Russia moved from 120th place to 31st place in the World Bank’s annual ranking of countries easiest to do business in, within the space of 7 years. This position made Russia ahead of many highly developed nations like France, Japan and Switzerland . This article aims to fully explain the benefits of investing in the Russian economy. Between the years 2000 and 2008, Russia’s nominal GDP(Gross Domestic Product) doubled. This made it a very essential emerging market economy.
Russia has been a country full of opportunities since the collapse of the USSR. Intrepid entrepreneurs have been leveraging these opportunities. There has been a large increase in these opportunities year by year. Despite sanctions, Russia is still a great place for foreign businesses to invest.
Friendly environment for foreign businesses
When it comes to a country that comes with the ease of doing business, Russia is a friendly and welcoming destination. The World Bank ranked Russia 28th place in the Doing Business 2020 ratings. Some of the factors considered for these ratings are taxation peculiarities, lending opportunities, obtaining a permit for construction, premises rental e.t.c.
The foreign investment law guarantees that foreign businesses enjoy the same benefits as domestic businesses. They have a right and are treated no less favorably. The law also allows you the right to draw revenue and profit from your customers’ investments in Russia.
The government of Russia continues to bring in new initiatives to encourage foreign investors discouraged by international sanctions. This simply means that it is currently easier to set up a successful business in Russia than it was before the year 2014.
Opportunities through economic sanctions
Economic Sanction is also a way you can key into the benefits of investing in the Russian economy. As a foreign investor, there are many ways to take advantage of the economic sanctions in Russia. In fact, this move is often encouraged by the Russian government.
If you participate in this, you promise to invest in goods production in any Russian region. As a result, you receive a number of tax benefits. Reports show that many canny entrepreneurs have been able to build their business successfully off the back of the sanction wars.
The Benefits of Investing in Russia
All emerging markets have their own share of risks. Russia’s checkered history makes it riskier than more developed markets. However it is still hard to ignore one of the world’s hottest commodity markets in the world-Russia.
Natural Resources
Russia is rich in Natural resources. It is the world’s largest exporter of natural gas. It is also one of the world’s largest producers of oil and steel.
Middle Class Growth
Reports show that the middle class of the Russian population is growing significantly. Russia has a large population of 142 million citizens. The average personal income of the citizens is growing an estimated 10 percent to 15 percent each year.
Strong Emerging Industries
There has been significant growth in industries emerging in certain niches of the economy. For instance, information Technology and telecommunications have experienced significant growth.
Investment Opportunities
There are plenty of regions rich in resources in Russia asides Moscow and St Petersburg, which is where most people tend to think of. The Russian government is actively marketing these regions to foreign investors through the implementation of a series of new jurisdictions.
Special Economic Zones
These zones are targeted at attracting investments into some particular sectors of the economy. The sectors include manufacturing, tourism and recreation, technology and innovation, port and logistics. Now what is the benefit? In the Special Economic Zones you have a custom free zone, reduced social contributions, accelerated depreciation and also a lower tax burden.
Advanced Development Territories
These target investments are in the Far East, less favored areas in Russia. These areas are rich in natural resources and are ripe for the picking. Foreign investors do not really think of these parts. Thanks to these advanced development territories, areas of the Far East of Russia now provide special custom arrangements. These areas also offer an investment and taxation framework that contains a reduced profit tax, reduces social insurance contributions and a five year property tax exemption.
In Conclusion
Russia has a wide range of natural wealth in oil, gas and minerals. Investing in Russia’s stock market directly may not be the key easy move but foreign investors have access to the country through mutual funds, ADRs and ETFs. However, it is completely up to you whether you choose to actively invest in Russia.