Poor Business Climate
Poor business climate
Describe
Small business, the economic engine of most developed economies, employed only 20 percent of Russia’s economically active population, versus more than 50 percent in Europe and 80 percent in Japan. How to attract foreign investment to maintain the economic growth is important issue for Russia.
Enablers
Strong GDP growth over the last ten years
Continuous expansion of domestic demand and income
Russia’s trade with the West has grown significantly
Positive taxation reform, such as tax break and corporate tax reduction
Inhibitors
Poor access to external financing
High bureaucracy and corruption causes the higher entrance barrier for small business
Paradigms
1. Potential foreign directly investment inflows will drop
2. Existing foreign investors are still interested in investing conservatively
3. Privatization and government-own business still exist in Russia
4. Joint ventures will expand
Time
1991 Price controls were abolished, privatization was started.