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A huge market, abundant natural resources and a highly educated workforce are just three of the reasons businesses should look to operate in the Russian economy. “Russia has recovered quickly from the pandemic-related downturn, and it has recently been ranked in 11th place among Europe’s top investment destinations,” says Reta Alshundba, International Business Centre Director at Grant Thornton Russia.
“Our GDP returned to its pre-Covid level in the first half of 2021. We have a stable political background and well-developed infrastructure in our major cities. Additionally, there are a host of opportunities to participate in large-scale infrastructure projects across the country.” With a total population approaching 150m, Russia presents a significant market opportunity, Reta adds.
The most important and fastest growing sectors of the Russian economy are energy and fuels, IT, pharmaceuticals and agriculture, Reta says. The sheer size of the country means it has a wealth of resources ranging from hydrocarbons and minerals to forests. However, the importance of oil and gas to the Russian economy mean that it can be vulnerable to short-term price fluctuations.
Foreign and international companies that are present in Russia operate in a wide range of sectors, such as manufacturing of consumer goods and industrial products, energy and natural resources, healthcare and pharmaceuticals, trade, transportation, financial services, the automotive industry, and agriculture.
There are also likely to be significant opportunities for businesses which can help Russia make the transition to a low-carbon economy in the years ahead.
The Moscow government has stepped up efforts in recent years to make it more straightforward to set up and run businesses in Russia. Legislation has resulted in shorter waiting times for construction permits, for example, and the procedures around electricity connections have been simplified and speeded up.
There has also been a strong commitment to digitalisation of the state bureaucracy, for example in terms of tax reporting and payroll as well as in online customs clearance. At present, the corporate tax rate stands at 20%.
“Russia ranked 25th in terms of getting credit in the 2021 Doing Business survey,” Reta says. “And overall the availability of finance – and the ease with which it can be obtained – is good. For example, Bank of Russia research found that 85% of SMEs which raised bank loans from April 2020 to May 2021 were satisfied with the service.”
She adds that a major bureaucratic hurdle for businesses has been the large number of regulatory oversight bodies and audits they can request. “But Russia is currently carrying out control and oversight reform and preparing a unified register of control procedures. This is intended to help to reduce the administrative burden on businesses.”
Meanwhile, the Foreign Investment Advisory Council (FIAC) is a partnership involving government as well as 53 international companies and banks. The council works to improve the investment climate in Russia using global best practice.
Alshundba also notes the strong government support for international trade. “The Russian Export Center is a state-owned institute established by the government to support the development of non-commodity exports,” she explains. “It offers a wide range of financial and non-financial support tools to benefit Russian exporters. Meanwhile, the Russian Ministry of Communications and Mass Media provides special support measures to exporters of ICT services.”
These include plans to simplify export processes for IT developers, and support for exhibitions and fairs organised to promote Russia-based IT companies to an international audience.
Access a world of resources, connections and expertise to help your international plans
Selling into, supplying or setting up operations in Russia can be a step into the unknown. At Grant Thornton, we have the experience to guide you. Our Russia International Business Centre director can co-ordinate access to international teams, resources and global delivery, while also helping you forge valuable trading relationships in the Russian market.