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Russia Competitive Advantage

After the collapse of Soviet Union, the Russian Federation emerged as the largest country. After the formation of separate Russia, the series of reforms introduced by new government did not go as planned and the country plunged into deep recession.

However, things have changed for better after dissolution of Soviet Union and economic restructuring, macroeconomic stabilization has helped the country to put its economy back on the track. Russia was the tenth largest economy in year 1999 and it forex reserves amounted to $8.5 billion. The economy has grown leaps and bounds since then and currently Russia stands at the seventh position in list of world’s ten largest economies.

The Russian Government has taken concrete steps and charted policies that make the business environment in Russia more favorable to foreign investment. The new regime has introduced policies that improves global competitiveness and encourage foreign investors to play an important role in Russia’s prosperity.

After European transition economies, the Russian Federation is the largest country, which has the biggest gift of natural resources, huge potential market and a well-educated workforce. The unstable economic conditions of Russia is thing of past and the country has shown good economic growth since 2007 and the country’s continuous economic and political stability has attracted is certainly an encouraging factor for Foreign Direct Investment in Russia.

With the firm belief that, especially in Russia, past is prologue, the first and most important economic trend of 2007 was that nation's continued political and economic stability. This has made possible, will continue to enable, reliable forecasts of economic trends, and has attracted a great deal of foreign investment in Russia. The stability has encouraged many Russian entrepreneurs to increase their investments in domestic market rather than investing it abroad. This has resulted to stimulated economic growth, which is heading towards 8%, which is quite astounding.

This has led to a favorable investment climate and leading multinational companies have invested some $100 billion in various sectors in Russia just in period of 12 months. This is all time record for any emerging market and great milestone for the country’s business and economy. Many of the foreign direct investments made by MNC’s are long term and these companies have seen a bright future for their investments in Russian economy. The investment has increased by almost 55% since 2007 and it seems the trend will continue for coming years.

The Foreign Direct Investment law introduced by regime is favorable to investors in many ways. The legal framework ha is conducive to foreign investors. Some of the favorable clauses are

Resource usage: the companies have freedom to export local goods and do not have to adhere to any performance requirement.

Grandfather clause: Protects the investors from unfavorable changes in tax regulation and laws for period up to 7 years.

Labor laws: Investors are free to employ any personnel of any nationality.

Dispute resolution: the disputes between foreign investors and country do not have to go through local court system and the dispute can be settled with international arbitration.

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