Why Set Up Business in Russia?
Emerging as a diverse nation after a long and eventful history, Russia’s growing and strengthening consumer economy, with a market of over 140 million people, is evolving into a prime location for investment. Business opportunities can be found in many sectors of Russia’s economy and strong support exists for investors from both the government and the Foreign Investment Advisory Council (FIAC). Russia was the world’s ninth largest economy by Gross Domestic Product (GDP) in 2014 according to the International Monetary Fund (IMF). Russia improved to 62nd in the World Bank’s ‘Ease of Doing Business’ ranking in 2014 and is making some headway in meeting President Putin’s target of reaching 20th position by 2018 after starting from the position of 122nd.
From 2000 to 2010, Russia’s GDP growth averaged 5.3%, and that’s including a fall of 7.8% in 2009; it’s also the world’s seventh largest economy by purchasing power parity. The economy is expected to grow from $2 trillion in 2011 to over $3.2 trillion in 2017; coupled with one of the lowest levels of public debt of any major economy. There are over 140 million consumers with increasing incomes, and one of the most highly skilled workforce due to a strong education. The country has a huge array of natural resources, including 35% of the worlds gas production and exports and 23% of the worlds forest resources. They have a very attractive taxation system that’s aimed at promoting investments and developing the economy.
Investment and Modernisation Programmes
Russia has also started major investment and modernisation programmes which will provide opportunities for foreign firms. It’s looking for foreign investment, expertise, technology and resources to help boost its FDIs. Russia’s diverse regions also present opportunities for foreign businesses. These regions are increasingly competing to attract international investment. Some regions have made significant improvements to make it easier to do business, such as Kaluga and Kazan. Benefits for foreign businesses exporting to Russia include a desire of Russian companies to use international accounting and legal standards, respect for foreign made brands, including retail and luxury and an anticipated increase in the number of Russian mid and small sized businesses.
Young and Well Educated Workforce
Also, the Russian market is a young and well educated workforce, while it also has strong transport links and logistics as well as access to supply chains that could lead to exports to other markets in the Commonwealth of Independent States (CIS). Russia, Kazakhstan and Belarus entered into a Customs Union in 2011. In 2015 the union evolved into the Eurasian Economic Union (EAEU), which consists of a Customs Union and a Single Economic Space. Russia became a full member of the WTO in 2012. It’s now expected to follow WTO rules and become integrated into the global economic system. The country has also committed to change customs duty rates to permit access to the Russian services market; apply recognised food safety, and animal and plant health measures; simplify import licensing procedures; and make changes relating to protection of intellectual property.
If your business requires a licence (e.g. if you sell alcohol) or any other authorisation (e.g. if you conduct construction activities), you will be able to apply once your legal presence is registered. Russia has quite detailed procedures for obtaining a licence/authorisation and, so long as you follow it carefully, it should usually be granted within 1-2 months. If your licence/authorisation is for some reasons declined, there is a possibility to challenge this in court. If you are looking to set up a business in Russia, contact us.