...| Russia: PEST Analysis for Foreign Direct Investment | Principal of Finance | Russia: PEST Analysis for Foreign Direct Investment Overview Russia is a large country with a long history extending back to the 12th century AD when it first freed itself from Mongol domination (Russia). Russia’s most relevant historical past is its emergence from Communist rule and the breakup of the Soviet Union under Mikhail Gorbachev in 1991 due to his policies of glasnost and perestroika, or opening and restructuring. Since that period Russia has been defined by a kind of political turmoil that has seen every sort of leader from a, it is said, Vodka imbibing progressive in Boris Yeltsin to a former intelligence officer in the KGB with a black belt in Judo, in Vladimir Putin (Russia). While the political turmoil has unfolded publicly, the business and professional climate has deteriorated from the heady days of the Soviet breakup when foreign enterprises believed the region was ripe for investment and, to some degree, exploitation. The level of corruption has largely dissuaded the full development of foreign investment and is an international concern, not just local to Russia: “the prevalence of corruption and crime in business affairs has been generally recognized as a major cause of concern...”(Taylor, Kazakhov & Thompson par.1). Until Russia is able to solve this unregulated chaos, business in Russia will remain an exercise in risk rather than revenue. Political Many...
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...As the CEO of a company that has to choose between making a $100 million investment in either Russia or Czech Republic the risk considerations have become critically important in choosing the best option. The risk considerations include evaluation of each nation’s political, economic and legal systems along with the cultural practices, education and skill levels and each countries stage of economic development. The political systems of a country shapes both the economic and legal systems (Hill, 45). These systems are interconnected and play a vital role in making a decision of which country to make an investment in. In evaluating the risks of making the investment in Russia, the most widely discussed risk that is found is the corruption in the country; this remains a major barrier success for businesses in the nation. There is a complex business environment in Russia along with known issues involving bribery. The corruption in the nation leads to a number of problems including non-transparent and inconsistent application of laws and regulations with the weak enforcement of laws and court decisions (Business Anti-Corruption Portal). This isn’t the only area where corruption is a problem in Russia, there is corruption in the area of licensing and permits with multiple inspections and red tape. Intentional and lengthy delays in the procedures for starting a business, getting required permits and licensing are additional risks along with the corruption. It does seem as though the...
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...3. Investment Climate POLITICAL AND ECONOMIC STABILITY The Czech Republic is a fully-fledged parliamentary democracy, and is one of the faster growing economies as well as one of the ten countries that entered the European Union on 1 May 2004. The country’s economic policy is consistent and predictable. A strong and independent central bank (the Czech National Bank) has maintained an extraordinary degree of currency stability since 1991. The Czech Republic was the first CEE country to be admitted into the OECD. The country is a member of NATO and is fully integrated into other international organisations such as the WTO, IMF and EBRD. EU legislation was adopted in preparation for EU accession. Czech commercial, accounting and bankruptcy laws are compatible with Western standards. The Czech koruna is fully convertible. All international transfers (e.g. profits and royalties) related to an investment can be carried out freely and without delay. NON-DISCRIMINATION Under Czech law foreign and domestic entities are treated identically in all areas, from protection of property rights to investment incentives. The government does not screen any foreign investment projects with the exception of those in the defence and banking sectors. As an OECD member the Czech Republic is committed not to discriminate against foreign investors in privatisation sales, with the same exception as that mentioned above. INVESTMENT PROTECTION The Czech Republic is a member of the Multilateral Investment...
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...University Mark Pate July 6, 2014 The impact of the deprivatization of Russia in the late 1990’s had a tremendous impact on investment by managers of privatized firms. What Russia had done to private buyers of foreign companies is make a private market public. This means many different things to Russia and the companies that it deprivatized. The first thing is that when you deprivatize a company you lose company goals or missions. The loss of planned managerial objectives and strategic efficiency will be lost with local state run companies. Local managers are only going to do as the regulations require and nothing more. These companies that were privatized and then deprivatized by Russia for any slight wrong in paper work. This allowed the local Russian people to invest their time and money into these now local businesses that were taken over by Russian government. With the initial deprivatization of Russia, managers were very hesitant to make decisions on investments. Russia made it very difficult for privatized companies to exist without local interest. Anyone could report a privatized company for any little violation of state. Again this would lose the company managerial objectives and strategic efficiency. The effects of deprivatization on foreign investment in Russia could be detrimental to investors. Investors have watched oil companies like Sidanko, who was a foreign private firm deprivatization in Russia. The Sidanko assets were sold during bankruptcy proceeding to a Russian...
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...India-Russia Relations Relations with Russia are a key pillar of India's foreign policy and Russia has been a longstanding time-tested partner of India. Since the signing of “Declaration on the India-Russia Strategic Partnership” in October 2000 (during the visit of President Vladimir Putin to India), India-Russia ties have acquired a qualitatively new character with enhanced levels of cooperation in almost all areas of the bilateral relationship including political, security, trade and economy, defense, science and technology and culture. Under the Strategic Partnership, several institutionalized dialogue mechanisms operate at both political and official levels to ensure regular interaction and follow up on cooperation activities. During the visit of Russian President to India in December 2010, the Strategic Partnership was elevated to the level of a “Special and Privileged Strategic Partnership”. Political Relations: Annual Summit meeting between the Prime Minister of India and the President of the Russian Federation is the highest institutionalized dialogue mechanism under the Strategic Partnership between India and the Russian Federation. So far 14th Annual Summit meetings have taken place alternatively in India and Russia. The last (14th) Annual Summit was held in Moscow on 21 October 2013 when PM Dr. Manmohan Singh visited Moscow and had a meeting with President Putin. A Joint Statement “Deepening the Strategic Partnership for Global Peace and Stability” was adopted during...
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...TREASURY F DI in Russia Issues and Perspectives Vinay Kumar The wave of Foreign Direct Investment in Russia started during 1990s, when the Law on Joint Ventures with firms from capitalist countries was passed. Initially, there was not much foreign investment. Later, in the year 2003, Russia attracted huge FDI and was placed third in FDI projects in the world, beating both China and the US. This article primarily focuses on FDI in Russia and also discusses some relevant issues. F oreign Direct Investment is seen growing faster than world GDP and is becoming a key factor of foreign investment. There has been a oneway flow of FDI between the developed and developing economies, and a two-way flow of FDI between the developed economies. Russian Finance Minister Alexei Kudrin’s handling of the country’s oil windfall was the mere indication for those who thought that Russia was able to pursue sensible fiscal. He has managed the petroroubles prudently and the contribution he has made to Russia’s economic stability is impressive. Industrial countries like the US, the UK, Japan, Italy, Russia, and Germany have long dominated the FDI flows and totaled to 94% of outflows and over 70% of inflows in 2001. During the period of 1990-2000, the inflows in developing countries grew by an average of 23% per year. Later in 2001, these inflows declined to 13% (US$215 bn) affecting inflows into Brazil, Argentina, and Hong Kong Special Administrative Region (SAR). Putting these three economies...
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...policies were successful in modernising the Russian economy in the period of 1892-1904? At the end of the nineteenth century, Russia had been plunged into depression, because the government was forced to print more and more money which caused a rise in inflation. In addition, because Russia was at war with Turkey, over thirty per cent of the government’s expenditure was being spent on the armed forces, whilst another thirty per cent was being lost on debt interest, which left little money for education or social welfare. Ivan Vyshnegradskii, the finance minister from 1887- 1892 began attempting to rescue the government finances. He reduced imports and imposed tariffs on imported goods, which forced peasants to sell more and more grain which they could not produce, this lead to a famine which overwhelmed large parts of the country in 1891. Russia was also lagging behind many of the Western countries at the time in terms of industrial development too. When count Sergei Witte was appointed finance minister in 1892, there was a desperate need to decrease inflation, improve infrastructure and encourage foreign investment. However, it is debatable how successful the policies introduced by Witte were in modernising the Russian economy. Witte’s aim was to make the Russian economy strong enough to maintain Russia’s position as a Great Power. However, Russia did not possess several of the essential factors required to be able to rapidly industrialise like countries such as Germany and...
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...To what extent did the policies of Sergei Witte address the problems facing Russia at the end of the nineteenth century? Russia faced many problems at the end of the nineteenth century. Under Minister of Finance Ivan Vyshnegradskii there had been famine because of high taxes on consumer goods which had forced peasants to sell more and more grain. The government were slow to act and, although they eventually enforced a ban on grain exports, 350,000 died of starvation or disease. Economically and industrially Russia was also falling far behind many other Western countries at the time, like Britain and Germany. When Count Witte became Minister of Finance in 1893, there was desperate need to decrease inflation, improve infrastructure and encourage foreign investment. This essay will discuss how successful he was at introducing policies that addressed these problems. A great success for Witte was the expansion of heavy industry in Russia. He linked industrial growth with a stronger nation politically and economically, and was inspired by the more developed nations in the west. He invited foreign experts from more industrialised countries like Britain, France and Germany to Russia to advise him on modernisation. He realised that he would have to have policies that would allow individual business people to start factories and encourage metalwork. His policies were successful, because industrial growth increased on average by 8% a year between 1890 and 1899, which was the highest...
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...14 Foreign Aid and Foreign Investment Financial flows to developing countries take two main forms—aid that comes from foreign governments, often called official development assistance, and investment from foreign private companies, known as private capital flows. Official Development Assistance After World War II and until the early 1990s, the main source of external finance for developing countries was official development assistance provided by the governments of high-income countries in the form of food aid, emergency relief, technical assistance, peacekeeping efforts, and financing for construction projects. Donor countries are motivated by the desire to support their political allies and trade partners, to expand the markets for their exports, and to reduce poverty and military conflicts threatening international security. After the breakup of the Soviet Union, former centrally planned economies also started to receive official assistance, aimed primarily at supporting market reforms. Table 14.1 shows the amounts of net official assistance provided to developing and transition countries by the member countries of the Organisation for Economic Co- operation and Development (OECD) in 1996. On average, the donor countries in Table 14.1 spend about one-third of 1 percent of their combined gross domestic product (GDP) on official development assistance. Use Table 14.1 and Data Table 1 to calculate which countries spend larger and smaller shares of their GDP on such assistance...
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...INTRODUCTION 3 THE PROPOSAL 3 TALK TO ME INC. 3 THE RUSSIAN ENVIRONMENT 4 DOUBTS ABOUT THE PROPOSAL 5 DECISION ANALYSIS 5 What really happened 6 REFERENCES: 6 INTRODUCTION The present case study refers to Talk to Me Inc., a company specialized in telecommunications that examined back in 1995 whether or not to expand in the Russian market. The company’s background and action so far, as well as the environment of Russia played a catalytic role in making the decision of expanding in the soviet country. THE PROPOSAL The case begins with the proposal of the Russian Ministry of Communications to Talk to me Inc., known as the 50/50 project. The purpose of this project is to develop an entirely new telecommunications network in Russia and got its name from its goals. In particular, the 50/50 project’s aims were to connect 50 Russian cities, to establish 50 long-distance transit switches and 50 thousand kilometers of digital lines. The 50% of equipment required for the project would be manufactured in Russia and the 50% of the funding would come from Russian resources. This project was expected to last 10 years, with an estimated Budget of $40 billion. Among Talk to me Inc., the Ministry had also approached numerous other American telecommunications companies, such as AT&T and US West, as well as large European organization, for example Deutsche Telekom and France Telecom. TALK TO ME INC. BACKGROUND: Talk...
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...the rest are quite average or below the poverty line. It is an overachieving country, with high income compared to low competitive index. In Porter’s Diamond-E Framework, Russia is in the Efficiency-Driven Stage; it is an investment-driven economy. This is not congruent with the general analysis of the banking industry worldwide, when looking at it through Porter’s Five Forces Model. Applying the model to this sector yields high barriers of entry, a moderate power of suppliers in terms of their ability to lure away human capital, increased power of buyers in terms of switching costs, many substitutes, and a high competitive rivalry. To better assess the entry of The Royal Bank of Canada (RBC) into the Russian market, one must also consider Canada-Russian relations. Being the two largest Artic countries, Canada and Russia share many common opportunities and challenges. The countries have a long history of cooperation on issues such as science, energy and environmental protection, and in 2012, promising areas of cooperation include energy, mining, transport, communication technologies and the aerospace industry. Russia’s key industries include agriculture, forestry, oil & gas to name a few. In regards to the banking sector, there are numerous opportunities in the country to boost Canada-Russia cooperation in the due to the latters need for more financial services. RBC would help greatly in terms of the...
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...Conditions in Russia and Their Effect . . . . Kouznetsov and Jones CONDITIONS IN RUSSIA AND THEIR EFFECTS ON ENTRY MODE DECISIONS OF MULTINATIONAL MANUFACTURING ENTERPRISES: A QUALITATIVE STUDY IDENTIFYING ISSUES FOR FURTHER RESEARCH IN THE AREA OF COUNTRY CONDITIONS AND THEIR IMPACT ON ENTRY MODE ALEX KOUZNETSOV, Melbourne Institute of Technology ASHELEY JONES, Melbourne Institute of Technology This study examines entry modes employed by foreign multinational manufacturing enterprises (MMEs) when entering Russia. This exploratory study focuses on country-specific conditions associated with the chosen entry mode - an important component in the consideration of overall entry strategy. Information from field studies representing 18 manufacturers – 10 directly manufacturing in Russia and 8 selling their products in Russia via representative/sales offices – was obtained by means of personal interviews with senior management in Moscow and constituted the primary qualitative data. Research questions are posed for further examination of conditions in Russia and the effects of such conditions on the entry mode decisions of MMEs. The study finds economic conditions to be the only important determinant of entry modes for large multinational manufacturing companies investing in Russia with other country factors playing no role in their choices. INTRODUCTION With the expansion of global business activity, the ability to analyze the key characteristics of potential...
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...9-297-005 Rev. October 18, 1996 D O Private Equity Investment in Russia: Alliance Cellulose Limited N In April, 1995, portfolio managers were reassessing the investment climate in Russia. Since the disintegration of Communism and the Soviet Union in 1991, western investors had been intrigued by the potentially huge returns that could be gained by participating in the restructuring of the Russian economy. Russia’s transformation to a market system, however, had been highlighted by missteps and disappointments. Foreign investors who had jumped into the market only eight months earlier were burned badly by a general market collapse in October. Furthermore, Russia’s political and economic future were uncertain. O Nevertheless, Russia possessed many attractive features that could reward those with the courage to invest at this early stage of market development. Russia’s natural resources accounted for significant portions of the world’s proven oil and gas, timber, coal, and minerals reserves. In addition, the privatization process, lack of internal capital, and country-specific risk resulted in valuations for Russian companies that seemed to be small fractions of their world peers. T Russia in 1995 was frequently compared to America’s “Wild West,” when the search for riches and general lawlessness combined to create very volatile conditions. While western money managers were drawn to Russia by tantalizing asset valuations and high market growth potential...
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...move was risky but potentially necessary to in order to move itself to a better position within the market. By moving into Russia first through a joint venture with VNG Phibro hoped to gain access to a significant source of scarce input crude petroleum One of the main reason moving into new market is that a company has a specific expertise to share to allow it to gain a competitive advantage. While Phibro certainly had a capital to contribute to any venture its expertise in the oil industry was limited and it has been in operation only for less than ten years before it took on the White Night Project. This lack of expertise showed itself in the mistakes it made while entering the Russian market. First the company had trusted the Russian estimates of the available oil rather doing its own research. This was a costly mistake when it turned out that the estimates of available crude oil was too generous. Second the company entered into a contract that left it dependant of on its foreign partner. Phibro promised to provide capital to find the needed technology and services, while VNG would provide the feels and the infrastructure. This left Phibro with little control over how to work was implemented in Russia. It also left Phibro with a partner that was required to continue to selling oil to its traditional customers, which because of economic crisis in Russia could not afford to sell pay for the oil. Finally Phibro did not bring any other strategic partners into its agreement. Phibro...
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...Country Analysis: Russia MBA Fall 2015 International Management in Sport and Entertainment Table of Contents Country Analysis: Russia 1 Introduction 1 Economic Environment 1 Political and Legal Environment 2 Culture 2 Conclusion 6 Country Analysis: Russia Introduction Russia is the world’s largest nation, covering 6,5 million square miles, with a population of 143 million people recorded in 2014. Russia borders European and Asian countries as well as the Pacific and Arctic oceans. In order to make a decision, concerning the market expansion of an organization into Russia, the economic environment as well as the political and legal environment will be analyzed with a focus on the cultural aspects. Economic Environment Russia is one of the BRICS countries (Brazil, Russia, India, China and South Africa), which are projected to be the fastest growing emerging economies, with a combined GDP of $16 trillion. With a GDP of $2.6 trillion, Russia is a leading exporter of natural gas and oil and is the fifth largest economy in the world. Services are the largest sector of the economy and accounts for 58 percent of the GDP. The most important segments in services include wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods. This represents 17 percent of total GDP; public administration, health and education (12 percent); real estate (9 percent) and transport storage and communications (7 percent). Industry contributes...
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