23+ Pros and Cons of Doing Business in Russia (Explained)

Russia is the world’s greatest nation, by far. The nation spans a region from Europe in the West to North America in the East and bordering Asia in the South, and boasts complex geography spanning 11 time zones.

Emerging from a long and eventful past as a diverse country, Russia’s rising and expanding consumer economy, with a market of over 140 million people are transforming into a prime investment place. Business prospects can be found in many sectors of Russia’s economy, and it is good to support both the government and the Foreign Investment Advisory Council (FIAC), investors.

It provides the following main benefits and drawbacks to doing business in Russia:

Benefits of Doing Business in RussiaThe Drawbacks of Doing Business in Russia
There is Gender EqualityStrict Dress Code
Economical Benefits are well maintainedLong Working Hours
Educated and skilled workForceCredit
A Good Location for BusinessConstruction is a pain

Advantages of Doing Business in Russia

  • Stabilized Growing Economy

Russia boasts one of the most dynamically-developing and lucrative economies in the world, according to Invest in Russia. GDP growth has averaged 6.8 percent per annum since 1999 and reached 8.1 percent in 2007 (compared to the overall global economic growth of 4-5 percent).

Thanks to the rising rouble, GDP growth for 1999-2007 was an impressive 26 percent per annum in dollar terms, well above international growth rates.

does Russia have stabilized economic growth
  • Equality is Maintained

Russians usually adhere to attitudes that encourage market equality, reciprocity, and reciprocal benefit, and a “contract” is also seen as an incentive for similarly shared advantage.

In Russia too, personal ties are of great importance. When doing business in Russia, initially investing time in the development of strong bonds is worthwhile as these are likely to form a solid base for future business deals.

  • Good Education System

In Russia’s large market of over 140 million people, whose earnings are improving steadily, there is untapped talent.

In relation, a strong education system in Russia has a good reputation for producing a highly skilled workforce and knowledgeable consumers. Russian people’s talent is clearly evident in Russian art, music, literature, and architecture accomplishments.

  • Feasible Geographical Location

The vast geographical reach of Russia extends a distance exceeded by any other single nation. Linking Europe with Asia and bordering the continent of North America, Russia has greater accessibility to routes by sea, road, and rail, and is home to several major airports.

Russia’s position is further complemented by its significant natural mineral resources, coal mines, oil and gas, and timber wealth.

Does Russia Have Suitable Location For Doing Business
  • Top Class Labour Force

Russia is a large communal culture, with a sense of solidarity possibly deriving from its history and environment.

The harsh winters and geographical conditions in Russia have meant that cooperation was required for survival rather than competition. This sense of cooperation and solidarity has to be taken into consideration when doing business in Russia, especially when dealing with Russian counterparts.

It is important to note, for instance, that you address the community rather than the individual.

  • Value of Middle-Class People

With Russia’s middle and working-class rising rapidly in size, many foreign businesses are finding Russian consumers are highly receptive to their brands, particularly in the luxury products and meals and drinks domain. You may find Russia, depending on your industry, is home to the market society for your business.

  • Increasing Investment Prospects

Russia has launched new investment initiatives and is attracting foreign investment, which could be helpful for companies looking to raise funds to begin the process of growth.

  • Strong Logistics

Although the scale of Russia can pose a challenge to logistics and supply chains, recent advances in transport networks and infrastructure have significantly improved the logistical efficiency of doing business in Russia.

Moreover, a foreign extension to Russia in the Commonwealth of Independent States could open up opportunities for exports to other countries.

Disadvantages of Doing Business in Russia

  • Commencement of Business

According to a World Bank and International Finance Corporation (IFC) survey, starting a company in Russia takes an average of nine procedures and a duration of 23 days.

  • Difficult to Construct

The number of steps taken to obtain building permits will differ considerably from city to city; Novosibirsk needs only 16, compared to 47 in Moscow. As a consequence, the time it takes to procure permits is greatly variable; a year in Moscow compared to five months in Surgut.

  • Registration of Property

Registration of properties in Russia is relatively inexpensive, and registration fees are among the lowest in the world and far below the OECD average. But to complete the operation it also takes an average of four procedures and about 35 days.

  • Electricity Constraints

Having electricity is an exceedingly laborious process in Russia and businesses can wait to be turned on between four months and a year, depending on the destination.

Design approval is a specially difficult phase, involving several trips to public agencies and taking 30 to 120 days for everything.

  • Punctuality is Important

Businesses also find the polychronic culture of Russia-where attitudes towards punctuality is a little more relaxed-difficult to become accustomed to. Many meetings would not be compatible with linear agendas used in other nations which may interrupt inter-business contact.

  • Infrastructure is Under-Developed

Russia’s infrastructure is heavily Moscow-centered, with most economically important transportation networks originating from the country’s capital.

Commercial transport depends heavily on the rail but is not fully incorporated into world transport networks. Air links are still underdeveloped for such a large nation, making intercountry travel strenuous.

Does Russia Have An Underdeveloped Infrastructure For Doing Business
  • Intellectual Property Rights

Maintaining intellectual property rights in Russia is still a tired company, though steps to simplify the process have been taken. As of 1 In February 2013, a specialized intellectual property rights court has been created in the Russian Federation’s commercial courts.

  • Government Transparency is Not There

Government accountability is a historically complicated topic in Russia, but the situation has greatly improved.

The International Budget Partnership’s 2012 Open Budget Survey showed that Russia has greatly increased its budget transparency over the years, and is now telling the citizens more about government revenue and expenditure than countries like Germany or Spain.

Is There Lack of Trasnparency in Russia
  • Protectionist measures

An EU study reported a “staggering rise” in protectionist steps as policymakers attempt to defend domestic industries from international competition in a demanding economic climate.

Russia was among the worst offenders; the report concluded that Moscow did not respect its future World Trade Organization commitments.

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