PESTE—Technological Factor
Science and technology in Russia developed rapidly since the Age of Enlightenment, a cultural movement of beginning in the late 17th century emphasizing reasoning rather than tradition, establishing a strong culture of learning and innovation. In the 19th and 20th centuries the country produced a large number of notable scientists, making important contributions to the technology.

Technological parks
There are five massive technological parks in Russia. The Russian government has announced the building of the Skolkovo Innovation Center near Moscow, the capital city. This is going to be the biggest “silicon valley” in the world. It aims to attract technological companies to set up factories there and focus not only on the development of technology start-ups but also on marketing them. Skolkovo Innovation Center includes five clusters specializing in different areas of technology. The Skolkovo Innovation Center will certainly be an ideal place to invest in High Tech industries.
(Refer to appendix 4J)

Infrastructure
According to the International Logistics Performance Index (LPI) in 2012, Russia is ranked 95th among 155 countries, scoring 2.58 upon 5. This indicator measures the quality of trade and transport related infrastructure such as ports, roads, railway etc. Being moderately developed in its infrastructure compared to many developing countries, it can attract a significant number of foreign investors. The upcoming 2014 Russia Winter Olympics and the 2018 FIFA Russia world cup have resulted in a huge investment in transport infrastructure and Russia’s transport infrastructure is expected to be extremely developed after these events.
(refer to appendix 4A)

Extensive railway system (very low risk/ great advantage)
Russia has the world's second-largest railway network with 150000 kilometers of tracks, losing out only to the United States. Russian Railways, the state-owned national rail carrier, is one of the world's largest transport companies and enjoy an absolute monopoly over rail transport in Russia. In 2007 alone, Russian Railways carried a total of 1.3 billion passengers and 1.3 billion tons of freight. When considered in terms of distance hauled per unit of energy consumed, rail transport is more cost effective than other means of transportation such as trucks or airplane. A decent rail system is a very important consideration if the company needs to gather resources or distribute its products in a big country like Russia.
(Refer to appendix 4K)

Fair quality of Roads (Moderate Risk)
Russia’s road network covers over 933000 kilometers and includes 270000 kilometers of expressways. According to the World Bank, 87.4% of the total roads in Russia are paved, and Russia ranks 136 out of 181 countries in the quality of its roads. Generally, the road systems in Russia are fairly developed in comparison to other ex-soviet countries. The highways link major growth centers to seaports and airports throughout the country and provide an effective means of transportation for goods. Hence, transportation is not a major issue in Russia. However, road safety in Russia is poor with road accident deaths rates higher than most developed countries and is the highest of the BRIC countries.

Accessibility to Seaport and Airport (Very low risks)
Airport
There are 7 international airports in Russia, of which 2 of them are in the capital, Moscow. In addition, there are another 7 large scale domestic airports and over a hundred small scale domestic airports. The country has 51 passenger airlines which provide international and domestic air services. Russia’s largest airport, Domodedovo International Airport, is approximately 42 kilometers away from Moscow and has an initial capacity of 22.5 million passengers and 700,000 tons of cargo per year. Air cargo facilities are well developed in the airports. Therefore, the airports can help to facilitate the flow of tourists coming into Russia and the transportation of cargoes, encouraging tourism and investments in the country.
(Refer to appendix 4E and 4F)

Seaport
Russia has 27 international ports with the largest one being Novorossiysk Commercial Sea Port. It is the busiest oil port in the Black Sea and the 6th largest port in Europe. Novorossiysk Commercial Sea Port is connected by rail and highways to the main industrial and population centers of Russia, Transcaucasia, and Central Asia. There are 3 airports near the port, with the nearest one, Gelendzhik Airport, just 33 km away. To keep business costs low, investors can consider shipping materials through water, as it is much cheaper though a bit slower.
(Refer to appendix 4B, 4C and 4D)

Payment Infrastructure (Low Risks)
The modes of payment instruments are cheques, charge cards, credit and debit cards. As such, transactions can be carried out smoothly in a B2C model, which is commonly done in a retail store. For a B2B model transaction, instruments such as cheques, Internet and mobile banking are forms of payment modes that businesses can utilize. In overall, the reliable and steadfast payment infrastructure in Russia complements smooth transactions, which is essential in the course of doing business.

Advanced Telecommunications (Very Low Risks)
Telecommunications network is good compared to many eastern European countries, but still worse than other developed countries. The Russian government has promised to upgrade its telecommunications infrastructure to first world standards by 2020. The telephone direct dialing system gives instantaneous international communication from both fixed and mobile units. Having 8 major telecommunication companies to select from, relatively high quality services can be assured of when there is competition among the telecommunication companies.
The cell-phone penetration is 164%, one of the highest in the world and the smartphone penetration rate is 18%. This shows that it is easy for investing companies to stay connected with its Russian workforce through mobile and internet.
(Refer to appendix 4G)

Availability of Workers (Low Risks)
In Russia, there is an abundance of highly skilled labor. Russia is an extremely literate country. 99.4% of Russians are literate, 54% have at least a tertiary (college) education, giving Russia the highest attainment of college-level education in the world. This shows that the workforce is very highly skilled and companies will not face shortage in skilled labor. However, the labor cost in Russia is high, average wage per capita is USD 14,302 annually, much higher than other newly industrialized countries such as China and India. Hence, employers have to drive up the production prices to stay profitable. The labor cost is expected to continue to rise as Russia is rapidly developing.
(Refer to appendix 4H)

Future Risks: (Moderate Risks)

Aging/declining workforce (moderate risk)
One of Russia’s long term woes is its fast aging workforce. The average age of an industrial worker in Russia has increased from 38.5 years old in 2000 to 40 years old in 2010. Russia’s rapidly shrinking workforce is another major problems facing Russia over the next decade. The Russian Federal Migration
Service said that Russia will lose up to 10 million workers (out of approximately 70 million currently) by 2025. Investors in Russia have to make plans for this problem, such as providing skills upgrading to ensure its workforce stay competent or provide re-employment to older workers that are supposed to retire.

Rising labor cost (moderate risk)
Over the past three years, labor costs in Russia rose by almost 50% in inflation-adjusted terms. In dollar terms, wage increases were even higher. The rapid increase in Russian labor costs is a major economic challenge for companies investing in Russia. Unless they constantly decrease other expenses or increase their selling prices to increase their revenue, their profit will decrease. However a high labor cost is not always bad as it can also mean high productivity per employee. Employees will be more motivated if their salaries are higher and thus company does not have to employ as many employees to do a job.

Crumbling buildings (moderate risk)
According to the Russian Ministry of Regional Development, half of the buildings in Russia are extremely worn out and pose danger to the people living or working in them. These buildings need complete overhaul or might collapse. News of Soviet era buildings collapsing makes the headlines regularly. This might affect investors as it makes it more difficult to convince parent country nationals to go to Russia as expatriates due to the fear of losing their lives in a collapsed building. However, The Russian government has dedicated 3.5 billion US dollars to upgrade aging residential buildings over the next ten years.

Technological considerations | Risk ratings | Infrastructure * Fair quality of roads * Extensive railway system * Accessibility to seaports and airports | LowModerateVery low / great advantageVery low | Information technology * Advanced telecommunication | Very lowVery low / great advantage | Facilitate business transaction * Good payment structure | LowLow | Workforce * Highly qualified workforce * High labor cost | LowVery low risk / great advantageModerate | Future risks * Aging/declining workforce * Rising labor cost * Crumbling buildings | ModerateModerateModerateModerate |

Appendix 4A http://lpi.worldbank.org/ Appendix 4B http://www.searates.com/maritime/russia.htm Appendix 4C http://www.nmtp.info/en/ Appendix 4D http://en.wikipedia.org/wiki/Novorossiysk Appendix 4E http://www.mapsofworld.com/international-airports/europe/russia.html Appendix 4F http://www.domodedovo.ru/en/ Appendix 4G http://www.reuters.com/article/2013/08/08/mobile-russia-idUSL6N0G93MD20130808 Appendix 4H http://literacyratio.blogspot.sg/2010/01/list-of-countries-by-literacy-rate.html Appendix 4J http://rustradeusa.org/eng/256/366/ Appendix 4K http://www.railway-technology.com/features/featurerussia-railways-connecting-growing-economy/ Articles on Russia’s infrastructure

http://uk.reuters.com/article/2013/09/27/russia-investment-infrastructure-reuters-idUKL5N0HG0JF20130927

http://www.pwc.com/gx/en/capital-projects-infrastructure/assets/russia-snapshot.pdf

http://meridian103.com/issue-6/business/

http://russiaprofile.org/business/60317.html

http://www.investmenteurope.net/investment-europe/opinion/2258821/russia-starts-to-get-to-grips-with-infrastructure-funding

http://themoscownews.com/russia/20130621/191632921.html

Articles on Russia’s R&D

http://www.rdmag.com/articles/2012/12/bric-russia

http://www.access4.eu/russia/172.php

http://www.themoscowtimes.com/business/article/experts-say-russia-needs-better-execution-of-rds-abcs/478726.html