming to Russia primarily for high revenues, foreign
developed investors bring unique managerial expertise and knowledge
in Russia. ones. Second, of global markets. They facilitate the implementation of
initiatives advanced technology and contribute to the modernization
like the Russia Direct Investment Fund (RDIF) make it of production in Russia. It all fits very well with the
easier to invest in Russia. RDIF is a partner for direct Government’s agenda for attracting “smart” long-term
investment funds, state investment funds and transnational foreign investments.
corporations that can share risks and elucidate the finer
points of the investment machinery in Russia. In addition, While a member of BRICS, Russia has some big advantages
RDIF will attract foreign capital by showcasing real over the rest of the group. Russia possesses huge mineral
examples of successful deals made in partnership with resources and a more literate and educated population than
leading financial and strategic investors. The mere presence other BRICS countries, which, unlike Russia, have to rely on
of such investors in Russia will be very good public relations either mineral or human resources. In addition, Russia boasts
(PR) for the country. Third, Russia has a large-scale the highest GDP per capita, the best capitalized banking
government program of investment in infrastructure under system and the lowest corporate tax among BRICS nations.
way, as well as a new wave of privatizations, targeting
assets worth US$30b–US$50b, in total. Russia’s investment climate is often cited as one of this
country’s weaknesses in comparison with other BRICS
Russia has to become more competitive in the international countries (Brazil, Russia, India, China and South Africa),
capital market. The Russian Government has clearly realized but, as stated above, the Russian Government intends to take
that it needs to improve the local business environment and some serious steps to improve it.
is prepared to commit itself to state, corporate management
and regulatory reforms. There are some real problems that International experts often speak about the low
the Government has been trying to solve. It is clear that we competitiveness of Russian businesses. But the lower
still suffer from excessive bureaucracy and red tape, and efficiency of Russian companies also has an upside, as it
there are concerns about the reliability of the Russian judicial shows that there is growth potential, and, most importantly,
system, although we have recently seen some improvements where this growth may come from is clear. In spite of
in all these areas. To tackle these challenges, a special some pessimistic views of the current state of the Russian
institution, the ombudsman, has been established in Russia economy, growth is not only possible, but inevitable. Suffice
during the transition period. it to say that the Russian middle class, which, in relative
terms, is the largest middle class in the BRICS group,
According to an Ernst & Young survey of more than has emerged only in the last five years, during which time
150 executives whose companies’ combined assets exceed the number of middle-class Russians has tripled.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 7
10. An optimistic
outlook
The global context 6.5% GDP growth in 2014
forecasted for the 25 rapid-growth
markets (RGMs) monitored
by Ernst & Young.
16% global FDI increase
despite the global financial crisis.
US$1.5t global FDI
in 2011, exceeding pre-crisis level.
22%
Russia.
surge in FDI inflow to
40% of investors consider
market appeal as the top criterion
for investment.
8 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
11. An optimistic outlook
Global economic outlook
World RGMs
3.9 3.5 3.9 6.3 4.9 5.9
Russia
4.3 4.0 3.1
UK
0.7 0.2 1.4
Euro area
1.5 -0.3 0.3
US Japan
1.7 2.0 2.3 -0.7 2.4 1.5
China
Mexico 9.2 7.5 8.4
India
3.9 3.8 3.8
7.5 5.7 7.5
Colombia
5.9 4.5 4.2
Brazil
2.7 2.2 5.1
South Africa
Argentina 3.1 2.8 3.8
Chile
5.9 4.7 4.8 8.9 3.3 3.5
Real GDP growth rates (%)
2011 2012 2013
World Economic Outlook (WEO): Growth resuming, dangers remain, April 2012, IMF 2012.
Rapid-growth markets forecast, Ernst & Young, July 2012.
The global economy began 2011 pressures in Europe are also leading to will remain strong as mature market
in recovery mode. It was weak and reduced demand for commodities and companies seek to tap into their projected
unbalanced, but there was some optimism. a slowdown in exports of manufactured growth, and the emerging markets
However, the global recovery slowed in the goods. However, many developing themselves use their favorable economic
second half of the year due to weakening economies continue to grow robustly, positioning to drive development.
investor and consumer confidence and the group of 25 RGMs monitored by
and sharply escalating risks during the Ernst & Young should achieve overall GDP National and regional differences do exist
fourth quarter. Economic growth in many growth of 5.9% in 2013 and 6.5% in 2014. between emerging market economies, and
developed economies decreased during significant growth differences are opening
the latter part of 2011 as many Western Growth in the emerging world is up this year. Asian RGMs are projected to
economies headed toward a double-dip underpinned by the emergence of a richer see growth rates of 6.2% in 2012, while
recession. Increased uncertainties in middle class, favorable demographics and, RGMs in the EMEIA and Americas regions
the Eurozone, persistently high levels of as a consequence, strong and sustained can expect to register growth of 4.0% and
sovereign debt and government austerity growth in domestic demand. Increased 3.2% respectively. Strong RGM performers
programs are all acting as a brake on trade among emerging markets will in 2013 are expected to be Brazil (+5.1%)
Gross domestic product (GDP). They are further help protect these markets from and Chile (+4.8%) in the Americas; India
the main forces holding back economic unfavorable developments in mature (+7.5%), Kazakhstan (+7%) and Qatar
recovery in the West. markets. The developing markets that (+6%) in EMEIA; and mainland China and
rely on energy exports may see some Hong Kong (+8.3%), Vietnam (+6.9%),
As a result of the financial crisis, expansion short-term variation. However, the mid- Indonesia (+6.6%) and Thailand (+6.5%)
in rapid-growth economies has slowed to long-term outlook remains positive. in Asia. Russia is projected to grow at
recently, in some cases notably. Economic Investments in emerging markets a moderate rate of 3.1% in 2013.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 9
12. An optimistic outlook
Global FDI market:
dynamic and demanding
Viewpoint
Our success will depend on us
Herman Gref, Chairman of the Management Board & CEO of Sberbank
If we assess the investment climate in we still have a lot of hard work ahead of kindergarten, but all we are concerned
Russia retrospectively, we can say that, us. The World Bank and the International about is how to make sure our
at the beginning of this century, Finance Corporation have placed Russia in kindergartens can accommodate all the
the temperature was around zero. the 120th position in their recent Doing children. Nobody seems to be thinking
The nominal tax burden was twice as large Business report, which is far from about the quality of education — as if we
as real tax payments, with massive red satisfying. Making a leap from the 120th were building some sort of luggage room
tape and corruption. The macroeconomic to the 20th place is not easy, but the fact and assigning kindergarten teachers the
situation was also awful, as was the that President Vladimir Putin has declared role of luggage security officers! In the
nation’s credit history. The only attractive this as an objective is very important. morning, you deposit your kids at the
features included perhaps the size of kindergarten and in the evening you take
the market (and even this was no more them back home. Yet about 80% of a
than potentially so) and our oil and gas Russia’s main nation’s successes rest upon the quality
reserves. goal is to reform of pre-school education. Eighty percent
of a child’s potential is built during the
By the middle of the 2000s, the
its system of first seven years of their life. As for the
investment climate in Russia had changed federal and local quality of Russian secondary and higher
significantly. This climate is not only, and government. education, I would rather not speak about
not so much, about figures as it is about it at all.
how it feels to do business in the country. Russia’s main goal is to reform its system
In 2006-2007, business in Russia was in of federal and local Government. It needs The third goal is to create a system of
a state of elation at the pace of growth to improve its blatantly inefficient judicial values.
we had achieved. We simplified the tax system (all major transactions are carried
system, cut interest rates and managed to out in other jurisdictions now, which is We can also mention the need to improve
reduce red tape. We shortened the evidence of the complete lack of trust our infrastructure, etc. But above
company registration process from two in our own system); improve the law I mentioned the fundamental things.
months to three days in accordance with enforcement system and customs
the law. We amended the Civil Code and legislation; eliminate corruption and Foreign capital plays a critical, though not
adopted the Land Code, Water Code, the Government’s involvement in areas decisive, role in the modernization of the
Forestry Code and law concerning where it is unnecessary; and concentrate Russian economy. And this is true for all
minerals. All in all, we took a big step its efforts on the priority areas of Russia’s Russian industries, without exception. At
forward and, as a result, enjoyed a foreign development. Corruption is our number the end of the day, our success will
investment boom. one problem, because it, too, is a measure depend on our own preparedness to move
of the Government’s efficiency. in the direction of modernization.
Unfortunately, the pace of growth then
slowed down, primarily because of Our second goal is to reform the system I do not have enough empirical data
corruption and Russia’s crippled judicial of education. The notion that the quality yet to make any predictions concerning
system, while our competitors were of education in Russia is much better the efficiency of the modernization drive
marching forward. Governments in than in any of the other BRICS countries in Russia in the coming years. I do hope
advanced economies did not simply work is nothing but a myth inherited from that modernization will take place,
to accommodate the interests of their Soviet times. In China, the quality of yet I believe we need to wait for some
business communities; but they actually education is rising, while in our country it systemic improvements from the
tried to anticipate their needs. Therefore, is falling. Education starts in new Government.
10 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
13. Top 10 destinations for FDI inflows in 2011
(in US$ billion)
UK Belgium Russia
$54b 7% $89b 10% $53b 22%
France
$41b 34%
US
$227b 15% China
$124b 8%
Hong Kong
$83b 17%
Singapore
$64b 32%
Brazil
$67b 37%
Australia
$41b 16%
Note: this data includes greenfield and expansion projects, and M&As.
Source: World Investment Report 2012, UNCTAD, July 2012.
Global FDI increased by 16%
Despite the economic and financial crisis, According to UNCTAD, investors were Most important factors in deciding the
global FDI increased by 16% in 2011. motivated by the continued growth of local location in which to establish operations
At US$1t, the total exceeded the pre- consumer markets and by a new round of The country or region's domestic market
crisis level. In comparison, Russia’s inflow privatizations in Russia. 39%
of foreign investments surged 22%. Stability and transparency of political, legal
and regulatory environment
36%
Labor costs
Investors look for market opportunities as much as stability 28%
and transparency Transport and logistics infrastructure
25%
Potential productivity increase for their company
Economic volatility and lower growth this requirement was far less important. 24%
prospects around the world have caused Rapidly changing circumstances around Local labor skill level
24%
business leaders to re-evaluate their the world have triggered a radical change
Stability of social climate
selection criteria. In our 2011 survey, in sentiment. Companies want to set up
20%
investors cited transportation and operations in regions with large and strong
Corporate taxation
telecommunications infrastructure as the domestic demand. 17%
top two factors in their location decisions. Flexibility of labor legislation
Minimizing risk is the next main goal. 9%
But this year, executives clearly have market Stability and transparency in the political, Telecommunications infrastructure
appeal and the stability of their investment legal and regulatory environment is listed 8%
destination at the top of their agenda. by investors as the second-most important Source: Ernst & Young's 2012 European attractiveness
Almost 40% of investors questioned criterion (36%) when deciding where to survey. Total respondents: 840
in 2012 said that, when deciding to invest, invest. Labor costs, which used to be a
a country or region’s domestic market is compelling concern, still matter for 28% of
now their top concern. In our past surveys, respondents, but rank third overall.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 11
14. Russia takes
a step forward
Investors' perception 19% of international investors
perceive Russia as one of the most
attractive global regions.
8 percentage point increase
of international investors who find Russia
attractive compared to 2011, the largest
increase of any region.
43% of respondents find natural
resources to be Russia’s most attractive
feature.
56% of investors deem availability
of skilled labor a positive factor for
investing in Russia.
61% of investors are attracted by
low labor costs.
62% of respondents consider
that the country’s political, legislative
and administrative environment needs
improvement.
12 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
15. Russia takes a step forward
Russia in the global context
China’s lead is widening
Investors are still focusing on rapid-growth make the country a magnet for investors. “attractiveness gap.” The gap between
markets. Business leaders see a larger Consequently, in Ernst & Young’s 2012 China and Western Europe has increased
role for emerging economies, particularly European attractiveness survey, China from one percentage point in 2010 to
China, that offer greater returns on retains its position as the most attractive three percentage points in 2011 and 11
their investments. In addition to the size FDI destination. It was named as the percentage points in 2012. Similarly, China
of its market and pace of consumption most attractive destination by 44% of has extended its attractiveness lead over
growth, China also has a broad economy, respondents — the highest level of investor CEE. In contrast, competition among the
specialized clusters in key industries, confidence since 2009. Although the pack of other leading players — Brazil, CEE,
easy access to international markets rankings of the most attractive destinations India, North America and Russia — remains
and an enduring image as a low-cost remain roughly similar to those of last keen.
production base — all of which combine to year, there is a noticeable variation in the
Russia has joined the competition
What are the three most attractive regions in which to establish operations?
68% Western Europe
52% CEE
48% China
44%
41%
North America 33%
India
21%
18% 19%
Russia 18%
Brazil
5%
2006 2007 2008 2009 2010 2011 2012
Source: Ernst & Young's 2012 European attractiveness survey. Total respondents: 840
According to our 2012 European closed substantially. While Russia overtook base and recent government efforts to
attractiveness survey, Russia’s Brazil in terms of its attractiveness profile, it reduce the country's over-reliance on
attractiveness as an investment destination is also in very close competition with India, oil and gas. In 2011 particularly, there
(19%) increased by eight percentage points North America and CEE. was a boost in investors’ confidence in
over the previous year, the largest increase the country as a result of its sustained
of any region. In last year’s survey, Russia Since 2006, Russia’s investor appeal has consumer demand, its agreement to join
ranked far behind India, North America, increased nearly fourfold. Its profile for the WTO from mid-2012 and a new round
CEE and Brazil. However, this year, the investors has been improved by its growing of privatizations.
“attractiveness gap” between these regions consumer market, expanding industrial
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 13
16. Russia takes a step forward
Europe’s attractiveness has halved since 2006
Europe continues to appeal strongly to Yet the number of investors who rank Europe other rapid-growth economies, means that
investors. Western Europe is ranked as as the most attractive destination for an CEE is now competing with North America
the second-most attractive investment FDI project has fallen by more than half and emerging markets such as India and
destination for global FDI (33%), followed since 2006. In this year’s 2012 European Brazil. It is clear that the global economy has
by CEE (21%). These results, which were attractiveness survey, Western Europe’s a growing number of attractive destinations
achieved during a period of extreme attractiveness slid by two percentage in which to invest. Western Europe, however,
uncertainty in the Eurozone, confirm the points to 33% and CEE’s attractiveness is still ranked far ahead of these markets and
continent's fundamental appeal. suffered a steep decline of eight percentage is challenging China, the leading investment
points to 21%. This decline, coupled with a destination.
simultaneous rise in the attractiveness of
Mixed messages between Central and Eastern Europe
Investor confidence in CEE has declined. which contributed to the credit crunch in banks have foreign parents. Labor costs
In 2006, 52% of respondents ranked the the region — are among CEE’s problems. have risen too, making manufacturing in
region as the most attractive place in the Given the region’s strong trade and financial CEE less attractive. With the increasing
world for investment. In 2012, this figure links with Eurozone economies, it is no appeal of BRIC countries and other
is just 21%. Many factors explain this surprise that the International Monetary rapid-growth economies, CEE now finds
decline. A few years ago, CEE benefited Fund (IMF) expects CEE to be hit the itself competing with North America and
from Western Europe’s success. It was hardest by adverse knock-on effects of the emerging markets such as Brazil and
seen as a low-cost location to serve free- Eurozone crisis. India. Nonetheless, some CEE countries
spending Western consumers. Today, and regions, including the Baltic States,
Europe’s problems have hit CEE hardest. In addition, debt levels in some CEE the Czech Republic, Hungary and Poland,
A rise in non-performing loans, a very countries are high and economic growth continue to attract good FDI inflows from
high dependence on exports to Western prospects low. Banks have cut their net investors who seek relatively favorable
European economies and a weak and aggregate lending to the private sector labor costs and availability of skills.
largely foreign-owned banking system — across CEE. Also, many of the region's
14 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
17. Viewpoint
Russia on the way to liberalization
Yaroslav Lissovolik, Member of the Management Board, Chief Economist, Head of Research Department, Deutsche Bank Russia
Russia’s investment appeal has been resources, Russia is still ahead of all development of the Russian economy.
largely understated because of its other BRICS nations, and Russia must Key decisions must be taken by Russia to
controversial image in the world, and the learn how to capitalize on this); and move ahead with institutional reform,
Russian Government should do more to abundant natural resources. If used in create a better investment environment,
improve it. The market has overlooked the right way, these resources could help reduce red tape and fight corruption.
some important factors that have Russia address numerous development Meanwhile, foreign capital may be critical
become visible in Russia in recent years. challenges instead of weighing down on for large-scale infrastructure projects
For example, Russia is the only BRICS the country like the so called “resource such as the Sochi 2014 Winter Olympic
country that does not have any capital curse,” which is only too often the case Games or the 2018 FIFA World Cup. Such
flow restrictions. This makes the Russian with developing markets. undertakings are simply too large a claim
market more open to foreign investment. on the Government’s purse to be
Progress made by Russia while preparing financed by the state on its own,
for accession to the World Trade
A nice cushion considering their cost inefficiency and
Organization has not received due for the Russian the possible decline in oil prices in the
appreciation either. However, it is very economy would next six to eight years. A nice cushion for
important not only for the liberalization the Russian economy, which remains
of the Russian economy, but also be a stable heavily dependent on oil prices, would be
because international standards are inflow of long- a stable inflow of long-term foreign
capital and FDI.
playing an increasingly significant role in
this country (though legal matters and
term foreign capital,
the rule of law are still a matter of direct foreign investment. Incidentally, saying things like, “We don’t
concern to many foreign investors). need any short-term investment — give us
Speaking about Russia’s weaknesses in only the long-term capital in the form of FDI
Furthermore, we have recently seen comparison with the other BRICS instead” will hardly help Russia in achieving
some major improvements in corporate nations, demographics are one of them. its goals. Russia must improve the local
governance, which has never been Notwithstanding the recent years’ environment for portfolio investment,
Russia’s strong suit. In this respect, improvements in this area, population which will help attract long-term
Russia has always been behind other decline is still a formidable challenge for investment. According to our analysis,
countries, including other BRICS nations. Russia, as many investors regard there is a connection between these.
But Russian companies have recently demographic growth as a crucial
taken some important steps to modify prerequisite for long-term sustainable In general, although there is still a lot
their dividend policies, thus becoming development. Russia’s other issues are to be done in Russia, I am an optimist.
more open in many respects, including the low efficiency of production and However, given the inertia in perceptions
their financial reporting. labor, as well as inadequate investment. regarding the changes in Russia's
These issues are partly caused by the economy, our country, in certain cases,
Other advantages of Russia include a nation’s underdeveloped infrastructure. may have to put in more effort than other
stable macroeconomic situation; good nations to persuade investors that the
quality human capital (in terms of the Foreign capital plays an important, positive changes in Russia are viable and
quality of education and human though not decisive, role in the will continue.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 15
18. Russia takes a step forward
Russia’s world-class
natural resources
An abundance of natural resources contributors to the Russian economy. What are Russia's world-class features?
continues to be Russia’s most globally The country holds the world’s largest
Natural resources/oil/gas
competitive feature, according to 43% of natural gas reserves and second-largest 43%
survey respondents. Russia’s domestic coal reserves. Over half of respondents Large domestic market/large population
market comes a distant second (19%). (56%) expect Russia to still be an energy 19%
sector leader in 2020. Although energy High education level
Investors recognize Russia as a key global dominates the country’s economy, 10%
energy player and a large market. the Russian Government is trying to Leader in the energy sector
9%
reduce its reliance on revenues from the
Strong development/good economic potential
Two-thirds of Russia’s export receipts volatile oil and gas sector, while looking for 5%
come from the oil and gas sector. a more balanced economic growth model Famous for innovation/R&D
Extractive industries thus remain key for the future. 4%
Importance of the defense industry
3%
Good geographical location
3%
Cheap labor costs/low production costs
3%
Other
9%
Can't say
22%
Source: Ernst & Young 2012 Russia attractiveness
survey. Total respondents: 208.
16 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
19. Russia’s attractiveness:
strengths and areas for improvement
According to our 2012 European What are the most attractive features of the Russian economy?
attractiveness survey, in the current
Domestic market
environment, a country or region's domestic 74% 18% 8%
market is foremost in the mind of investors Education
when they consider an investment location. 65% 25% 10%
Stability, labor costs, skills and infrastructure Telecommunications infrastructure
are some of the other key factors they 64% 23% 13%
consider when deciding on an investment Labor costs
61% 24% 15%
location. In the 2012 Russian attractiveness
Local labor skills
survey, investors highlight Russia’s domestic 57% 28% 15%
market as its key strength. Education, Quality of life, culture, social environment and language
telecommunications infrastructure, labor 51% 42% 7%
costs and skills are also recognized as some Entrepreneurial culture
of Russia’s most attractive features. 49% 35% 16%
R&D availability and quality
47% 36% 17%
In terms of weaknesses, investors remain
Corporate taxation
concerned about Russia’s political, legislative 46% 27% 27%
and administrative environment; its transport Transport and logistics infrastructure
and logistics infrastructure; and limited 44% 45% 11%
incentives for sustainable development. Access to funding and local partnerships
The country’s leaders continue to emphasize 44% 35% 21%
the need to improve, while holding mixed Flexibility in labor law
44% 31% 25%
views in terms of innovation and an
Government initiatives on sustainable development
entrepreneurial environment in Russia.
35% 43% 22%
Political, legislative and administrative environment
Investors already present in Russia have 27% 62% 11%
more confidence in its economy. First, they
like Russia more because they understand Attractive Not attractive Can't say
the market better and are aware of the
elements that make the country attractive. Source: Ernst & Young 2012 Russia attractiveness survey. Total respondents: 208.
Second, investors have already crossed
the preliminary hurdles to enter the
Russian market.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 17
20. Russia takes a step forward
Viewpoint
Russia will become a more balanced economy than India or China
Alexei Kudrin, Chairman of the Committee for Civil Initiatives, Minister of Finance 2000-2011
Why are foreign companies that are but an imitation of one dominated by freedom and confidence, so that they feel
already doing business in Russia more state regulation, many procedures freer to appeal to state institutions for
optimistic about its investment climate there are set up better than in Russia. support and have greater trust in the
than those who haven’t yet entered the Take investment projects, for example. judicial system. Russia will follow this
Russian market? We don’t meet a In China, after reaching an agreement path and ultimately, I think, become a
number of standards that investors are with the central authorities, an investor more balanced market economy than
used to in other countries. They have to will face minimal problems. An investor India or China.
accommodate themselves to the specific can’t count on that in Russia. Here,
working styles of local and federal unfortunately, problems can arise at any For any BRICS country — Russia included
government bodies, and even individuals. — foreign investments are important.
They have to allow for the specifics of the But they are not decisive for successful
tax system and financial reporting, and Investors simply economic development, although
adjust to sometimes unaccustomed have to learn advanced technologies come along with
inspections. They don’t always the money, which is also very important.
understand the mentality and motivation
to manage and In recent years, China had fixed capital
behind decisions that are made here. But avoid specific investments of 30%–40% of GDP and
those who go through this “school” risks; and to higher, and the contribution of foreign
acquire an ability to resolve the issues investors accounted for approximately
facing them and, most importantly, earn devote a little more time 4% of GDP. In 2011, these figures were
a good income. Investors simply have to to this than usual. 48% and 1.5% of GDP (22% and 3% in
learn to manage and avoid specific risks; Russia). A few countries have foreign
and to devote a little more time to this investments totaling well over 10%,
than usual. I understand that big Western stage. In Brazil, there is probably no less but I wouldn’t say that these are
companies don’t like to deal with such economic crime than there is in Russia, stable countries in terms of their
fine points or with country specifics. but some market institutions function macroeconomic indicators. The main
They want everything to operate the way better there than they do in Russia. India source of investment is personal savings,
it does at home. Since they’re bringing is a very closed country. Building a deposits made by the population — and
money with them, they think everything business there is even harder. As in Russia is no exception.
should be done for them. But Russia Russia, obstacles can be encountered
doesn’t work that way yet. Even after a project has been launched. But its
businesspeople who go through this colonial past and the English language
“school” don’t always make everything bring India a little closer to Western
work. But half, or even more, do make it business in terms of mentality and the
work and are quite successful. legal system. Still, as strange as it may
seem, I believe most of all in Russia.
If we talk about Russia in the context of Russia will develop a more classical
the BRICS, it should be noted that these market model than China or India. In this
countries are all very different and hardly sense, we’re closer to Brazil. But we still
comparable. We lag behind in a number have a lot to do to make the political and
of respects. Although China isn’t a economic climate more competitive; to
market in the direct sense of the word, give market players a feeling of greater
18 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
21. Russia’s strengths
• Market opportunities • Higher education advantage Fifty-six percent of investors are attracted
Three-quarters of all respondents, and Two-thirds of the respondents cited to the availability of skilled labor in Russia.
85% of those already present in Russia, education as one of Russia’s competitive However, some respondents feel that
continue to be impressed with Russia’s advantages. The country’s population is there is a need to upgrade the skills of the
domestic market. With a population of relatively well educated, with a near 100% Russian labor force in order to take steps
more than 142 million,1 Russia is the ninth literacy rate and an exceptionally high toward a knowledge-based economy.
most populous country in the world and the tertiary enrollment rate of more than 75%. While outlining Russia’s long-term economic
largest in Europe. It also enjoys the highest Russia also produces one of the highest policy objectives earlier this year, President
GDP per capita (US$16,700) among all proportions of science and engineering Vladimir Putin promised to create 25 million
BRICS countries. As a result of rising wealth graduates in the world, well above the jobs for highly skilled workers by 2020.
levels over the past decade, 25% of Russia’s Organization for Economic Co-operation
population (nearly 40% of its workforce) and Development (OECD) average. • Solid telecommunications
is now part of the “middle class.” And Expenditure on higher education has more infrastructure
this percentage is growing. According to than tripled since 2005, reaching RUB390b Sixty-four percent of respondents list
the Ministry of Economic Development of (almost US$14.5b) in 2011. However, Russia’s telecommunications infrastructure
Russia, the middle class will grow to 37% of overall education spending still remains as an attractive feature. Russia has the
the population by 2020 and 48% by 2030. low compared with OECD levels. There is fourth-largest number of operational land
also a need to renew university curricula to lines and cellular phones in the world. In
The expansion of Russia’s consumer base respond better to the skill requirements of 2011, Russia also surpassed Germany to
was displayed in 2011 when it became the a market economy. become the largest internet user in Europe.
largest internet market and the largest
milk market in Europe.2 Therefore, many • Balanced labor costs and skills
international and domestic firms are now Investors come to Russia to find the right
investing in manufacturing and selling their balance between labor costs and skill levels.
products in Russia. According to industry Russia has the eighth-largest labor force in
estimates, the country is poised to become the world. In 2011, the average monthly
Europe’s largest consumer market by 2018. wage in Russia was US$806.40. Although
this is higher than in other emerging
1. IMF World Economic Outlook, April 2012. markets such as China, India and Mexico, it
2. Anna Krachenko, Ben Aris, “Russia's baby boom boosts
children's goods sector,” accessed via www.telegraph. remains substantially lower than Brazil and
co.uk, 12 June 2012; “Europe’s great exception: Why local
firms dominate the Russian internet,” accessed via www.
the developed economies.
economist.com, 14 November 2011; “Overview of European
Internet Usage in September 2011” press release, accessed
via www.comscore.com, 12 June 2012.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 19
22. Russia takes a step forward
Russia’s areas for improvement
• Political, legislative and • Infrastructure • Innovation and a culture of
administrative environment Respondents have mixed views on the entrepreneurship
Sixty-two percent of respondents consider current state of Russian infrastructure. Russia’s performance on most of the
that Russia’s political, legislative and While 45% do not find Russia’s infrastructure innovation performance indicators is
administrative environment needs attractive, 44% consider the transport and mediocre overall and poor when it comes
improvement. Russia’s ranking of 120 out logistics infrastructure to be an advantage. to indices that involve technical achievement
of the 183 economies in the World Bank’s According to the OECD, more than 60% of or economic incentives. According to the
Doing Business 2012 report3 confirms the federal and regional highways do not meet recent OECD Innovation Review of the
operating and administrative challenges regulatory standards. The World Economic Russian Federation,8 innovation in the
faced by investors in the country. Getting Forum’s (WEF), global competitiveness country suffers because of very low levels of
electricity, dealing with construction permits report 2011-20125 ranks Russia 130 R&D and relevant activities in corporations;
and trading across borders continue to be out of 142 for the quality of its roads. weak framework conditions for innovation;
complex and costly activities in Russia. An adequate transportation infrastructure and inadequate infrastructure. According
Uncertain property rights, red tape and is only available in urban areas such as to Ernst & Young’s G20 Entrepreneurship
corruption still pose a huge challenge for Moscow and St. Petersburg. Russia also Barometer report, respondents face a
investors in the country. ranks low (94) on the World Bank’s dilemma with respect to the country’s
overall Logistics Performance Index.6 culture of entrepreneurship. Half (50%) of
Russia’s agreement to join the WTO and Russia’s current level of containerization the Russian respondents did not agree that
a new round of privatizations could provide is approximately 4%, compared with the their culture encourages entrepreneurship,
partial reassurance, helping to open up emerging markets’ average of 15%. Russia while the other 50% agreed that Russia’s
Russia’s huge energy sector to foreign has the second-largest railway network environment for entrepreneurs is supportive.
investors. Also, internal tensions that arose in the world. Its railroad infrastructure also The same report also highlighted that access
after the elections now seem to be easing, fares well in the WEF global competitiveness to funding continues to be one of the most
and Russia is also changing its system of civil report,7 ranking at 29 out of 142 countries. significant challenges for the creation,
laws in September 2012. The new draft law growth and survival of small and medium
is designed to introduce fundamental changes Government spending on road and railway enterprises (SMEs), particularly innovative
to property rights, obligations, contracts, infrastructure is growing. The need to ones. Entrepreneurs also complain about
security instruments and intellectual property. renew transport and logistics infrastructure the lack of tax incentives to start a business.
Finally, although the Russian Federation has now become a political priority at the
ranked 120 in the World Bank’s Doing highest levels. Infrastructure spending is
Business 2012 report,4 it was still ahead of expected to increase further in light of the
Brazil (126) and India (132). upcoming 2012 Asia-Pacific Economic
Cooperation (APEC) summit, the 2014
Winter Olympic Games and the 2018 FIFA
World Cup, all to be held in Russia.
5. The Global Competitiveness Report 2011–2012, World
Economic Forum, p. 307.
3. Doing business in a more transparent world, World Bank, 6. “World Bank overall Logistics Performance Index: Russian
2012, p. 14. Federation,” accessed via www.worldbank.org, 11 June 2012.
4. Doing business in a more transparent world, World Bank, 7. The Global Competitiveness Report 2011–2012, World 8. OECD Reviews of Innovation Policy: Russian Federation
2012, p. 14. Economic Forum, p. 307. 2011, p. 1.
20 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
23. Viewpoint
Foreign capital enhancing Russia’s competitiveness
Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs
What should be done to improve the The priority measures to be taken right capital out of the country, foreign
investment climate in Russia? The now include the following: investors will either stay out of Russia or
question is far from simple. The acutest • Reducing the state’s involvement in the limit themselves to short-term
problems are the insufficient protection economy and leveling the playing field for investments of a speculative kind. We can
of property rights; administrative private and public companies now see this in our own case. Last year,
barriers; inconsistent legislation; • Reducing the fiscal burden on businesses direct foreign investments accounted for
difficulties in connecting to the power • Continuing efforts to improve the less than 10% of total investment, while
grid and obtaining construction permits efficacy and independence of judicial “other credits” accounted for over 70%.
as well as complicated and costly procedures And even the Federal Statistics Service
customs procedures. • Eliminating excessive administrative and the Bank of Russia cannot say what
barriers the proportion of foreign investments is.
Foreign • Promoting a formalized expert
examination procedure for all draft Alas, we have not yet become a quiet
investment regulations governing entrepreneurial harbor for a crisis period in the world
provides activities economy, and the situation is unlikely to
improve in the near future.
access to new Of course, this is not a complete list
production and of priority measures. But even Meanwhile, a lack of foreign investments
management technologies, implementing only these, will make it could make Russian economic
possible to dramatically improve the modernization too slow. Foreign
which are essential for business climate in Russia. investments provide access to new
further progress. production and management
A question that comes up periodically is technologies, which are essential for
Human resources are an even trickier how impartial our judges are when further progress.
issue, as foreign investors believe that considering disputes between domestic
Russia has enough of a qualified labor and foreign companies. According to the Here, it is enough to look at the auto
force, while Russian entrepreneurs take Russian Union of Industrialists and industry. Foreign investments changed
the opposite view. Entrepreneurs, there is no deliberate bias the rules of the game. As it turned out, it
here. Eighty percent of companies believe was not enough to make cheap cars to
The key to improving the business their chances of defending their rights are remain in the market; you also had to
environment is a balance between high and the results of a survey of Russian think about quality, design and
specific and universal measures. Some and foreign companies are virtually maintenance costs. The next leap
specific measures have either already identical. As regards disputes with control forward should be in the production of
been taken or are currently being and oversight bodies (including the tax auto parts, for which the foundations
implemented (special economic zones, authorities) or regional administrations, have already been laid out. Some new
Skolkovo). But this approach cannot be foreign companies are even more producers have appeared in Russia, who
applied to the challenges involved in optimistic. But we are now speaking make auto parts based on international
developing the financial market or be exclusively about courts of arbitration. standards, although the number of such
used to simplify the complex procedure companies is still smaller than we would
of connecting all Russian regions to the Foreign investors are very important for like it to be.
power grid at once. Large-scale economic modernization, but it is the
modernization requires universal national companies that have a key role to Success stories like this emphasize the
measures, and exempting new equipment play. If the latter do not invest in their importance of foreign capital in enhancing
from assets tax is only the first step. “native” economy and prefer to take their Russia’s ability to be competitive.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 21
24. Russia’s industrial
progress
Reality check #1 FDI destination in Central
and Eastern Europe.
4%
in 2011.
increase in job creation
36% decline in the number
of projects in 2011 — but their value
has increased.
92% of job creation
between 2007 and 2011 was due
to manufacturing activity.
78% of respondents already
present in Russia plan to maintain
or expand their operations in the
country.
42% of investment projects
are located in Moscow and
St. Petersburg.
22 Ernst & Young's 2012 Russian attractiveness survey Positioned for growth
25. Russia’s industrial progress
FDI in Russia in 2011:
larger projects
FDI projects decline but are still close to the pre-crisis level FDI jobs increase in 2011 after a continuous decline since 2007
201 14,934
170 -36% 12,900
+18% 11,834
139 143 -14%
+19% -8%
+3% 128 8,058 8,362
-32%
+4%
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Source: Ernst & Young's European Investment Monitor 2012. Source: Ernst & Young's European Investment Monitor 2012.
In 2011, Russia attracted 128 FDI projects, Russia remained the most successful nation After a continuous decline since 2007,
a decline of 36% on the previous year. in CEE at attracting FDI, and its average FDI job creation started to pick up in 2011,
Political uncertainty caused by the electoral project size continues to increase. This is mainly due to a rise in labor-intensive
cycle, coupled with concerns arising from mainly due to the comparative advantage of industrial activities. FDI projects in 2011
the escalation of the Eurozone debt crisis, Russia over the other CEE countries. generated 4% more jobs than the previous
made companies think carefully about year. The average project created 65 jobs
investment in the country.9 in 2011, up from a low of 40 jobs in 2010.
9. Oksana Teplinskaya, Kate Ryzhkova, “Russia Business
Report — EU leaders’ informal summit took place in
Brussels,” accessed via english.ruvr.ru, 12 June 2012;
Carol Matlack, “Country report: The Peril and Promise of
Investing in Russia,” accessed via www.businessweek.com,
12 June 2012.
Ernst & Young's 2012 Russian attractiveness survey Positioned for growth 23