Russia is one of the largest economies in the world with the GDP in 2014 having improved significantly in the since 2014. Russia’s currency is called ruble, with the most popular exchange rate being the Ruble to US rate. It is the 62nd most appropriate destination of business in the world according to the “Ease of Doing Business” ranking report. Russia’s diverse regions are a major business opportunity factor that attracts more investors into the country. According to Shaposhnikov, (2015), Russia presents the global investors with well connected transport network, young and well educated workforce, and access to supply chains that are crucial for imports and exports. These factors are critical for investors that intend to conduct businesses in the country. Good transport and communication network is critical for foreign investors as it facilitates the movement of goods and services within the market.
Despite the good transport network and an educated workforce, conducting business in Russia is likely to face many challenges, especially for foreigners. The major trade partners to Russia include Japan, Ukraine and China. The country’s GDP improved by 0.6% in 2014. However, the country’s economy recorded a shake in the investment in various sectors of the economy. The decrease in business and investment was attributed to various factors ranging from socio-economic and political factors.
First, Smith, (2016) notes that the legal process, the slow pace of response from the local authority and the government agencies in granting foreigners the trade license discourage the establishment of foreign firms in the country. Additionally, there are bureaucracy rules and transparency issues. It is alleged that the country’s legal system has little concern for the foreign investment, giving more preference to the local companies. On the same note, Russia has many regions with local laws that govern the establishment and operations of businesses including the foreign firms (Gould‐Davies, 2015). This discourages the foreign investments in the regions as it is hard to fulfill the regional requirements. Finally, on the challenges, Russia experiences extreme climate changes, varying levels of economic growth and differing socio-economic factors. These factors limit the foreign investors’ ability to focus on the productivity for the growth of the industries.
Russian economic growth slowed down significantly since 2010 with a record growth in the GDP recorded in 2014 at 0.6% with a negative GDP growth in the year 2015 (Smith, 2016). The slow pace in the economic growth of the country could be attributed to the fall in the oil prices and the Ukraine’s sanctions. According to Murray, (2014), Russia is the smallest population as compared to India, China, and Brazil, which are the major markets for foreign investors because of the large population (Smith, 2016). Russian domestic supplies of consumer goods and services are underdeveloped in many sectors. The underdevelopment has adverse impacts on the ability to invest in the country.
It is important to note that Russia is a member of various trade organizations, which promote trade in the country. Based on the fact that Russia is a member World Trade Organization since 2012, the member states can access the Russian market with little legal requirement. In this regard, the member countries may enjoy the privileges that come with the trade agreements.
For the purpose of investment in Russia, the Russian market has opportunities in the field of pharmaceuticals because of innovative research and development, generic medicines and active pharmaceutical ingredients (Smith, 2016). In the essence, investors that intend to establish businesses in Russia may consider investing in the pharmaceutical industry to tap on the available resources, research and development, and the Russian government’s support in the industry.
In conclusion, conducting business in Russia requires preparations and understanding of the business environment. The legal framework is considered one of the slowest with regards to dealing with protecting foreign investors; there are established corrupt cartels, and diverse social setup that may be difficult to penetrate. However, with proper planning and integration of international trade agreement, foreign investors may invest in the country and succeed in reaching the market with goods and services that meet the needs of the Russians and beyond.
- Gould‐Davies, N. (2015). International partnership in Russia. By James Henderson and Alastair Ferguson: Putin’s energy agenda. By Stefan Hedlund.
- Murray, G. (2014). Doing business in China: The last great market. Routledge.
- Shaposhnikov, S. (2015). Doing business in Russia.
- Smith, N. V. (2016). Exploring Regional-Level Impact of Corruption and Crime on Multinational and Domestic Firms: The Evidence from Russia. In Impact of International Business (pp. 25-42). Palgrave Macmillan UK.