Russia is in 48th place in the Bloomberg ranking, out of 160 countries analyzed. Source: Getty Images
Russia is among the top 50 countries with favorable investment climates, according to the recent “Bloomberg Best Countries for Business” ranking, which measured conditions for attracting more foreign investment.
Russia is in 48th place in the Bloomberg ranking, out of 160 countries analyzed. It pushed ahead of its BRICS colleagues India and Brazil, which took 49th and 50th place, respectively. The survey took into account numerous economic indicators, from the degree of economic integration and the cost of setting up a new business, to the cost of labor and materials and the readiness of local consumers.
Business analysts expressed cautious optimism about regarding the report, which targets portfolio investors who are looking to maximize profits. Some international business observers said that a renewed commitment to Western business practices, stable incomes and low inflation all contributed to Russia’s improved status.
“Improving the investment climate in the country is a gradual process and it may take several years,” said Fedor Naumov, head of the research at the Moscow-based Kapital Asset Management LCC. “Nevertheless, there are some positive signs for improvements. Russian banks and some companies pledged to follow Western standards of doing business,” he said.
Yet the Bloomberg ranking is also controversial, since the 2011 World Bank report has Russia in 120th place in its report. Some analysts appeared hesitant to rely on the accuracy of the Bloomberg ratings considering such discrepancies.
Bloomberg and the World Bank rankings are not easily comparable because they utilized different criteria and different methodologies, according to Yevgeny Gavrilienkov, chief economist at investment firm Troika Dialog in Moscow.
“While the World Bank has a more complicated, complex approach in creating ratings, Bloomberg doesn’t have [the same] methodology. They just target portfolio investors,” he said.
Russia’s post-WTO economy
While the Bloomberg ranking is encouraging to some, companies that are doing business or considering business ties with Russia are also waiting for the results of the country’s WTO accession to kick in.
“In the short-term we won’t see any noticeable results from the accession to WTO as was the case with Ukraine which joined the WTO recently,” said Gavrilienkov. In the long term, the investment climate may be improved. However there are hardly likely to be radical changes.”
The Bloomberg ranking could well encourage new investors to take the plunge into the Russian market and take advantage of stable incomes and the low level of inflation in 2011. “Russia has a comparably big income per capita thanks to the well-developed oil industry,” Naumov said. “Investors may take it into consideration because the more income people have, the easier for investors to promote certain production. In addition, foreign companies may take into consideration the forecasts of Russia’s future economic growth.”
Bernard Sucher, a member of the Board of Directors at Aton Group, said that foreign entrepreneurs have been investing in Russia despite the lack of favorable business conditions. “Russia's shortcomings may be serious, but they have not stopped thousands of companies, domestic and international, from building strong and profitable businesses over the past two decades,” he said. “The evidence of one's own eyes says that Russia doesn't belong at the bottom of any global ranking assessing investment climate or opportunity.”
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