Economists: investors will leave Russia if the business climate does not improve

Economists: investors will leave Russia if the business climate does not improve


Of the British consulting company conducted a study whose results show that some investors try to turn the crisis to your advantage and to expand our presence, but it is necessary that conditions for business in Russia has improved.

LONDON, 19 Oct. Denis Voroshilov. Part of foreign investors trying to use the crisis to expand its presence in Russia, however, if the business climate in the country improves, more and more companies will think about reducing the activity on the Russian market, according to British consulting firm Global Counsel.

On Monday, the company released another study that estimated that, as large foreign investors see Russia’s economic prospects, whether they are committed to working in Russia, as well as how do you evaluate the Russian policy.

“Large investors are pessimistic about the prospects on the Russian market, however, while some of them pull back and reduce their activity in the Russian Federation, consider all other possible options, and some are trying to turn the crisis to your advantage and to expand its presence. However, if business conditions in the near future will not improve, this balance will likely change, and more and more companies will consider reducing its activity in the Russian market”, — stated in the report.

As noted by Global Counsel, the company has reviewed the positions of international companies in Russia after a year and a half, when the country was under international sanctions, global oil prices fell and Russia’s economic policy was highly volatile. The report contains statements about Russia 46 major foreign companies, contained in their quarterly and annual reports 2014 and the first half of 2015. The study looks at how these companies view the Russian market, as their actions demonstrate the commitment or caution towards this market, as well as what aspects of Russian politics increase, or Vice versa, remove the existing foreign business concerns.

“The vast majority of companies feel that Russia is rather pessimistic, both because of structural and cyclical factors. It’s six times more companies are looking to the Russian market negatively and not positively. While those who committed to working on the Russian market and expansion on it, twice more than those who seek to reduce it. A fairly large group of companies, however, either remained at the same position, or does not reflect their intentions in reporting,” the report said.

“There is a significant difference in the estimates and the behaviour of firms depending on sector: pharmaceutical companies are more optimistic and the most pessimistic are the financial and energy sectors. While most companies will not comment on public and economic policy of the Russian Federation, those who do speak negatively about any action such as food counter-sanctions and measures affecting the financial sector,” according to the authors: chief economist, Global Counsel Gregor Irwin, Alexander Smotrov and Thomas Grotowski.

Some companies “raise the stakes” and increase their presence, despite the pessimistic assessments of the market, but experts Global Counsel admit that they do not know whether this situation, as in future much will depend on external factors and domestic policy.

“Following a year and a half, it seems, will be critical for foreign investors, who will decide whether they remain on the Russian market or to leave it. Russia has always been a difficult place for doing business, although often very profitable. However, the combination of sanctions, low oil prices and volatile economic policies hit hard by the economy and is now testing the nerves of even the most persistent and sophisticated investors. If external conditions improve, then the number of foreign companies that will seek to reduce its dependence on Russia, most likely, will increase,” concludes Irwin.

Global Counsel is a strategic consulting company, founded in 2010 and based in London. The company provides consulting and research services for clients in a number of countries, where the understanding of the interdependence of politics and business is critical. Global Counsel also publishes a detailed analytical material on key aspects of the interrelationship of politics and Economics.

Posted on Monday the study is based on the statements of operations in Russia, is contained in publicly available corporate reports 46 foreign companies in the period from 1 January 2014 to 30 June 2015. List of companies essentially reproduces the list of members of the Advisory Council on foreign investments, to which were added two large foreign Bank operating in Russia. 27 from the companies officially registered in the EU, 11 in the United States. Companies operate in the eight largest sectors of the Russian economy.