Russia’s Image Among Foreign

InvestorsKey findings from survey and focus group research

conducted April – May 2007 by

HARTRESEARCH

P e t e r D

A S S O T E SC I A

Russia’s Image among Foreign Investors – May 2007/Hart Research for2

Methodology

Quantitative Surveys among 106 current foreign investors

(fieldwork conducted by CESSI, Institute for Comparative Social Research) and 51 potential foreign investors, conducted April – May 2007

Qualitative Focus group among potential foreign investors,

conducted in New York, NY, and in-depth, one-on-one interviews among current and potential foreign investors, conducted May 2007

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Context For The Research

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Key Details About Current Investors Sample

More than two-thirds of their companies have global sales over $1 billion, including 24% that have sales over $50 billion.

51% of the companies that responded are head-quartered in the U.S., 36% are in Western Europe, 4% are in Asia.

31% entered the Russian market before 1991; 23% entered within the past eight years.

In 2006, 58% invested over $10 million in the Russian market, including 38% that invested $50 million/more.

More than two-thirds (70%) say they invested more in Russia in 2006 than in 2005.

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Key Details About Potential Investors Sample

Half of their companies have global sales over$1 billion, including 12% that have sales over $50 billion.

A large majority (86%) of the companies that responded are headquartered in the U.S., 6% are in Western Europe, 4% are in Asia.

Half say there is a good chance their company will consider investing in Russia.

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Dollars Drive Investment DecisionsBiggest Attraction to Investing in Russia

Return Russianconsumers

Russianresources

12%8%

Currentinvestors

Potentialinvestors

Currentinvestors

43%

Potentialinvestors

40%

Currentinvestors

Potentialinvestors

21%

27%

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Direction Of Economic Policies And Laws

47%

28%

25%

Russian Economic Policies and Laws that Encourage Foreign Investment

Current Investors Potential Investors

Headed in the right directionDifficult to sayGotten off track in past year

26%

41%

33%

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Russia’s Integration Into The Global Economy

Russia’s Ratings on Integrating Itself into Today’s Global Economy

Current Investors Potential Investors

2%

32%28%

38%

6%

31% 30%33%Well integrated

(8-10 ratings)

Integrated (6-7)

Somewhatintegrated (5)

Isolated (0-4)

* zero-to-ten scale

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The CaseFor Russia

Russia’s Image among Foreign Investors – May 2007/Hart Research for10

56%

26%

10%

7%

Majority Satisfied With Investment In Russia

Company’s Level of Satisfaction with Decision to Invest in Russia

Current Investors

High(8-10)*

Medium(6-7)*

Low (0-4)*

Mixed (5)*

* zero-to-ten scale

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Return On Investment

52%

24%

17% 18%

39%

29%

Higher than average

About average

Lower than average

Assessment of Russia’s Return on Investment, as Compared with Emerging Markets in General

Current Investors Potential Investors

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Key Economic Factors

35%

53%

55%

67%

59%

75%

Current investorsPotential investors

Increasing consumer purchasing power

Growing GDP

Skilled, well-educated

labor force

Russia’s Top Economic Strengths

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Positive Investment Factors

41%

58%

74%

Current investors

Macroeconomic situation

Access to qualified personnel

Investment climate in general

Which factors have the most positive impact on the investment climate?

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Positive Investment Factors

41%

41%

57%

Potential investors

Access to qualified personnel

Macroeconomic situation

Investment climate in general

Which factors have the most positive impact on the investment climate?

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Messages About Russia’s Advantages

67%65%

43%

71%

51%84%

90%

89%

Current investorsPotential investors

Extremely/Quite Persuasive Reason For Investing

Large consumer market with expanding credit, increased saving, rising income; in top third in per capita GDP

Stable economy with sustained GDP growth, expanding consumer credit, trade surplus, inflation under 10% in 2006

Current foreign investors rate highly as place to invest, with good returns/profits and strong/growing market for goods/services

Highly educated work force, high productivity from executive professionals to skilled laborers

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39%

53%

71%53%

51%

57%

59%

62%

Current investorsPotential investors

Extremely/Quite Persuasive Reason For Investing

Strong base of technological and scientific potential driven by strong education system

Poised to become member of World Trade Organization: compete as equal in world markets, further integrate into global trade system

Ready supply of affordable energy

Government has effectively transitioned to capitalist model: 6.7% average economic growth for eight years

Messages About Russia’s Advantages

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ChallengesFacing Russia

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Investment Risks

39%

53%

6%

59%

25%

14%

Higher than average

About average

Lower than average

Assessment of Investment Risks in Russia, as Compared with Emerging Markets in General

Current Investors Potential Investors*2% not sure for both

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Evaluation Of Efforts To Recruit Foreign Investment

8%

26%

66%

8%

43%41%

How much do you think Russia goes out of its way to recruit and attract new foreign investment?

Current Investors Potential Investors

Russia does a great deal to attract foreign investment (8-10)*

*zero-to-ten scale

Russia does little to attract foreign investment (0-4)*

Russia undertakes some efforts to attract foreign investment (5-7)*

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Negative Investment Factors

26%

35%

37%

58%

65%

Current investors

Corruption

Bureaucracy and red tape

Inconsistent application of legislation

Licensing/administrative procedures

Rule of law and judicial system

Which factors have the most negative impact on the investment climate?

Major Factors

Medium Factors

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Negative Investment Factors

27%

27%

35%

51%

65%

Potential investors

Corruption

Bureaucracy and red tape

Security/protection of property rights

Inconsistent application of legislation

Lack of enforcement and protection of business rights

Which factors have the most negative impact on the investment climate?

Major Factors

Medium Factors

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Non-Economic Factors:Implications For

Investments

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27%57%

16%

Media Coverage Is Having A Negative Impact

How has what you have heard or read about Russia in the media in the past 12 months made you feel about the country’s investment climate?

Current Investors Potential Investors

More reassured

More concerned

No impact

16%

61%

23%

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Confidence In Russia’s Potential

69%

16%

39%

22%

Confidence in Russia’s Ability to Become One of the Premier Countries in the International Market

Current Investors Potential Investors

High level of confidence (5-7)*

Low level of confidence (1-3)*

*one-to-seven scale

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Conclusions

1. Proactively tell Russia’s positive story.

Promoting the country’s economic success

Promoting the consumer market

Promoting the labor force

Availability of country’s energy for growth & production

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Strategic Conclusions

2. The State has to make more consistent and strong efforts in addressing corruption and bureaucracy

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Conclusions

3. Re-energize joint efforts of

investors and government in

encouraging FDI 

Russia’s Image Among Foreign

InvestorsKey findings from survey and focus group research

conducted April – May 2007 by

HARTRESEARCH

P e t e r D

A S S O T E SC I A