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Investment In Russian Industry

Investment In Russian Industry. Deputy Minister for Economic Development and Trade of the Russian Federation A. Sharonov. Average Annual Growth Rates for the Period, % 2001-2005 2006-2010 Gross domestic product (GDP) 6 . 1 6 . 3

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Investment In Russian Industry

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  1. Investment In Russian Industry Deputy Minister for Economic Development and Trade of the Russian Federation A. Sharonov

  2. Average Annual Growth Rates for the Period, % 2001-2005 2006-2010 Gross domestic product (GDP) 6.1 6.3 Capital investments 9.9 12

  3. Federal Law No. 65FZ of May 1, 2007 “Concerning Changes in Federal Law on Technical Regulation”: - obligates making use of international standards when developing draft technical regulations; - specifies a procedure for technical regulations approval; - singles out 17 priority regulations to be adopted before January 1, 2010.

  4. Improving legislation on the use of natural resources: - newly amended Water and Forestry codes have been adopted and taken effect from 2007; - a draft law”Concerning Amendments to RF Law on Subsoil Resources” is being finalized; - amendments to draft laws regulating specific use of subsoil plots in internal sea waters, territorial seas, and continental shelf areas are to be drafted during 2007; - a concept of the Ecological Code of the Russian Federation is being elaborated; - industry regulatory acts have been drafted.

  5. Lowering administrative barriers in the economy - administrative regulations: - define timelines for and sequence of steps in making decisions by executive bodies when responding to enquiries of individuals and legal entities or in executing powers assigned therewith; - adoption of administrative regulations will help to make responsibilities of executive bodies more clear and straightforward, and introduce efficient controls and evaluation of their performance; - administrative regulations will be conducive to the creation of single information environment under the ‘electronic government’ program In 2006, 170 administrative regulations were elaborated; in 2007, it is planned to work on more than 300 documents

  6. Improvement of tax system will contribute to investment appeal of the economy: - reduced tax burden on the economy; - tax incentives for investments and innovations; - better tax administration; Improvement of customs system by way of harmonizing Russian legislation with international conventions: - improve regulation of transit procedure; - introduce a single form of a customs document; - get prepared for the introduction of ‘authorized consignee’

  7. Foreign Investment Advisory Council (FIAC) • in Russia – working groups: • - State Regulation; • - Tax & Accounting; • - Financial Institutions & Capital Markets; • - Food & Agriculture; • - Natural Resources; • - Industry, Construction and High Tech; • - Image of Russia; • - PPP in Transportation Sector Task Force; • - Customs Task Force. created in 2007

  8. About Current Investors • More than two-thirds of their companies have global sales over $1 billion, including 24% that have sales over $50 billion. • 51% of the companies that responded are head-quartered in the U.S., 36% are in Western Europe, 4% are in Asia. • 31% entered the Russian market before 1991; 23% entered within the past eight years. • In 2006, 58% invested over $10 million each in the Russian market, including 38% that invested $50 million/more. • More than two-thirds (70%) say they invested more in Russia in 2006 than in 2005.

  9. Headed in the right directionDifficult to sayGotten off track in past year Investment climate in Russia over past year Russian Economic Policies and Laws that Encourage Foreign Investment Current Investors Potential Investors

  10. Russia’s Integration Into The Global Economy * zero-to-ten scale Current Investors Potential Investors

  11. Majority Satisfied With Investment In Russia Company’s Level of Satisfactionwith Decision to Invest in Russia Current Investors Low (0-4)* High (8-10)* Mixed (5)* Medium (6-7)* * zero-to-ten scale

  12. Return On Investment Assessment of Russia’s Return on Investment, as Compared with Emerging Markets in General Current Investors Potential Investors

  13. Key Economic Factors Russia’s Top Economic Strengths Increasing consumer purchasing power Growing GDP Skilled, well-educated labor force

  14. Messages About Russia’s Advantages Extremely/Quite Persuasive Reason For Investing Large consumer market with expanding credit, increased saving, rising income; in top third in per capita GDP Stable economy with sustained GDP growth, expanding consumer credit, trade surplus, inflation under 10% in 2006 Current foreign investors rate highly as place to invest, with good returns/profits and strong/growing market for goods/services Highly educated work force, high productivity from executive professionals to skilled laborers

  15. Investment Risks Assessment of Investment Risks in Russia, as Compared with Emerging Markets in General Current Investors Potential Investors *2% not sure for both

  16. Corruption Bureaucracy andred tape Corruption Bureaucracy and red tape Security and protectionof property rights Inconsistent applicationof legislation Lack of enforcement andprotection of businessrights 65% 58% 65% 51% 35% 27% 27% Negative Investment Factors Current Investors Potential Investors Major Factors Medium Factors Inconsistent applicationof legislation Licensing/administrativeprocedures Rule of law and judicial system 37% 35% 26%

  17. More reassured No impact More concerned Media Coverage Is HavingA Negative Impact How has what you have heard or read about Russia in the media in the past 12 months made you feel about the country’s investment climate? Current Investors Potential Investors

  18. High level of confidence (5-7)* Low level of confidence (1-3)* *one-to-seven scale Confidence In Russia’s Potential Confidence in Russia’s Ability to Become One of the Premier Countries in the International Market Current Investors Potential Investors

  19. Conclusions 1. Proactively tell Russia’s positive story. • Promote the country’s economic success • Promote the consumer market • Promote the labor force • Promote the availability of country’s energy sources for growth and production

  20. Conclusions 2. The State has to make more consistent and strong effortsin addressing corruption and bureaucracy

  21. Conclusions 3. Re-energize joint efforts ofinvestors and government in encouraging FDI

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