2013 Assessment of the Russian Business Environment by Foreign Companies

Representatives of foreign businesses gave neutral/positive and neutral assessments of the business environment in Russia in 2013. According to the study “Assessment of the Russian Business Environment by Foreign Companies” carried out by the Russian Union of Industrialists and Entrepreneurs and FleishmanHillard Vanguard, 42 percent of the respondents noted insignificant improvement in Russia’s business climate, while 29 percent said there was no change. 23 percent of the respondents thought the business environment has gotten worse, with 15 percent describing the deterioration as insignificant and 8 percent saying it was substantial.

The study of business environment in Russia is conducted by the Russian Union of Industrialists and Entrepreneurs every year. Since 2011, the study has been supplemented with a survey of companies operating in Russia that have capital participation of foreign investors. The survey is conducted by communications agency FleishmanHillard Vanguard.

50 percent of the respondents named lack of qualified personnel as the main difficulty in running a business in Russia, an increase from 27 percent last year. Corruption (rise to 45 percent from 42 percent) and insufficient protection of property and contract rights (40 percent from 33 percent) were also in the top three.

Compared to the 2012 results, there has been a marked increase in respondents who complained about interferences from the tax authorities (54 percent from 36 percent). Also noted were interferences coming from the Licensing Body (50 percent from 41 percent), the Federal Consumer Protection Service (41 percent from 34 percent), regional authorities (41 percent from 32 percent) and the Federal Environment Agency (27 percent from 20 percent). The level of interference coming from the Federal Customs Service (48 percent) and the Migration Service (29 percent) remained virtually unchanged. The Federal Antimonopoly Service (17 percent from 20 percent) and the Health and Social Development Agency (15 percent from 20 percent) were described as less intrusive this year.

Representatives of foreign businesses in Russia continue to give average assessments to the state of the infrastructure needed to run a business. Respondents gave the average score of 4.1 out of 7 points to the state of infrastructure in 14 various sectors, a slight improvement from 2012 (4.0 points). Telecommunications received the best score with 4.8 points; railways were rated at 4.7 points, while gas infrastructure received 4.7 points. Accessibility of land and real estate was rated at a low 2.3 points, while the banking system received 3.9 points, a decrease from last year’s 4.4 points.

At 73 percent, personal contacts were described as the most important factor in conducting relations with government authorities, while business and industry associations were named by 69 percent of respondents, a marked increase of 10 percent over the last two years.

The results reflect the increasing social responsibility of Russian businesses, with the average social responsibility score growing from 3.5 points in 2011 to 3.8 points in 2013. The share of companies supporting social projects in their regions grew from 46 percent in 2012 to 56 percent in 2013. 52 percent of the respondents named cleaning of the municipal territory and planting trees as their way to support social development of the region, an increase from 33 percent in 2012. The share of companies running educational programs for children also increased (41 percent from 13 percent), as did the share of companies providing assistance to underprivileged citizens related to the company (28 percent from 8 percent).

More companies chose partnerships with government structures and non-profit organizations as a mechanism for financing and implementation of their corporate social responsibility programs (38 percent from 29 percent), while the use of socially-orientated marketing rose to 32 percent from 29 percent.

The study “Assessment of the Russian Business Environment by Foreign Companies” is conducted since 2011. Respondents are asked to answer questions on the state of business climate in Russia, its perspectives and current challenges. The report represents a sample of views on the current state of the business environment and a comparison with the results of the previous year. Participants in the survey work in industries including manufacturing, energy, wholesale and retail, hospitality, transport and communications, financial services, real estate, agriculture and forestry, education, health and social services.

The Russian Union of Industrialists and Entrepreneurs is an all-Russian organization representing interests of the business community. It has over 320,000 members representing industrial, scientific, financial and commercial organizations in all regions of Russia. Companies represented in the RSPP collectively produce over 60 percent of Russia’s GDP. RSPP has over 100 industrial and regional associations representing key sectors, including energy, engineering, banking and investment, military-industrial complex, construction, chemical industry, light and food industries and the service sector.