Evaluation of Russia’s business environment for 2017

The seventh annual report «Evaluation of Russia’s business environment» conducted by the Russian Union of Industrialists and Entrepreneurs and FleishmanHillard Vanguard / Orta CG shows positive or somewhat optimistic outlook as more and more foreign businessmen working in Russia see positive changes in the country’s business environment.

For the past year, Russia’s business environment has improved quite noticeably, as evidenced by the 33% of the report respondents who saw positive dynamics of the investment climate in the marketplace. In earlier years this evaluation rate was significantly lower – 23% in 2016 and 6% in 2015. The share of pessimistic views decreased by more than 2 times compared to 2016 and made up 22% against 53% in the previous year.

As Elena Fadeeva, FleishmanHillard Vanguard General Director, Orta Communication Group President, said: “The evaluation of the Russian business climate has raised up to the level of 2013, a year before the recession. In 2017 the number of negative respondents made up 22% which is almost equal to the data of 2013 (23%) while the rest of evaluations remained neutral or positive. Foreign investors look at the Russian business climate from the global perspective comparing it with other countries and regions many of which show instability and forces of uncertainty. International investors are quite positive about the current state of the Russian infrastructure necessary for business management – the average estimation reached 4.68 points (out of 7 points) which is a record-breaking level since 2011. This unprecedented optimism expressed by the foreign companies for the past 7 years is a positive sign for further investments in 146,8 million people country”.

Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs added up: “There was an obvious rise of the positive attitudes of foreign business towards Russian business environment as evidenced by the seventh annual report. Taking into account existing difficulties, foreign enterprises still acknowledge some progress in regard to the level of cooperation between business and public authorities which inspires optimism».

However, on the path of investment there are several certain problems that worry businesses doing business with Russia – the lack of key personnel was highlighted by 67% of respondents (47% in 2016), public authorities’ corruption – as stated by 56% of survey participants (2 times higher compared to previous year), high administrative barriers traditionally receiving high grades was outlined by 48% of respondents. In 2017, only 14% of interviewees named political uncertainty as a limitation factor, while in 2014 this number was a record-high and amounted to 82%.

The most perspective industries turned out to be telecommunications (6 points in 2017 and 5,5 points in 2016), heat supply (5,7 points in 2017, 4,8 points in 2016). Banking and airports also received high ranks in 2017 while education and highways showed the most positive dynamics (4,7 points in 2017, 3,5 points in 2016).

The sector of real estate was put aside (3,4 points in 2017, 3,2 points in 2016) nevertheless keeping positive dynamics. All other sectors such as exchanges, water and gas supply, railroads, insurance, power supply networks and leasing received above average marks and were given no less than 4.1 points. In particular, the state of the road system has improved significantly (4.7 points in 2017 against 3.5 in 2016) as well as educational institutions (5 points in 2017 against 3.4 points in 2016).

Talking about factors stimulating doing business under the principles of corporate social responsibility respondents pointed out “raising transparency of business processes” (67% in 2017, 60% in 2016) and “tax preferences for socially responsible entrepreneurs” (58% in 2017, 45% in 2016).

International countries doing business with Russia tend to stake on the engagement in social programs implemented by the federal authorities – this indicator increased by 3 times compared to the previous year (74% in 2017, 25% in 2016). At the same time foreign investors in 2017 became less involved in the regional social programs – the share of companies helping regional authorities reduced to 44% compared to 60% in 2016. Implementation of social corporate projects for young people (59% in 2017, 56% in 2016) and education programs for children (57% in 2017, 56% in 2016) were the key focus areas in the past year. Implementation of social programs for company’s employees has significantly lost its positions compared with the previous year (59% in 2017, 78% in 2016) nevertheless remaining among the priority areas.

It seems like foreign business changed their priorities in regard to the use of instruments for cooperation with public authorities – “personal contacts” received significantly less marks – 76% of respondents compared to 80% in 2016. Almost all respondents (98% in 2017, 79% in 2016) gave their votes to “business-associations and industry organizations” as a key instrument to build cooperation with the public authorities. “Public and collective discussions with government officials” was outlined by 47 % of respondents while “working in consultancy structures” – by 31% in 2017 (30% in 2016)».

The annual report on the current state of business climate in Russia «Evaluation of Russia’s business environment» presents cross-section of opinions of both local and foreign market players on Russia’s business environment, its prospects, current challenges and barriers. A special section unveils foreign investors’ attitudes towards various business, economical and political issues and gives valuable insights to foster foreign investments into Russian economy. 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.