Julien Vercueil
email: julien.vercueil@univ-lyon3.fr

Changing investment climate in Russia : an institutional approach

this paper proposes an inst itut ional approach of the changing investment climate in Russia. Studying successively official positions about investment policy, legal texts, and then evaluat ing the effect iveness of the enforcement mechanisms, we show that reality is often at odds with official declarat ions about the friendliness of business environment. Evidence provided by surveys of both nat ional and internat ional business people also show that during the recent crisis the business climate has not really improved for foreign investors in the country. St ill, the situat ion does not hamper Russia from cont inuing to be one of the most attract ive countries in the world for Foreign Direct Investments.

Changing investment climate in Russia :

an institutional approach 1

The last two years have brought new waves of uncertainty around foreign investors in Russia :

new lags in the WTO accession process, adverse implicat ions of the Russia-Georgian war on the relat ions between the country and its main western economic partners, no real progress in Russia's internat ional ranking regarding corrupt ion, and so on.

Meanwhile, due to the peculiar structure of its external sector, the Russian economy has proven part icularly vulnerable to the global financial and economic crisis, underlining its overdependency on the energy sector and its relat ively poor internat ional compet it iveness as regards high-tech industries and non financial, high value-added services.

While being fully aware of the potent ially damaging consequences of such a situat ion on the nat ional economy, Russian authorities are experiencing difficult ies in sett ing up an inst itut ional environment able to foster durably foreign investments, notably in manufacturing sectors.

The object ive of this paper is to answer the two following quest ions: what have been the main steps taken by Russian authorities towards the building of a stable investment climate during the last two years (2008)(2009)(2010) ? What are the results achieved so far ? In this aim, we propose an inst itut ional approach of the evolut ions that occurred in the very recent past along various dimensions the « investment climate » in Russia. Basing our approach on the exist ing literature, we define investment climate as the set of institutions, policies and enforcement mechanisms that are considered as relevant by companies in their investment decisions.

The first sect ion of the paper is devoted to the definit ion of the various dimensions of the investment climate, using a methodology that pays due attent ion to qualitat ive differences and interrelat ions between theories and public statements, legislative acts, enforcement processes, 1 actors' percept ions of their environment and stat ist ical indicators of the current investment climate in Russia. In the second sect ion, we propose a synthet ic view of the actual stage of development of the legal framework surrounding investment in the country. In the third sect ion, we study the enforcement of this framework and the opinions of enterprises' leaders about its results. The fourth part offers a stat ist ic survey of the recent dynamics of investment, both domest ic and foreign, in Russia. Last sect ion concludes.

Investment climate : an institutional approach

The transit ion process in Russia has been far more arduous than what was expected in 1992. One of the main lessons of these difficult ies is that it is extremely difficult for reformers to impose measures from above, without taking into account the exist ing inst itut ional framework (legal texts, written and tacit norms, habits, expectat ions, etc.). As far as Russia is concerned, policies would have probably experienced more positive results, had they been adapted to local contexts.

As the World bank defines it, investment climate is "the set of locat ion specific factors shaping the opportunities and incent ives for firms to invest product ively, create jobs, and expand" (World Bank, 2005, p. 20). The exist ing literature acknowledges that investment climate is shaped by inst itut ional and political factors [START_REF] Henisz | The inst itut ional environment for mult inat ional investment[END_REF][START_REF] Hallberg | An Evaluat ion of World Bank Investment Climate Act ivit ies[END_REF][START_REF] Majocchi | Economic Liberalisat ion and the FDI locat ion decision: Evidence from Italian Firms in Eastern Europe[END_REF][START_REF] Luebke | Political Economy of Local Investment Climates: A Review of the Literature[END_REF][START_REF] Slangen | The impact of inst itut ional hazards on foreign mult inat ional act ivity: A cont ingency perspective[END_REF]. In World Bank publicat ions, a "good investment climate" is usually described as being the result of the well funct ioning of three pillars: macroeconomic stability and openness to trade; good governance and inst itut ions, including control of bureaucrat ic harassment and crime, as well as effect ive financial and legal inst itut ions;

and adequate infrastructures [START_REF] Stern | A Research Agenda for Development[END_REF], World Bank, 2005). More precisely, the former chief economist of the World Bank, includes in the investment climate "policy, inst itut ional, and behavioural environment, both present and expected, that influences the returns, and risks, associated with investment" [START_REF] Stern | A Strategy for Development[END_REF]. In accordance with this definition, in our analysis of the Russian investment climate we take into account the expectat ions and appreciat ions of economic agents regarding their inst itut ional environment. Hence our acceptat ion of the investment climate as a set of inst itut ions, policies and enforcement mechanisms that are considered as relevant by companies in their investment decisions.

Economic transition in Russia has been characterized as a market oriented inst itut ional change (Economic Commission for Europe, 1992[START_REF] Kozul-Wright | The Inst itut ional Hiatus in Economies in Transit ion and its Policy Consequences[END_REF], Internat ional Monetary Fund, 2000, World Bank, 2002). Kim et alii (2010) see market oriented inst itut ional change as a two stages process : in the first stage, inconsistencies and frict ions among formal inst itut ions and between formal and informal inst itut ions produce uncertainty in the economic environment. This uncertainty is detrimental to the investment climate. In the second stage, these frict ions are supposed to vanish progressively as market oriented inst itut ions prevail over inherited inst itut ions (Kim et alii, 2010(Kim et alii, , p. 1143)). In order to assess the current transformat ions of the investment climate in Russia, we propose a conceptual framework able to grasp not only the official policy steps taken by the Russian authorit ies, but also the "inst itut ional frict ions" (the "inst itut ional hiatus" as Kozul-Wright and Rayment (1997) put it) prevailing in the business environment. This conceptual framework is based on an inst itut ional approach of economic and inst itut ional changes.

Inst itut ional evolut ion is a process involving various stages, interconnected with one another.

Firstly (at the « theory stage »), policy makers adopt theories about the economic situat ion their are facing and the policy tools they have to use in order to improve it. Secondly (at the « legal stage »), legal texts (laws, decrees and so on) are adopted on the basis of these theories with the aim to impulse behaviour changes in the right direct ion. Thirdly (at the « enforcement stage »), at the microeconomic level, this legal framework is enacted by administrat ive bodies and interpreted by economic agents as a new basis for their ant icipat ions and behaviours. Fourthly (at the «evaluat ion stage »), the stat ist ical and scient ific inquiry apparatus provides various measurements of the results of the whole process. These measurements are images of the reality that allow new theories to be elaborated by analysts and adopted, in turn, by policy makers.

[Figure 1 to be inserted here]

Of course, such a cycle cannot be a simple one : there are mult iple possibilities of reverse causat ion between each dimension of the process. Moreover, each dimension can be directly connected to the three others. For example, the stat ist ical image of the results (the « evaluat ion stage ») is largely influenced by the theories in use, since the latter contributes to define the shape and scope of indicators that are used to measure the effect iveness of the policies. In fact, the four stages of the inst itut ional change form a network of mutual influences, even if it is possible to establish a logical hierarchy between them, dist inguishing main and secondary interact ions, as shown in Figure 1.

Such an approach of the inst itut ional and economic changes is inspired by the inst itut ionalist tradit ion, init iated by Thorstein [START_REF] Veblen | The Preconcept ion of Economic Science[END_REF], recently developed by Douglas [START_REF] North | Inst itut ions, Inst itut ional Change and Economic Performance[END_REF] and applied to organizat ional science by Richard [START_REF] Scott | Inst itut ions and Organizat ions[END_REF], among others. Its main interest is its usefulness for explaining why, under certain conditions concerning formal and informal inst itut ions, apparently rat ional policies do not produce the expected results in the economy.

Applying this canvas to the notion of investment climate in Russia, we raise the following Next sect ions of this paper propose tentat ive answers to these quest ions.

From theories to laws : the formal context of investment in

Russia

In 2008, Russian government launched the «Russian 2020 growth strategy », whose main object ive was to shift toward an innovat ion-driven growth and to reduce the dependence of the economy on the product ion of raw materials. This announcement followed seven years of unprecedented growth, during which GDP more than doubled while Foreign Direct Investments (FDI) inflows surged, promoting Russia as one of the top five destinat ions for investments in the world. During this period, however, Russian economic growth was largely driven by extract ive and raw materials industries, attract ing large inflows of capital and leaving little room for hightech investments and innovat ive act ivities (World Bank, 2008, OECD, 2009[START_REF] Vercueil | WTO accession : on the finishing strech ? Russia.NEI.Visions[END_REF].

For this reason, Russian authorities repeatedly emphasized the necessity to set up favourable legal condit ions for the diversificat ion of the economy. Attract ing foreign capital and technologies being widely seen as a way to improve the level of product ivity and innovat ion of domest ic enterprises [START_REF] Borenzstein | How Does Foreign Direct Investment Affect Economic Growth[END_REF]Lee, 1998, Lipsey andSjöholm, 2004), the friendliness of the business environment for foreign investors has become one of the declared priorit ies of the Government. In next subsect ions, we explore several domains in which the legal environment of the Russian economy has been changed in the past few years. Since WTO promotes an internat ionally harmonized legal framework for nat ional and foreign enterprises, WTO membership is generally associated with a better investment climate. Hence, one could expect that, in order to improve the investment climate in their country, Russian execut ives try to accelerate its membership. However, the long last ing accession negotiations to the WTO have repeatedly shown the reluctance of Russian authorit ies to fully comply with the legal framework of the internat ional organizat ion (Vercueil, 2002[START_REF] Vercueil | WTO accession : on the finishing strech ? Russia.NEI.Visions[END_REF]. Having started in 1993, the process is st ill not completed, 17 years later. Russian is now the largest economy and the only G20 member st ill outside the WTO.

World Trade Organization accession

Meanwhile, the GATT has been transformed in WTO, average tariffs have been lowered all over the world and some rules have become more stringent on the possibility for an economy to protect what it considers to be its economic interests. The Marrakesh agreement stipulates that unified customs territories applying for membership must have full sovereignty over their trade policies, as do Hong-Kong and Taiwan, and does not mention customs unions of any kind. its accession talks than its two partners. Such a tact ical change could slow down considerably its progress towards accession. This unexpected announcement was later tempered by other declarat ions of Russian top officials, saying that Russia would join the WTO in whichever way that would be effect ive. In April 2010, Russian First Deputy Prime Minister Igor Shuvalov acknowledged that Russia could abandon its plans to join the World Trade Organizat ion in a joint bid with Kazakhstan and Belarus, adding that Russia hopes to complete all procedures by the end of the year 5 .

Box 1. Russia's Membership of international and regional structures Political and security structures : Sources : [START_REF] Pricewaterhousecooper | Doing Business and Invest ing in the Russian Federat ion[END_REF]. Transparency International, 2009a. Apart from WTO and OECD, Russia is now a member of all relevant internat ional economic organizat ions and has signed many internat ional agreements (see the list in Box 1), attesting its will to be considered as a full-fledged member of the internat ional economic community.

•

Regulations on foreign investments

"We will only welcome foreign investments, especially those bringing in new technologies.

We don't have any other way"

Alexei Kudrin, Finance Minister of the Russian Federation, February 2010.

Ensuring a level playing field between domest ic and foreign firms is one of the conditions for attract ing foreign investors. In this respect, Russia's legal environment is often considered as unsat isfactory by foreign observers (OCDE, 2009). The current state of its legal framework is summarized in Box 2. Source : [START_REF] Levashenko | An Analysis of the correspondence of Russian legislation to the oecd requirements in the sphere of direct investment[END_REF] One of the limits of the exist ing legal system is lack of consistency : while the Federal Law 'On foreign Investments in the Russian Federat ion' states that the legal regime of the act ivity of foreign investors may not be less favourable than the legal regime of act ivity, it opens the possibility of introducing limitat ions to this provision by referring to other, more restrict ive normat ive-legal acts. For example, in the banking sector, foreign credit inst itut ions must submit addit ional documents in order to register as a Russian legal ent ity, in violat ion of the principle of extending the nat ional legal regime to foreign investors.

Box 2. Russian Legislation Regarding Foreign Direct Investments

More recently, the « Law on Strategic Industries » of 29 April 2008 6 prevents foreign states, internat ional organizat ions and organizat ions controlled thereby, from the right to take control over 42 types of act ivit ies 7 [START_REF] Levashenko | An Analysis of the correspondence of Russian legislation to the oecd requirements in the sphere of direct investment[END_REF]. Replacing the former case-by-case, opaque system of authorisat ions, this law has been considered by western analysts as a welcome step toward a clearer legal environment for FDI. However, the sectoral coverage of the law is much broader than in OECD countries, that limit the scope of « strategic industries » to nat ional defence, public order and health (Conway et alii, 2009). has been able to attract some moderate investments, but those in the Russian Far East had less success. The special tourist economic zone in Krasnodar, site of the 2014 Sotchi Winter Olympics, was expected to attract significant foreign investment, but the financial crisis and the polit ical uncertainty prevailing in the Caucasus region might postpone many investment projects.

Protecting intellectual property rights

« Legislators will take all decisions to ensure comprehensive support for the spirit of innovation in all spheres of public life, creating a market place for ideas, inventions, In addition to weapons, aviation and space, the law also names natural monopolies (except electrical power, municipal heating and postal services), the mass media and companies involved in natural resource exploration and extraction (except where the Russian government owns more than 50% of the company) as strategic. According to the law, foreign investors acquiring control over Russian strategic enterprises are required to obtain approval of a special government commission. The Federal Antimonopoly Service and Federal Security Service must establish that the acquisition does not threaten Russia's national security.

discoveries, and new technologies. Public and private companies will receive full support in all endeavours that create a demand for innovative products. Foreign companies and research organisations will be offered the most favourable conditions for establishing research and design centres in Russia. We will hire the best scientists and engineers from around the world. Most importantly, we will explain to our young people that the most important competitive advantage is knowledge that others do not have, intellectual Russian policy makers have often stressed the importance of alleviat ing the administrat ive burden on domest ic enterprises in all sectors. The corporate tax rate was cut from 24 percent to 20 percent. As regard public procurement, the Government intends to use more broadly internet applicat ions for open contests and auct ions and to streamline rules for state and municipal contracts for supplies, works and services 9 . For instance, the new Town Planning Code was adopted in late 2004, with the aim to introduce more transparent regulat ions on the issuance of construct ions permits. A further step was made after 1 January 2007 : a single state examinat ion of construct ion permits replaced the former, mult i-level and opaque system. In 2009, property registrat ion was accelerated by simplifying documentat ion requirements. As regards bankruptcy 8 RIA Novosti, 30/01/2009. For instance, the Russian law on topology of integrated microcircuits protects computer programs and semiconductor topologies during 10 years after the date of registration.

Clarifying the legal and administrative environment of specific sectors

9

IET «Russian Economy : Trends and perspectives », 09 2009. regulat ion, several changes were introduced to the insolvency law to speed up liquidat ion and strengthen the rights of secured creditors (World Bank, 2009a).

The electricity power generat ion network has been restructured and liberalized in 2007 and 2008.

Being the world's fourth largest producer of electricity, Russia needs to modernize its electricity system in order to meet the growing demand for electric power. Unt il 2007, electricity generat ion was dominated by State-owned Unified Energy Systems (RAO UES), who owned power plants, vert ically integrated energy companies, the federal high voltage transmission grid and the energy dispatching system. Almost all its output was sold to the domest ic market. In 2008 the unbundling of RAO UES was terminated, result ing in the creat ion of six wholesale generat ion companies (WGCs) and 14 territorial generat ion companies (TGCs). This restructuring and sales of assets have provided several buying opportunities for foreign investors (UNCTAD, 2009a).

The OECD carried out a synthet ic assessment of the legal framework surrounding business act ivit ies in Russia, called « Price Market Restrict ion Index » (PMR). Based on hard data, this index covers a wide range of legal act ivities that influence the ability of private businesses to conduct their operat ions. Ult imately, this index provides a measure of the degree of restrict ion to compet it ion prevailing in a given country. Table 1 shows the results of a comparison conducted between Russia and the OECD average countries on the basis of these criteria.

[Table 1 to be inserted here] In all the dimensions covered, the index is far higher in Russia than in the average OCDE countries. According to this assessment, the sector in which the state pressure is the t ightest are linked to internat ional trade and monopolist ic sectors. To say the least, the prevailing assessment of the Russian situat ion regarding corrupt ion is not favourable 10 . After a relative improvement following the succession of Boris Yeltsin, the problem seemed to increase anew during the second part of the economic growth period, causing some alarms in western commentaries. In 2008 however, a real change seemed to be possible after the elect ion of Dmitry Medvedev as President of the Russian Federat ion. Having announced in his electoral campaign that an ant i-corrupt ion policy would be one of the priorities of his mandate, he called a governmental meet ing on corrupt ion just a few day after his formal inaugurat ion on 7

Fighting corruption

Box 4. Main provisions of the National Anti-corruption Plan and the

Federal Law «On Counteracting Corruption »

Withdrawing officials from the boards of directors of state corporations and including new rules on conflicts of interest.

Creating a system of public legal and anti-corruption education programmes, including a specific programme for lawyers and others within the legal profession.

Imposing that all public officials, civil servants, the police and judges submit asset declarations, in order to reduce the opportunities for them to take or extort bribes. Establishing that when a bribe is offered, or commercial bribery takes place, the legal entity, not just the individuals involved, will be held liable.

Establishing new warnings and administrative fines for legal entities. This requirement will be developed through an amendment to the Code of the Russian Federation on administrative offences.

Source : Transparency Internat ional, 2009.

Western analysts consider that these changes constitute a real improvement in the ant icorrupt ion legal framework, as they set up a basis for effect ively counteract ing corrupt ion in Russia (Transparency Internat ional, 2009).

Supporting Small and Medium Entreprises (SME)

« We should pay more attention to the structure of small and medium-sized businesses and extend support to high-tech enterprises ».

« We will ban any unjustifiable interference in entrepreneurship »

Vladimir Putin, Prime Minister of the Russian Federation, January and March 2010.

One peculiarity of the Russian economy is the relat ive weakness of its SME network. The est imated share of GDP produced by SMEs is around 13-17 %, while their part in total employment is only about a fifth, far below the respect ive figures in OECD countries. Part of this weakness seems to be due to the difficult ies experienced by SMEs in the face of regulatory uncertainty (OECD, 2008, Molz et alii, 2010). The Government programme on long-term socioeconomic development of the Russian Federation intends to increase the proport ion of GDP produced by SMEs to 30 % by 2020.

A new « Law on SME development » had been adopted in 2007, but without being followed by the addit ional legislative acts that were necessary to put in concrete form its provisions. Shortly after his inaugurat ion in May 2008, President Medvedev signed a decree on urgent measures to eliminate administrat ive barriers to entrepreneurship. This decision accelerated the adopt ion of other legislat ive acts (See Box 5). Reduced tariffs for access to electrical grids Extension of the obligatory state contract quota of 10-20 % reserved for small businesses to purchases by municipalities.

Box 5. New measures concerning SMEs in Russia

Anti-crisis measures :

Increase in budget expenditures to 10.5 billion roubles in 2009 directed at SME support, such as grants to new entrepreneurs, development of microfinancing and interest rate subsidies.

Injection of 30 billion roubles into the capital of Vneshekonombank, targeted on commercial banks and non-bank financial entities working with SMEs.

Source : Conway and alii, 2009. Addit ional measures could be adopted in the near future, among which the shortening of the list of products requiring cert ificat ion, introducing special support for innovative SMEs, ensuring a non-discriminatory access to gas infrastructure, etc.

From laws to perceptions : the enforcement problem « The severity of Russian laws is balanced by the fact that their enforcement is optional » Mikhail Saltykov-Shchedrin

Despite the aforement ioned stock of legal texts whose purpose is to improve the investment climate in Russia, the picture taken from western comments about the country's business environment is mit igated. For instance, the U.S. State Department considers that « investors [in Russian] face several significant challenges, including a complex regulatory and legal system that requires professional help to navigate, widespread corrupt ion, a lack of respect for the rule of law, and immature banking and financial markets […] Concerns about possible liabilities associated with exist ing operat ions (especially environmental cleanup) and inadequate bankruptcy procedures are also factors. » 11 This assessment is confirmed by firms-level studies. Drawing their conclusions from a series of semi-structured interviews with small and medium-sized enterprises managers, Rick Molz, Ian Tabbaa and Natalia Totskaya conclude that "in Russia the inst itut ional environment remains weak, unstable and unpredictable, creat ing challenges for SMEs to contributes significantly to growth and development of the Russian economy" (Molz et alii, 2009). Their conclusion can be confronted to other percept ions of the features that contribute to shape the investment climate in Russian : corrupt ion, compet it ion, and the role of judicial system.

11

US State Department website (www.state.gov), 2010

Corruption assessments, corruption perceptions «Russian citizen have a primitive economy based on raw materials and endemic corruption »

Dmitry Medvedev, September 2009. [START_REF] Anderson | Ant icorrupt ion in Transition 3. Who is Succeeding[END_REF] remarked that despite apparent efforts of the Government to strengthen the ant i-corrupt ion legislation, enterprises cont inued to regard Russia as a country were corrupt ion is prevailing. The authors conclude that « the results for Russia underscore the fact that policy reforms may be necessary but are not always sufficient to reduce corrupt ion in and of themselves. Fundamental inst itut ional strengthening to ensure policy implementat ion, build checks and balances, and promote accountability in government is also essent ial » [START_REF] Anderson | Ant icorrupt ion in Transition 3. Who is Succeeding[END_REF]. 13

However, the following figures show that the situation is not completely blocked : in January -October 2008, the total number of corruption investigations reached 11492 (up 7.6 % year-on-year), out of which 8890 cases were sent to court for further prosecution. In total, 5285 officials received criminal convictions for corruption offences, up 6,4 % compared to the same period of 2007 (Source : Transparency International, quoting the the Interior Ministry, 2009). servants (index 4,5), followed by political part ies, the Parliament, and Justice (3,9 each), private sector (3,7) and mass media (3,5). There is a general consensus about the endemic corrupt ion among civil servants : 63 % of people surveyed think that they are the most corrupted sector (Transparency Internat ional, 2009b). Such a polarizat ion of the public opinion on a specific sector is one of the highest in the world. Respondents to another survey were scept ical about the capacity of the Russian authorities to fight corrupt ion : 56 per cent of business people and 58 per cent of cit izens stated that it was 'hardly possible' (Transparency Internat ional, 2009a). More generally, in the Newly Independent States (among which Russia), the level of the perceived « State Capture » by private interests (that is, the ability of a private enterprise to obtain, by illegal means, favourable legal condit ions from public officials) is the highest in the world : 71 % of respondents think that enterprises use corrupt ion in order to influence polit ics, laws or governmental rules (Transparency Internat ional, 2009b).

Are Russian markets distorted ? The business point of view "Modernization begins with oneself" Igor Shuvalov, February 2010

In 2007, 53% of the total number of violat ions of ant itrust law in 2007 was committed by various levels of the Russian Government, 80% of which being committed by the regional and municipal authorit ies (Conway et alii, 2009). Since then, simplificat ions in administrat ive procedures and the Government's efforts to struggle against arbitrary administrat ive decisions could have diminished the extent of administrat ive burden on private enterprises. Nonetheless, problems in the tax environment remain : many entrepreneurs complain about the complexity of the tax code and requirements of other regulatory and inspect ion bodies. According to them, the tax police makes no dist inct ion between genuine, skilled tax-evaders and inexperienced small-business people, who often do not fully understand all the bookkeeping requirements. During tax disputes, companies often have little recourse other than the courts to solve their problems. However, while firms have successfully appealed to the courts, tax authorit ies are often slow to implement judicial decisions. This behaviour can be harmful in some case since penalt ies for non-compliance include confiscat ion of property and freezing a company's bank accounts.

After the 1990's, Government regained control over the oil and gas sector. Now, the state companies Rosneft (oil) and Gazprom (gas) play a key role in this sector, that falls upon the 2008 "Law on strategic industries" already ment ioned. Recent struggles on Product ion Sharing Agreements (PSA), that were designed in the 1990's to attract foreign investors, have raised concerns about the safety of the investments realized by foreign companies. Under official pressure, one PSA, « Sakhalin 2 », sold its majority stake to Gazprom. As a result, « Kharyaga » and « Sakhalin 1 » are the only remaining major PSAs with majority foreign ownership. In 2007-2008, BP experienced a legal dilut ion of its influence over its investment in oil major TNK-BP, after a wave of official act ions init iated by Russian state bodies that affected TNK-BP operat ions and expatriate personnel. The event showed extensively the priorities of the Government in such matters and raised quest ions about the respect of property rights of foreign companies in the country.

The foreign business opinion on the topic can be illustrated in some way by this rather extreme assessment of the head of Hermitage Capital Management, one of the largest foreign portfolio investors in Russia by 2005 : "Anyone who would make a long-term investment in Russia right now, almost at any valuat ion, is completely out of their mind. My situat ion is not unusual. For every me, there are 100 others suffering in silence." 14 (quoted by [START_REF] Bowring | Improving Russian's Investment Climate : will the Latest Wave of Judicial Reform Succeed[END_REF].

The role of judiciary in the Russian business climate

« The investment climate in our country is directly dependent on the judicial system efficiency. Every time I meet with Russian entrepreneurs or foreign investors, they always say the same thing: if Russia is to have a first-class investment climate, the judicial system has to develop, mature and be able to effectively discharge its responsibilities. » Dmitry Medvedev , February 2010.

According to PriceWaterhouseCoopers, the litigat ion process of a commercial tax or dispute in 14

The Hermitage lawyer Sergey Magintsky, who had been fighting corruption of top official in Russia, died in custody in Moscow on 16 November 2009, after 11 months of detention without trial.

three instances takes from 9 to 12 months (PriceWaterhouseCoopers, 2009). The « Arbitrazh Court » system is competent on commercial disputes between business ent it ies. A survey conducted for the Inst itute of Contemporary Development concluded that the main problem for the judicial system in Russia is not corrupt ion, but the high level of dependence of judges on government officials. The research showed that cases which do not concern the interests of government bodies are decided object ively. But for sensitive cases, that may result in the condemn of an official, judges tend to protect the interests of the latter. This tendency is explained by the over-dependency of judges' careers and personal situat ions over the chairman of the court, who is nominated by the President of the Russian Federat ion. As Bill Bowring puts it, « This does not mean that every judicial decision is dictated by someone or other. It means that any decision in any case may be dictated » [START_REF] Bowring | Improving Russian's Investment Climate : will the Latest Wave of Judicial Reform Succeed[END_REF]. As a result, many western enterprises who have investment or trade disputes in Russia prefer to refer to internat ional arbitrat ion in Stockholm or to courts abroad.

Aggregating perceptions : a survey of surveys

Many surveys have been conducted to give an aggregate picture of the business climate and its percept ions by economic agents. Most of them offers comparat ive scores and figures, ranking countries by their respect ive merits according to the given criterion. Of course, these surveys suffer from limitat ions. They are dependent on the select ion of a rather arbitrary list of criteria ; some of them are constructed on « soft data » : they depend also on the number, characterist ics and personal judgements of the persons (almost exclusively businessmen) surveyed. However, thanks to their simplicity, their results are widespread and exert a real influence on business and polit ical decisions. Hence, it is worthwhile to compare the results of these surveys concerning Russia in this sect ion.

The World Bank « Doing Business » publicat ion is one of them. This survey measures the extent of administrat ive control over such economic act ivities as start ing -and closing -a business, applying for a construction permit, hiring employees, registering enterprises' property, gett ing credit, protect ing minority shareholders against ill-conceived decisions of the management, procedures for paying taxes and export ing, enforcing contracts. As shown in Figure 2, the comparison between Russia and 182 other countries included in the 2009 survey gives an average performance not far from the mean, while underlining two domains in which the administrat ive burden seems to be part icularly heavy : construct ion permits (see sect ion 2.4) and internat ional trade.

[Fig. 2 To be inserted here] As shown in Table 2, a comparison with other BRIMC countries places Russia in a median posit ion.

The Russian situat ion has not evolved much in the last two years : its relat ive position improved according to 5 criteria, although 4 criteria show a degradat ion. The downgrading of its ranking according to the credit criteria may be due to the financial crisis that hit severly the Russian banking system. In addition, a similar analysis conducted in ten Russian cit ies 15 showed that Moscow, which is taken as the reference city for comparing Russia with other countries, is one of the most difficult cit ies for doing business in the country (World Bank, 2009b).

[Table 2 to be inserted here] Complet ing the « Doing Business » survey, based on hard data obtained by a direct test ing of the administrat ive operat ions, the EBRD-World Bank Business Environment and Enterprise Survey (BEEPS) propose a yearly coverage of the businessmen opinion on a range of issues about the business environment in Russia and other countries of Central and Eastern Europe, former Soviet Union, as well as Turkey. In Russia the sample is of more than 1000 firms in construct ion, hotels and restaurant, manufacturing, wholesale and retail, transport and other services. It was carried out from September 2008 to March 2009.

[Table 3 to be inserted here] The 2008-2009 results of the BEEPS survey indicate a progressive shift of businessmen concerns about their environment in Russia. In comparison with the previous survey done in 2005, business regulat ions and their enforcement seemed to be more bearable by companies, while business execut ives increasingly complained about difficult access to skilled and educated workers as well as inadequate infrastructures (See Table 3). Between 2005 and 2008 the share of firms that reported paying bribes dwindle by half, although these results ranked Russia higher than the regional averages. About a quarter of senior management's t ime is declared to be spent dealing with public officials or public services in 2008, an increase of 7 percent from the 2005 survey 16 .

The last survey used in this comparison is provided by the Global Compet itiveness Report (GCR) of the World Economic Forum. Comparing the results of the two BEEPS surveys and the annual GCR is interesting since the two panels of businessmen are different 17 : contrary to the « BEEPS managers », who are largely Russian, the managers surveyed by the GCR work mostly in western mult inat ionals. This structural difference helps to explain the -rare -divergences that can be observed in the two series of assessments of the Russian business climate (Table 3). The BEEPS managers tend to have more difficult ies in hiring skilled workers than the GCR ones who are able, in average, to pay them much higher. Conversely, being more internat ionalized, GCR managers might give greater importance to macro-financial indicators than BEEPs ones. In both surveys however, corrupt ion, tax regulat ions, infrastructure and criminality are considered by business people as the most problemat ic characterist ics of the business environment in Russia.

[Figure 3 to be inserted here] The « Global Compet itiveness Report » elaborates 12 indicators as a basis for a comparat ive survey measuring the compet it iveness of nat ional economies. These indicators are built through quest ionnaires posted to top business execut ives and experts all around the world. The results of the quest ionnaires are compiled in order to rank economies along the « Global Compet it ive Index », an aggregated measure of the performance of a given country along this twelve dimensions. Figure 3 offers a comparison between the scores of Russia and France. It indicates that, according to the businessmen surveyed, the main weaknesses of the Russian environment lie in the quality of inst itut ions, the degrees of sophist icat ion in financial markets and business 16

Reality in figures : from assessing to investing

It can be noted that despite the overall mediocre assessment of the Russian business environment by firms' decision makers, in 2007 Russia was the fourth most attract ive destinat ion for FDI after China, India and the United States (UNCTAD, 2007). This ranking was somewhat confirmed in subsequent years, Russia losing only one place, due to its weaker resilience to the crisis 18 .

[Figure 4 to be inserted here]

Figure 4 describes the assessment of locat ion factors that induce -or discourage -investors to take a stake in Russia. Clearly, market size and growth, the presence of compet itors and, to some extent, access to cheap labour and natural resources are the main declared factors of the investor's presence in Russia : they are more often cited than in OECD or other BRIC countries.

Following their assessments by concrete decisions,mult inat ional firms did not hesitate to invest in Russia in recent years. After a long period of stagnat ion, FDI inflows accelerated in the middle of the 2000's, doubling each year from 2005 to 2007. In 2007 they reached their record level, after the seventh year of uninterrupted growth in the country. , 47 % 3. India, 34 % 4. Brazil, 25 % 5. Russian Federation, 21 % 6. United Kingdom 18% (UNCTAD, 2009b).

[Table 4 to be inserted here] The period of surge of FDI in the world came to an end in 2008. The total amount decreased by 15 %. Interest ingly, despite this unfavourable background, BRIC economies did not experience a decline in inwards FDI in 2008 19 . In Russia, FDI inflows were driven mainly by large investments in the power generat ion industry 20 then being liberalized (see sect ion 2.4), as well as in the automot ive 21 , beverages 22 and real estate industries. The bulk of FDI in the country has been constantly concentrated in natural resource-related sectors (extract ion, as well as oil and gas refining), reflect ing one of the structural tendency in investment, both foreign and domest ic (see Table 5 and annex for more details about the structure of FDI inflows in Russia).

However, in the second half of 2008, war with Georgia and tensions with certain developed countries, combined with concerns about the business environment and weaker economic performance, reduced investor confidence in the Russian Federat ion. The subsequent financial crisis definitely scaled back the amount of capital available for investment, result ing in a rapid fall of FDI all around the world. Russia was severely hit, with a drop of inwards FDI estimated to 48 % in January-September 2009(Illukhina, 2009), in line with the world fall. This drop confirmed that market size and growth are prioritary locat ion factors in Russia, provided the investing firm enjoys cont inued access to finance during tough times.

[Table 5 to be inserted here] 19 UNCTAD Investment Brief, 2009, n°1 20 Fortum (Finland) acquired a controlling stake in TGC-10, RWE (Germany) bought a majority share in and EDF (France) has entered into a partnership with the Russian bidder TransNeftServis-S to acquire OGC-1, one of RAO UES' most valuable assets. Other foreign investors are ENEL (Italy) and CEZ (Czech Republic). The total amount of foreign investment was of $5.4 billion for the year 2008 (UNCTAD, 2009a).

21

Renault (France) increased its equity share from 25% to 50%-plus-one in OAO Avtovaz for $1.2 billion (UNCTAD, 2009a) 22 PepsiCo (United States) purchased a 75% stake in Lebedyansky, the country's largest juice producer, for $1.4 billion. This was the biggest deal in juice production in the Russian Federation so far, and the largest foreign acquisition by PepsiCo worldwide (UNCTAD, 2009a).

Concluding Remarks

Investment climate is a mult idimensional complex that cannot be correctly grasped without due regard to links and differences between theories adopted by the execut ive power, polit ical announcements, legislative acts, enforcement processes, and rules incorporat ion by economic agents.

Our main findings are the following ones : at the « theories » and « legal » stages of the inst itut ional evolut ion process, repeated declarat ions of top officials have given the image of a country eager to become fully integrated into the world economy. Russian authorities have asserted their will to clarify the legal system regulat ing natural monopolies, to struggle against corrupt ion ant to support of SME and entrepreneurship. Several laws have been adopted in this aim (sect ion 2).

The main problems lie at the "enforcement stage" : it appears that legal texts designed to produce a level playing field in Russia are not fully enforced, while some of them are st ill lacking consistency. Several operat ions conducted recently by the administrat ion in the energy sector have been at odds with official declarat ions about the necessity to protect property rights. In addition, it its current state the judicial system is not in capacity to give full effect iveness to the legal framework in Russia (sect ions 3.1 to 3.3. ).

Consequently, problems arise in the « evaluat ion » stage : in spite of official declarat ions, Russian cit izens and businessmen surveyed continue to consider that problems affect ing the inst itut ional environment are not sat isfactorily tackled by the Russian authorit ies.

Internat ional assessments of the investment climate rank Russia among the least developed countries in the world, far behind other « BRIC » economies (sect ion 3.4).

Paradoxically, we cannot conclude from what precedes that Russia is not an attract ive country for foreign investors : recent FDI figures show a sharp decline since 2007, but the Russian evolut ion is in line with the world dynamics regarding internat ional investment. It can be assumed that this decline is partly due to the reversal of risk appet ite and the global tightening of financing condit ions that occurred after the financial crisis, and not to country-specific factors (sect ion 4).

The inst itut ional approach used in this paper helps to understand the interact ions between all dimensions of the investment climate. It provides an assessment of the Russian business climate evolut ion during the past two years. Also, it can be used to derive public policy implicat ions from our findings : At the theory stage, authorities should adopt straightforward and non self-contradictory policies regarding foreign enterprises. This move could also facilitate WTO accession of Russia.

At the legal stage, it remains necessary to overcome the lack of independence of the judiciary system vis-à-vis political power: any sound investment climate requires respect of the state of law. Certain contradict ions regarding the legal treatment of foreign firms should also be removed.

The results of the enforcement stage depend on the former. Assuming that main problems at these stages would have been correctly addressed, Russian authorities should ensure that administrat ive or judiciary bodies are properly prepared for their tasks, namely, interpret ing and giving force to legal texts.

The main shortcoming of this study is the lack of a complete analysis regarding sub-nat ional business climates in Russia. As we have shown in sect ion 3.2, local administrat ions can greatly influence the business environment in their region, given their role in the enforcement process.

The same applies with sectoral analysis : in a fast-transforming country, inst itut ional problems can vary from an industry to another, as the negotiations for WTO accession have been showing extensively for 17 years.

Consequently, one would have to go further in analysing the variables evoked above in order to get a more complete picture of the investment climate in Russia. But this would exceed the scope of this paper. The same remarks can be made about the important question of the economic consequences of the barriers to entry maintained by the Russian authorit ies on some sectors and in some regions. Hence, these topics appear to be an appealing field for future researches on business climate in Russia.

Figure 1. The conceptual framework : dimensions of the institutional change

Source : adapted from Vercueil, 2002. Source : author's calculations based on UNCTAD, 2009b.

Executive summary

Repeated declarat ions of top Russian officials have given the image of a country eager to become fully integrated into the world economy, offering a welcoming investment climate to foreign investors. Several laws have been adopted in this aim. However, problems lie at the "enforcement stage" : legal texts designed to produce a level playing field in Russia are not fully enforced, while some of them are st ill lacking consistency. Several operat ions conducted recently by the administrat ion in the energy sector have been at odds with official declarat ions about the necessity to protect property rights. In addition, it its current state the judicial system is not in capacity to give full effect iveness to the legal framework in Russia. Consequently, Russian cit izens and businessmen cont inue to consider that problems affect ing the inst itut ional environment are not sat isfactorily tackled by the Russian authorities. Internat ional assessments of the investment climate rank Russia among the least developed countries in the world, far behind other « BRIC » economies.

Paradoxically, we cannot conclude that Russia is not an attract ive country for foreign investors.

After having attracted the fourth biggest amount of FDI in the world in 2007, recent figures show a decline, but this trend is fairly in line with the world dynamics regarding internat ional investment : part of the drop is due to the reversal of risk appet ite and the global t ightening of financing condit ions that occurred after the financial crisis, and not to country-specific factors.

As far as investment climate is concerned, several public policy implicat ions can be derived from the above observat ions:

Russian authorities should adopt straightforward and non self-contradictory policies regarding foreign enterprises. This move could also facilitate WTO accession of Russia.

It remains necessary to overcome the lack of independence of the judiciary system vis-àvis political power: any sound investment climate requires respect of the state of law.

Certain contradict ions regarding the legal treatment of foreign firms should also be removed.

Assuming that the aforement ioned problems would have been correctly addressed, Russian authorities should ensure that administrat ive or judiciary bodies are properly prepared for their tasks, namely, interpret ing and giving force to legal texts.

  quest ions : At the theory stage : given the exist ing dominant -and rather crit ical -discourse among western observers regarding investment climate in Russia, what is the discourse of the main policy-makers on the topic ? At the legal stage : what have been the main legislative acts taken by Russian authorit ies in order to change the investment climate during the past two years ? At the enforcement stage : is economic actors' percept ion of the investment climate in accordance with legislative acts aforement ioned ? At the evaluat ion stage : what can stat ist ical indicators currently available reveal about the actual behaviours of (foreign) investors in the Russian economy ?

•

  United Nations: Security Council, General Assembly, United Nations specialised agencies • Group of Eight (G8) • Council of Europe • Organization for Security and Cooperation in Europe (OSCE) • NATO-Russia Council (NRC) • Permanent Court of Arbitrat ion (PCA, « the Hague Tribunal ») EU-Russia Partnership and Cooperation Agreement (PCA) • Organization of the Black Sea Economic Cooperation • Asia-Pacific Economic Cooperation Forum • European Bank for Reconstruction and Development Anticorruption conventions : •Council of Europe Criminal Law Convention on Corruption (signed January 1999; ratifi ed October 2006) •UN Convention against Corruption (signed December 2003 ; ratified May 2006) •UN Convention against Transnational Organized Crime (signed December 2000; ratified May 2004)

  Code of Liberalization of capital movements : Federal Law, of 9 July 1999, No 160 -FZ 'On Foreign Investments in the Russian Federation', Federal Law, of 10 December 2003, No 173 -FZ 'On Currency Regulation and Currency Control', Federal Law, of 2 December 1990, No 395 -I 'On Banks and Banking Activity', Federal Law, of 22 April 1996, No 39 -FZ 'On the Securities Market', The Law of the RSFSR of 26 June 1991 'On Investment Activity in the RSFSR', Federal Law, of 25 February 1999, No 39 -FZ 'On Investment Activity in the Russian Federation Effectuated in the Form of Capital Investments', Federal Law, of 29 April 2008, No 57 -FZ 'On the Procedure for the Effectuation of Foreign Investments in Economic Societies Having Strategic Significance for Ensuring the Defense of the Country and the Security of the State', Federal Law, of 31 March 1999, № 69-FZ 'On Gas Supply in the Russian Federation', Federal Law, of 8 January, No 10 -FZ 'On State Regulation of Development of Aviation', Federal Law, of 7 August 2001, No 119 -FZ 'On Auditor Activity', etc.

Following

  the legislation passed in 2005, six Special Economic Zones (SEZ) have been established in Russian, with the aim to attract foreign and domest ic investments : Zelenograd and Dubna in the Moscow region (micro-electronics and nuclear technology), St. Petersburg (informat ion technology), Tomsk (new materials), Lipetsk (appliances and electronics) and Yelabuga (auto components and petrochemicals). In addition, seven special tourist economic zones were established in 2007 in the Krasnodar, Stavropol, Altai, Kaliningrad,and Irkutsk regions, as well as in the const ituent republics of Altai and Buryat ia. In June 2008, three port SEZ were established : the airports of Krasnoyarsk in East Siberia and Ulyanovsk in the Volga area, and the Sovetskaya Gavan port in the Khabarovsk Territory. The SEZ in Kaliningrad, previously established in 1996,

6

  Federal Law, No 57 -FZ 'On the Procedure for the Effectuation of Foreign Investments in Economic Societies Having Strategic Significance for Ensuring the Defence of the Country and the Security of the State'. The law came into force on 7 May 2008.

  7

  superiority, the ability to create things that people need. » Dmitry Medvedev, President of the Russian Federation, September 2009. Doted with fairly good technological capacities (notably in informat ion technologies) and loose legal environment, Russia has been considered by western investors as a kind of heaven for piracy. Meanwhile, as part of its WTO accession talks, the country has signed all major internat ional agreements concerning Intellectual Property Rights (IPR) (See Box 3). Box 3. Participation of the Russian Federation to international agreements and conventions on intellectual property Patent Cooperation Treaty, Madrid Agreement Concerning the International Registration of Marks of 14 April 1891, Madrid Protocol of 28 June 1989, Nice Agreement Concerning the International Classificat ion of Goods and Services for the Purposes of the Registration of Marks, Berne Convention for the Protection of Literary and Artistic Works, Brussels Convent ion Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite, Convention for the Protection of Producers and Phonograms Against Unauthorized Duplication of Their Phonograms, Rome Convention for the Protect ion of Performers, Producers of Phonograms and Broadcasting Organizations, Paris Convention for the Protection of Industrial Property, Locarno Agreement Establishing an International Classification for Industrial Designs, Trademark Law Treaty, Nairobi Treaty on the Protection of the Olympic Symbol, World Intellectual Property Rights Organization (WIPO) Copyright Treaty and the WIPO Performance and Phonograms Treaty (joined on 24/07/2008). Source : PriceWaterhouseCoppers, 2009. In 2006, Russia signed an agreement with the United States, committ ing itself to reduce the level of piracy on its territory. From 1 January 2008, Part IV of the Civil Code came into force. It covers patents, trademarks and copyright issues, replacing all previous legislation on these areas, with the aim to be consistent with the requirements of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). On 2 February 2009, the State Duma passed a law that intends to reinforce the protect ion of such results of intellectual act ivity as literature, fine arts, scient ific research and its applicat ions, trade marks, software and databases, with due reference to the TRIPS agreement 8 . Since then, several meet ings between Russian and European Commission officials have been held in order to progress in the EU-financed program of convergence of the legal systems of intellectual property right protect ion, notably in the pharmaceut ical research industry.

«

  We want to sell Russian markets to investors in the best manner possible » Dimitry Pankin, Deputy Minister of Finances, February 2010.

«

  Corruption became a systemic problem and we have to confront this problem with systemic actions ». Dmitry Medvedev, May 2008.

  May. On 19 May 2008, President Dmitry Medvedev signed the President ial Decree 815 on "Measures against corrupt ion". He also announced the sett ing up of a Nat ional Ant i-corrupt ion Plan within one month. The decree created the President ial Council for Combat ing Corrupt ion, headed by the President, whose task is to design a nat ional ant i-corrupt ion policy, to work out legislat ive proposals and to coordinate the efforts of the federal, regional and local execut ive and legislature against corrupt ion. Sergei Naryshkin, chief of the president ial administrat ion, was appointed chairman of the Council execut ive board. On 31 July 2008, the Nat ional Ant i-corrupt ion Plan (NAP) was published, establishing four domains of act ions : draft ing and adopt ion of the federal law against corrupt ion ; measures on corrupt ion prevent ion in public services ; measures on the improvement of public governance and governmental inst itut ions; and measures on the enhancement of legal and ant i-corrupt ion educat ion. The plan was signed by the president on 31 July 2008, and converted into draft laws submitted to the State Duma in October 2008 (see Box 4).

10

  In 2002 and in 2005, Russia featured one of the worst corruption indicators of the 33 transition countries surveyed by the « anti-corrupt ion survey » of the World Bank.

  Pre-empt ive rights to purchase state property leased for at least three years (July2008)Limits to scheduled inspections of SMEs to one every three years : any unscheduled inspection now requires an authorisation of the Prosecutor General (May 2009) Introduction of a notification mechanism for 13 types of business activities including retail trade, hotel and restaurants and publishing(May 2009)

  The percept ion of corrupt ion has not really improved since this statement. The Transparency Internat ional Corrupt ion Percept ions Index (CPI) of Russia was downgraded in 2008 (2.1, against 2.3 in 2007), placing the country at the 147th rank out of 180 countries (143rd in 2007), on the same level as Bangladesh, Kenya and Syria. Russian INDEM foundat ion 12 estimates that the yearly cost of corrupt ion offences is approximately $300 billion, almost equivalent to Russia's federal budget. The Investigat ions Committee of the Prosecutor General Office considers that private businesses in Russia pay up to $ 33,5 billion each year in bribes and kickbacks. St ill, in recent years there have been few prosecut ions and/or dismissals of high-level corrupt officials 13 . As a result, 43 per cent of the Russian citizens surveyed in 2008 did not consider the government's ant i-corrupt ion act ivities in the previous year to have been efficient. According to a survey conducted in September 2008, they consider that the most corrupted parts of the society are civil 12 INDEM (« Information science for Democracy ») is a Russian NGO founded in 1990 and devoted to research, assistance of the civil society and consultancy of Government bodies on such topics as anti-corruption.

  During the last two years, Russian lost twelve places in the GCI ranking (63 th from 51 st in 2008-2009, among 133 countries), mainly reflect ing its economic vulnerability during the crisis. As regard investment climate, the main drawbacks concern the perceived lack of government efficiency (110 th ), little judicial independence in met ing out just ice (116 th ), a lack of property rights (119 th ), concerns about government's favouritism in its dealings with the private sector, and poor corporate ethics (110 th ) in the private sector(World Economic Forum, 2009).

			Investment Climate in Russia	Journal of Euromarketing, Vol.19, N°2-3, 2010
	and the goods markets efficiency.
		The World Bank, «Russian Economic Report », n°21, March 2010.
	17	GCR respondents by firm size (Russian Federation, number of workers) :
				101-	501-1,001-5,001-
		Size	<101	500	1,000 5,000 20,000 >20,000 No response
			368	26	27	27	15	1	2

Table 4

 4

	offers a synthesis of recent

Presence of partners Following competitors Talents availability Cheap labour Market size Access to other markets Market growth Natural ressources Capital markets Gvt effectiveness Incentives Infrastructures Friendly environment

				1. Theories
		4. Evaluat ions				2. Legal framework
				3. Enforcement
		: Main interact ions
		: Secondary interact ions
		Figure 4 . Investors perception of location factors in Russia
		Comparison with BRIC and OECD averages, 2009-2011
						Russia's distance index to
						BRIC average
						Russia's distance index to
						OECD average
		Presence
	-150,00%	-50,00%	50,00%	150,00%	250,00%	350,00%	450,00%

of partners Following competitors Talents availability Cheap labour Market size Access to other markets Market growth Natural ressources Capital markets Gvt effectiveness Incentives Infrastructures Friendly environment

		Figure 4 . Investors perception of location factors in Russia
			Comparison with BRIC and OECD averages, 2009-2011
						Russia's distance index to
						BRIC average
						Russia's distance index to
						OECD average
	-150,00%	-50,00%	50,00%	150,00%	250,00%	350,00%	450,00%

Table 1 . Main Restrictions to competition in Russia according to the OECD « Price Market Restriction Index » : a comparison with OECD countries

 1

Source : author's calculations based on

Conway et alii, 2009.

Table 2 . Comparing Russia with other B(R)IMC according to the « Doing Business » criteria : rankings among 183 countries surveyed

 2 Source : World Bank, 2010. Note : a positive sign in the last column indicates a degradation of the ranking.

					Russian Index,
		PMR in Russia 2009		in % of the OECD mean
					index
		Regulatory barriers to international trade	1850
			Antitrust exemptions	920
				Price controls	625
		Barriers to FDI (foreign acquisition of equity)	283
				Tariffs	273
		The use of command and control regulation	250
	Discriminatory procedures against foreign firms	200
	Administrative burdens for sole proprietor firms	188
			Legal barriers to competition	182
		Scope of the public entreprise sector	152
		Administrative burdens for corporations	147
		Government involvement in network sectors	143
		Direct control over business entreprises	141
							Evolution of
		Mexico	China	Russia	Brazil	India	Russia's ranking 2009-
							2010
	Starting a business	90	151	106	126	169	-18
	Dealing with construction permits	37	180	182	113	175	0
	Employing workers	136	140	109	138	104	-5
	Registering property	99	32	45	120	93	4
	Getting credit	61	61	87	87	30	22
	Protecting investors	41	93	93	73	41	-5
	Paying taxes	106	130	103	150	169	5
	Trading across borders	74	44	162	100	94	-2
	Enforcing contracts	81	18	19	100	182	0
	Closing a business	24	65	92	131	138	0
	TOTAL	51	89	120	129	133	1

Table 3 . Main problems faced by businessmen in Russia, 2005-2009 : a comparison between two BEEPS surveys and the Global Competitiveness Report Source

 3 : The World Bank, «Russian Economic Report », n°21, March 2010 (note : The most severe problem ranks number 1, the least 14) andWorld Economic Forum, « Global Competitiveness Report 2009-2010 », 2009.

Table 4 . Russia : Economic Growth and Investment, 2007-2010

 4

		2007	2008	2009	2010*
	GDP (growth rate)	8,10%	5,60%	-7,90% 3,50-5,50 %
	Domestic Investment (growth rate)	22,70%	9,80%	-17,00%	-
	Foreign Direct Investment (bns $)	27,8	27	15,9	-
	Share of Gross Fixed Capital Formation ( % GDP)	19,60%	20,90%	15,60%	15,10%
	Sources : Rosstat, Central Bank of Russia, International Monetary Fund, World Bank. * : forecasts

Journal of Euromarketing, Vol.19, N°2-3, 2010

Annex (Source : UNCTAD, 2009a)