Evaluation of Russia’s business environment by foreign investors

The survey «Evaluation of Russia’s business environment» conducted by Russian Union of Industrialists and Entrepreneurs (RSPP) and FleishmanHillard Vanguard saw significant improvement of Russia’s business climate assessment by foreign businesses. 23% of the respondents think it improved in the past year which is almost 4 times higher comparing to a year ago when this index was evaluated at 6%.

Every year RSPP conducts a survey on the status of business climate in Russia. Since 2011 the survey features a section on foreign investors’ evaluation of Russia’s business environment. The section is prepared by FleishmanHillard Vanguard (part of Orta Communication Group), one of the leading consultants in strategic communications in Russia and CIS.

Alexander Shokhin, President, RSPP: «The survey on evaluation of Russia’s business environment by foreign business has been conducted by RSPP and FleishmanHillard Vanguard for 6 years now. The data accumulated during this time shows that, despite temporary difficulties and obstacles caused by economic and socio-political factors, foreign business remains optimistic about the Russian market and, giving conditions of certain stability and predictability of external factors, is ready to invest and work in the country. Positive sentiments are reflected not only in higher assessments of the Russian infrastructure, but also in the continuation of social projects conducted by the foreign business both independently and in cooperation with the authorities».

Elena Fadeeva, General Director FleishmanHillard Vanguard, President Orta Communication Group: «Foreign investors noted significant improvement of Russia’s business environment compared to the previous two years. The share of respondents who positively assess the dynamics of the Russian business environment increased almost fourfold – to 23% compared to 6% in 2015. At the same time, the share of the pessimistic estimates significantly decreased to 53%, compared to 77% in 2015 and 82% in 2014. Also investors noted a more stable political environment that 2 years ago: there was a peak of negative influence of political instability noted by 82% of foreign investors as a key factor in 2014 which decreased dramatically to 29% both in 2015 and 2016. Another interesting trend unveiled by the survey is a change in how foreign businesses interact with the government bodies in Russia.  There is a decrease in personal contacts to 80% in 2016 from 88% in 2015 and a growth in communication through business and industrial association (79% in 2016 and 77% in 2015) and through various public hearings and round tables (47% in 2016 and 41% in 2015) and work in advisory bodies (30% in 2016 and 24% in 2015)».

The most acute problems in the development of Russia’s business environment were noted as the lack of qualified personnel (47% in 2016, 49% in 2015, 27% in 2014), high administrative barriers (47% in 2016, 41% in 2015, 27% in 2014) and price increases (45% in 2016, 55% in 2015 and 2014). Significant but smaller roles were played by governmental corruption (35% in 2016, 34% in 2015, 18% in 2014), insufficient protection of property rights and contract rights (29% in 2016 and 29% in 2015, 36% in 2014).

Comparing to 2015 foreign business significantly increased the assessment of unfair competition as a factor hampering the entrepreneurial activities in the country. In 2016 it was noted by 29% of the respondents, which is almost 6 times more than the results of 2015 survey (5% in 2015, 9% in 2014).

The improvement of the economic situation also influenced the assessment of the state of the infrastructure needed to conduct business. In 2015, the average estimate for the Russian infrastructure was 3.97 points out of 7, while in 2016 it increased to 4.34 points, which is the highest estimate for the entire period of conducting the survey.

Speaking about specific infrastructure elements, the highest ratings were received by such areas as airports (5.4 points in 2016, 5.4 points in 2015), telecommunications (5.5 points in 2016, 4.7 points in 2015), electricity (4.9 points in 2016, 4.4 points in 2015 ), heating systems (4.8 points in 2016, 4.4 points in 2015), railways (4.5 points in 2016 and 2015), gas supply (4.6 points in 2016, 4.5 points in 2015), water supply and sanitation (4.5 points in 2016, 4.4 points in 2015) and the banking system (4.4 points in 2016, 3.5 points in 2015).

The foreign business assessment of almost all infrastructure elements improved comparing to 2015. The only exceptions were educational institutions (3.4 points in 2016), road and highways (3.5 points in 2016) and affordable real estate and land (3.2 points in 2016), which showed a decrease of 0.9, 0.3 and 0.1 points, respectively.

The survey showed the continuation of foreign businesses’ social projects in Russia. 60% of the respondents provided assistance to regional authorities and municipalities in the social development of the regions in 2016 (65% in 2015). The main directions for social projects conducted by foreign business were social programs for the company’s employees (78% in 2016, 56% in 2015), youth social corporate projects (56% in 2016, 47% in 2015) and assistance to specific social institutions that are not on the company’s balance sheet (78% in 2016, 59% in 2015). At the same time, 88% of respondents finance such projects through their own social programs (65% in 2015), and 50% through charity funds (53% in 2015).

Speaking about the factors that can stimulate foreign companies to do business in accordance with principles of social responsibility, respondents noted an increase in the transparency of processes (60% in 2016, 69% in 2015) and overcoming the practice of excessive regulation (50% in 2016, 27% in 2015).

The survey «Evaluation of Russia’s business environment» has been conducted since 2011. It features questions on foreign businesses dispositions, Russia’s business environment, its prospects and the current problems that foreign businesses face. The results reflect the cross-section of opinions of market players on the current state of the business climate and compared with the data from last year’s study. The participants of the survey are companies active in such industries as manufacturing, energy, wholesale and retail trade, hotels and restaurants, transport and communications, financial services, real estate, agriculture and forestry, education, health and social services.