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Invest in Russia or not?
January 18, 2011 15:14

According to the Maplecroft research, Russia has climebed five positions in the ranking of the most risky countries for the investment. In this rating list Russia stands among countries that suffer from armed conflict, but this fact doesn't affect much the income of investors.

According to Political Risk Atlas of British consulting company Maplecroft, endemic corruption on all government levels, the absence of independent judiciary and business rules, an increased risk of expropriation, non-effective business management and unreliable law enforcement make Russia one from ten most risky countries for the investors. For the last year Russia has climebed five points and figures in top ten of 196 risky-investment countries in the rating. It's important to note, that Russia made such a worrying jerk at the same time having some obligations to fight against terrorism on its territory, as opposed to the other countries in the list. In the rating list of countries with high risk for the investment, Russia stands near Zimbabwe and North Korea.

In the matter of countries with well-established "Western" reputation as Guinea-Bissau and Nigeria, Russia is also considered less reliable for the investment. It's striking to say that, nevertheless, Russian business climate and a sense of vulnerability, both in terms of business in general and assets, seem to be not so dangerous than in some African or Asian countries that occupate better position in Maplecroft rating list, according to the majority of businessmen who work in Russia.

The Maplecroft's rating is based on 41 criteria that take into account not only the most obvious or short-term risks such as instability, conflicts, terrorism, weaning assets, but also long-term risks associated with the social system or geographic location of the country such as human rights, poverty education, infrastructure, environment and health, that Russia can not boast.

Due to the specifics of any country there is a risk of failure. For example, the personal drama of Bill Browder, Chief Executive Officer and co-founder of the investment fund Hermitage Capital Management, shows all the bad luck that could happen. "Russia has now turned into a "criminal state", — says Bill who was once its leading foreign investor. According to BBC, "Mr. Browder was banned from Russia as a threat to national security after allegations that his firms had evaded tax, but Mr Browder says his company was targeted by criminals trying to seize millions of pounds worth of his assets." According to Stanford graduate school of business, Hermitage Capital Management went from $25 million to $4 billion by investing in undervalued Russian companies and tooday its founder, Bill Browder, says anyone investing in Russia long term "is out of their mind."

However, according to Les Echos french media-source, even if all these may seem paradoxical, a country that is risky for the investment doesn't mean it should be ignored by investors. As it is said, "nothing ventured, nothing gained". Thus, in the most unstable countries only investors with iron nerves can achieve extraordinary profits because of the lack of competition. Moscow businessmen who are not afraid of corruption and the risk of weaning assets at the same time show an impressive profit amount.

Ksenia Dzha

Tags: Russian economy     

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