Russia is the world's largest country in terms of territory, with a consumer market of over 140 million people, vast natural resources, a highly educated workforce, and technologically advanced research and production capabilities. Russia has tremendous growth potential. Investment opportunities exist in every region and in every sector of Russia's economy, with a wide array of government institutions, instruments and investment programs, as well as strong support for investors at all levels — federal, regional and municipal.
1. Dynamic Economic Growth
- Russia boasts one of the most dynamically developing and attractive economies in the world. Since 1999, GDP growth has averaged 6.8% per year and reached 8.1% in 2007 (compared to 4-5% average world economic growth). Thanks to the strengthening ruble, in dollar terms the 1999-2007 GDP growth was an astounding 26% per year, far outstripping international growth rates.
Gross domestic product (growth rate, %)
| Country | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
|---|---|---|---|---|---|---|---|
| World | 2.5 | 3.1 | 4.0 | 5.3 | 4.8 | 5.4 | 5.2 |
| Russia* | 5.1 | 4.7 | 7.3 | 7.2 | 6.4 | 7.4 | 8.1 |
| Middle East | 3.0 | 4.0 | 6.6 | 5.6 | 5.4 | 5.6 | 5.9 |
| Central and Eastern Europe | 0.2 | 4.5 | 4.8 | 6.7 | 5.6 | 6.3 | 5.8 |
| Newly industrialized Asian economies | 1.2 | 5.5 | 3.2 | 5.9 | 4.7 | 5.3 | 4.9 |
| European Union | 2.1 | 1.4 | 1.5 | 2.7 | 2.0 | 3.2 | 3.0 |
| Developed economies | 1.2 | 1.6 | 1.9 | 3.2 | 2.5 | 2.9 | 2.5 |
Source: International Monetary Fund, *Russian Statistics Service
- Other main economic indicators also outstripped global trends in developed and most developing economies:
Main economic indicators (growth rate, %)
| 2004 | 2005 | 2006 | 2007 | |
|---|---|---|---|---|
| GDP | 7.2 | 6.4 | 7.4 | 8.1 |
| Industrial production | 8.3 | 4.0 | 4.4 | 6.3 |
| Capital investments | 13.7 | 10.9 | 13.7 | 21.1 |
| Real personal disposable income | 10.4 | 12.4 | 13.3 | 10.4 |
| Retail trade turnover | 13.3 | 12.8 | 13.9 | 15.2 |
- In the recent European Attractiveness Survey, Russia leapt to fourth position for jobs created and moved from 13th to 8th for number of projects. Russia scored this year's sharpest climb up the attractiveness ladder - up nine points.
Retail trade growth (% to previous year)
| 2003 | 2004 | 2005 | 2006 | 2007. |
| 9 | 13 | 13 | 14 | 16 |
2. One of the Largest Consumer Markets
Consumer activity has contributed to dynamic growth in trade, retail, telecommunications and services on the back of rising incomes and the development of consumer lending.
- Russia has over 140 million people, whose incomes are increasing every year
- High consumption, spending will and capability
- Large untapped potential
- Russia was ranked third among developing countries in the A.T. Kearney Retail Trade Index 2008.
- Russia has become the largest automotive sales market in Europe as of 1H 2008 sales results (PricewaterhouseCoopers study).
3. World-Renowned Human Capital
Russia offers access to a skilled and well-educated human resource pool, letting companies recruit where they work.
Russia has one of the most highly skilled workforces in the world, backed by an educational system with a solid global reputation and producing professionals who take up leading positions in areas such as natural and applied sciences, programming, R&D, engineering, etc.
The government has begun implementing a program aimed at finding tomorrow’s leaders and providing priority support to them.
Two business schools have been created in St. Petersburg and Moscow to provide the country with highly professional personnel. The Graduate School of Management in St. Petersburg was set up on the model of leading foreign business schools (Harvard, Stanford and London), while the Skolkovo Moscow School of Management is a new educational center created with the help of public-private partnership. Also, a large Siberian University and Southern University are being created on the basis of a number of regional educational and research institutes.
Russia offers:
- A knowledge-based economy
- A highly educated workforce
- Strong scientific and research base
- Extensive R&D and engineering facilities and practice.
"If you are searching for Eldorado in the sphere of science and technology, take a close look at Russia."
George Schultz, former Secretary of State of the United States
4. Vast Natural Resources
- 32% of explored world reserves of natural gas (1st place)
- 35% world gas production and exports (1st place)
- 1st place in oil production and 2nd place in oil exports
- 18% of world reserves of oil (7th place)
- 23% of explored world reserves of coal (1st place)
- 47% of world reserves of peat (1st place)
- 23% of world forest resources (1st place)
- 1st place in sodium salt reserves and 2nd place in potassium salt reserves
- 1st place in drinking water reserves and 2nd place in fresh water reserves
- 1st place in the stocks of pollacks, crabs and sturgeons in the 200 mile economic zone and 2nd – 3rd place in the stocks of codfish, herring, capelin, polar cod, salmon, etc.
- 1st place in world explored reserves of tin, zinc, titanium and niobium
- 1st place in world reserves and production of nickel ore and refined nickel
- About 28% of explored world iron ore reserves (1st place)
- 1st place in steel exports and 3rd place in exporting rolled metal products
- 1st place in primary aluminum production and exports
- 1st place in nitrogen fertilizer exports, 2nd and 3rd place in the exports of phosphate and potash fertilizers, respectively
- 1st place in world diamond reserves and 2nd place in world diamond production
- 1st place in actual volume of diamond exports
- 1st place in explored world silver ore reserves
- 2nd place in explored world gold ore reserves
- 2nd place in explored platinum ore reserves and 1st place in exports of platinum ore
- 3rd place in explored world copper and lead reserves
- 3rd place in explored world wolframium and molybdenum reserves
- 10% of world reserves of uranium (9th place)
- 40% of world reserves of nickel
- One of the biggest world reserves of fresh water
- 1st place in the world in per capita natural resources
5. Unique Geographic Position
- Russia links Europe with Asia and also borders the North American continent, offering the following advantages:
- Worldwide sea routes — Russia is bounded by three out of four world oceans
- Major functioning and planned airport hubs
- Rail and road transit routes (leads the world in length of electrified railroads)
- Pipelines, developed networks of various types of warehousing facilities
- Other transport and logistics infrastructure.
- Russia’s geography facilitates building effective international and domestic supply-production-market chains.
- Geographically diverse federal districts and regions offer distinct competitive advantages and favorable investment-attraction policies.
6. Technologically Advanced Economy
Strong Russian scientific knowledge provides excellent opportunities for R&D partnerships with Russian research institutes and universities.
While Russia possesses some of the largest oil and gas reserves in the world, some of them have become harder to recover. This is a great opportunity to introduce innovative technologies to develop new gas and oilfields.
Additionally, critical technological areas are eligible for government co-financing on a competitive basis to facilitate research and development of innovative capabilities and leading technologies in:
- Aerospace
- Aviation
- Shipbuilding
- Automotive
- Machinery
- Metallurgy
- Construction
- Chemistry and pharmaceuticals
- Nuclear physics
- And many more.
Interesting fact: Russia leads the world in the number of annual spacecraft launches.
7. Attractive Taxation System
With a personal income tax rate of 13% for residents, corporate tax rate of 24%, and VAT rate of 18%, Russia has one of the most generous non-offshore tax regimes in the world, aimed at promoting investment and further developing the economy.
Russia has recently introduced a European-style participation exemption regime that exempts dividends received from qualifying participations.
In addition, the capital gains tax is currently scheduled to go to 0% in 2010, and reorganization for companies is tax-neutral according to the Russian Tax Code.
The Russian Tax Code is one of the most comprehensible of such codes in the world. And thanks to ongoing improvements, as well as a policy of resolving contradictions and ambiguities in tax legislation in favor of the taxpayer, the tax system is becoming increasingly oriented toward the investor.
Tax reform continues to move forward in Russia, with a noticeable reduction in the frequency of onsite tax audits from once a year to once every two or three years, according to Ernst & Young's 2008 survey of taxation issues in Russia. Respondents this year noted a dramatic reduction in the number of reported tax disputes being taken to court (65% versus 82% last year). A considerable majority (89%) of reported cases which went to court judgment continue to be settled in favor of the taxpayer.
See also: General taxation system
Personal income tax rates
VAT rates, 2008
8. Extensive Government Support
Investment in the Russian economy is accelerating, thanks to significant revenue growth and initiatives such as the Investment Fund and Special Economic Zones, with total capital investment reaching RUB 6.6 trillion in 2007 — a growth of 21% from the previous year. The Russian government works jointly with the business community through forums such as the Foreign Investment Advisory Council to further enhance the Russian investment climate.
Russia offers:
- Public-private partnership programs
- Concessions
- Existing infrastructure, large investment and development programs
- New institutional instruments:
- Development Bank of Russia (Vnesheconombank)
- Investment Fund of Russia
- Russian Special Economic Zones
- Russian Venture Company
- Russian Agricultural Bank
- Industrial Assembly
- Law on Concessions
- And more.
See details: Goverment Support
9. Stable Social and Political System
Following a transition period, the Russian economy has achieved macroeconomic and financial stability. Living standards have been steadily improving, with per capita GDP topping US$10,000 in recent years.
- Strong macroeconomics:
- World's 7th largest economy by purchasing power parity (2007)
- World's 3rd highest foreign exchange reserves (current)
- Significant government Reserve (US$140.98 bln.) and National Welfare (US$48.68 bln.) Funds
- Politically stable system:
- Long period of prudent economic and social policies
- Respectful and fair foreign relations policy
- Russia is a member of G8, the United Nations, APEC, SCO, and the CIS
- Social stability and nationwide support:
- Government approval rates are some of the highest among the world's leading democracies
- Steadily rising quality of life
- Prudent social policy devoted to improving all aspects of quality of life
- The country has a tolerant multi-ethnic, multi-cultural and multi-confessional population.
Why Russia?