Foreign Direct Investment into Russia - Pain Without Gain? A Survey of Foreign Direct Investors

Abstract

Foreign Direct Investment into Russia has been low in comparison to other transition economies. We surveyed almost 50 European enterprises that conduct business in Russia and asked about the reasons behind their presence here and about the main problems they have encountered. Our survey shows that the most pressing problem foreign direct investors in Russia face is connected neither with criminality, nor corruption, but simply an inadequate and ever changing tax law. Next in line come problems with property and creditor rights, customs, the risk of political change, macroeconomic instability, a weak banking sector, the Russian accounting system, and only then corruption. The risk of expropriation, harassment from federal and local government, and payment arrears from clients are considered to be of only medium-level importance. Finally, problems with the Russian workforce or management, Russian suppliers, crime, racket and barter are seen as being of moderate significance.