Russia

Investors are more optimistic about Russia than other any country except China, according to the AT Kearney’s FDI Confidence Index. The country’s improving profile is a consequence of the government’s ongoing reform and sustained economic growth.

In the first half of 2003, GDP grew by 7%, providing further evidence of recovery from the 1998 crisis. Relative political and economic stability plus ongoing reforms, in particular tax reforms, are likely to sustain growth and strengthen the overall investment environment.

Vast natural resources, in particular huge hydrocarbon reserves, promise to keep investors interested. In February 2003, BP invested $6.8bn to take control of Russia’s third largest oil company. Downstream opportunities include timber and wood processing and primary metals production.

Infrastructure sectors and public service sectors all offer potential. Other opportunities exist to meet the consumer demands of Russia’s large domestic market, including industries such as electronic appliance manufacture, and food and beverages.

The country benefits from a highly educated yet relatively inexpensive workforce. The government is taking action to tackle the remaining hurdles to investment, persisting with the necessary structural reform. Albeit a difficult market, Russia is increasingly a market that companies cannot afford to be out of.