Russia Capital Moscow Currency Rouble (RUR) Language Russian Population 142.89 million EU status Non-member GDP 2006 $733 billion Employment 93.4% Exports $317.6 billion f.o.b. (2006 est.) Imports $171.5 billion f.o.b. (2006 est.)

setting up business Number of days to start business 28 Cost (% of income per capita) 2.7% Nonwage labor cost (% of salary) 31% Total tax rate (% profits) 54.2%

Russia

Building for the future in Moscow

Russia’s economic development, from the “Wild East” to a major player in terms of the global economy, has been striking, and changes are still underway. In a country that spans 11 time zones, it is not surprising that the country is not one market, but several, and that some of these markets are considerably more developed, in terms of both fiscal and consumer sophistication, than others. Overall, the economy is fastgrowing but stable, displaying steady growth at an average of 6.7% over the last 15 years – GDP growth in 2006 was almost dead on average at 6.6%. Most of this growth, like much of the wealth, is concentrated in western Russia, particularly around Moscow and St Petersburg. Elsewhere, investment tends to be concentrated around natural resources, in particular the extraction of Russia’s large reserves of oil and gas, which are fuelling much of the economic growth.

FDI

FDI has dropped considerably over the last four years, down from $40 billion in 2003 to $26.3 billion in 2006, although some $5 billion has been invested over the first two months of 2007. There is no one dominant foreign investor, although the US is the largest single contributor, accounting for some 18% of all investment. Between them, the five major investors, the US, Germany, Finland, the UK, and France account for just under half of all foreign investment in Russia, whilst the rest is split between a number of smaller investors.

Sectors

The construction sector is booming

Russia is rapidly expanding the exploitation of its oil and gas reserves, and is consequently investing in the export of these materials. At least two new oil pipelines to the east of the country are due to be built within the next five years. Foreign investment in these sectors is likely to be subject to quota, however.

The manufacturing sector has attracted large numbers of FDI projects over the last five years – some 37% of new projects were in this sector. Retail, sales and marketing and support facilities were also investment targets. The US Commercial service recommends telecommunications equipment and services, computer hardware, pharmaceuticals and cosmetics as likely growth areas, where consumer spending will continue to grow on the back of Russia’s strong economic growth.

Legislative changes

The “Law on Foreign Investments” passed in 1999 grants foreign investors equal rights with Russian national companies with regard to property ownership, corporate governance and repatriation of profits. However, there are restrictions on foreign participation in certain sectors, which are subject to a quota system. These include the extraction of natural resources, aerospace and defence, and major construction projects. Particularly strict controls apply to the banking sector, where foreign banks are specifically forbidden to establish branches in Russia, although they may invest in Russian businesses, and in the insurance sector. A more detailed set of legislation that codifies investment practice in sensitive areas is currently being prepared, and it is hoped that this will allow greater investment in purely commercial projects.

Issues for investors

According to an article by Deloitte CIS, major issues for investors in Russia include transparency and the availability of independent information about existing companies. Russia has recently launched a five-year reform project, supported by a $50 million loan from the World Bank, that aims to increase the transparency, efficiency and accountability of the judicial process.

In addition, administration and bureaucracy are often reported as barriers in doing business in Russia. The corporate tax rate is capped at 24%, but some companies have reported difficulties in getting VAT refunded.

AMCHam Russia

The American Chamber of Commerce in Russia has over 800 members, making it the largest foreign business organization in the country.

The Chamber’s most important assets are its members. They are our clients, our workforce, and our strength. Our mission is to promote the development of commercial relations between the Russian Federation and the international community. We seek constructive solutions to trade and investment problems that protect and promote the legitimate common economic interests of our member companies. We do so with integrity and respect for our host country.

 

Contact IInformation

American Chamber of Commerce in Russia
Ul. Dolgorukovskaya 7,
14th Floor
Moscow 127006
Russian Federation
Tel.: +7 495 961 2141
E-mail: info@amcham.ru
Website: www.amcham.ru

 

Useful websites

moscow.usembassy.gov	US Embassy
www.buyusea.com/russia	US Commercial Service
www.napi.ru/enindustry	National Agency for Promotion of Investment
www.cbr.ru/eng	Bank of Russia – statistical information on economy
www.themoscowtimes.com	General news site, in English
www.visitrussia.com	Tourist and travel information

 

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