Securities investing in Russia also follows bottom-up, fundamentally-driven analysis process. Gains can be improved by moderate rotation in cyclical/economically-sensitive sectors. Recent research and studies show that in the investment environment of Russia, liquidity is getting stronger, corruption concerns, accounting and auditing issues are gradually presenting a better look. Let’s look at some economy statistics, as measured by GDP:
Since 1999, GDP growth has averaged 6.8% per year and reached 8.1% in 2007. In dollar terms the 1999-2007 GDP growth was an astounding 26% per year, far outstripping international growth rates.
Consumer Market – The high consumption, spending will and capability has made Russia one of the largest consumer markets; in addition, Russia has become the largest automotive sales market in Europe.
Education and Human Resource – Russia is backed by an educational system with a solid global reputation and producing professionals who take up leading positions in areas such as natural and applied sciences, programming, R&D, engineering, etc. In this sense, Russia is able to offer access to a highly educated and skilled workforce, strong scientific and research base, which also provides excellent opportunities for R&D partnerships. Critical technological areas are eligible for government co-financing on a competitive basis to facilitate research and development of innovative capabilities.
Natural Resources – Russia is ranking 1st place in the world in per capita natural resources, specifically, in:
- Oil production
- Sodium salt reserves
- Drinking water reserves
- Stocks of pollacks, crabs, and sturgeons
- World explored reserves of tin, zinc, titanium and niobium
- Production of nickel ore, refined nickel and explored world silver ore reserves
- Steel exports,
- Primary aluminum production and exports
- Nitrogen fertilizer exports,
- World diamond reserves and actual volume of diamond exports
- One of the biggest world reserves of fresh water
Geographical Location – Russia links Europe with Asia and also borders the North American continent, which facilitates building effective international and domestic supply-production-market chains, and offers favorable investment-attraction policies.
Tax Environment – with a personal income tax rate of 13% for residents, corporate tax rate of 24%, and VAT rate of 18%, Russia has one of the most generous non-offshore tax regimes in the world, aimed at promoting investment and further developing the economy. Finally, Russia has introduced a European-style participation exemption regime that exempts dividends received from qualified participants.