Companies Supported by Government More Optimistic about Investment Climate
Over the past three years, the business climate in Russia has improved
for companies with a long planning horizon and for those receiving government
support. State-owned companies, however, have been worse off after losing their
privileges and facing a level playing field, according to Andrei Yakovlev,
director of the HSE Institute for Industrial and Market Studies, Irina Levina,
research fellow at the same Institute, and Anastasia Kazun, postgraduate
student at the HSE Faculty of Social Sciences.
In February 2012, the then Prime Minister and
presidential candidate, Vladimir Putin, instructed the Russian Government to
take steps to improve Russia's investment climate so that the country could
upgrade its ranking in the World Bank's ease of doing business index from 120
To achieve this, The 100 Steps Programme was adopted, the
position of Business Ombudsman was established in the Presidential
Administration to act as an advocate for entrepreneurs, and roadmaps were
designed to facilitate access to electricity connections and construction
permits; other measures included changes in customs regulations and export
promotion policies. In September 2012, a federal decree was adopted which
introduced a new framework for the appraisal of the performance of regional
governors using local business climate indicators; in 2013, an amnesty was
declared for entrepreneurs convicted of economic crimes.
The results were not long in coming. Russia moved up
the global Doing Business ranking from the 120th to the 62nd position between the
end of 2011 and October 2014 (to compare, some other countries’ rankings stand
at 90 for China, 120 for Brazil, and 142 for India). However, according to
experts, the Doing Business rankings often fail to capture the full range of
diverse issues affecting a country's business climate and rarely address the institutional
environment and overall economic development of individual countries.
Yakovlev, Levina and Kazun examined
Russian entrepreneurs' perspectives on changes in the country's business
environment between 2012 and 2014; the empirical study used the data from a survey
conducted by the HSE Institute for Industrial and Market Studies in the summer
and autumn of 2014 and involving 1,950 CEOs of large, medium and small
businesses operating in nine manufacturing industries in 60 Russian regions.
The respondents were asked about various aspects of
their operations and internal processes, including ownership structure, trading
partners, investments, membership in business associations, perceived changes
in business climate, etc., and then regression analysis was performed to
identify trends and perspectives for different types of businesses.
The findings are presented in the paper 'What Firms
Observed Improvement of the Business Climate in Russia in 2012–2014?' published
in HSE's Public Administration Issues.
Government Support Drives Business
According to the study's authors, companies which
receive support from government and those practicing long-term planning have
benefitted most from the positive changes in business climate over the past
three years. Companies with a planning horizon of more than three years are
more likely than others to report improvement in their business environment.
The authors attribute this to the fact that companies
with a long planning horizon are more likely to appreciate easier access to
construction permits and electricity connections – an important focus of the
Although size was clearly not the most important
factor, larger businesses are somewhat more optimistic in their assessment of
business environment – perhaps because they have more opportunities to lobby for
their interests via direct access to policymakers and bureaucrats; but on the
other hand, they may be wary of sounding too negative, the study's authors
State-owned Companies Lose Privileges
Having the government as owner makes it more likely
for a company to have a negative perspective on the changes in the business
environment. "Simplifying certain formal procedures for doing business
(reflected in the Doing Business ranking) means creating a level playing field
for all market participants and thus leads to a depreciation of advantages
enjoyed by companies with government participation," the researchers explain.
despite some progress, the policy changes did not achieve the main objective of
creating a substantially better overall investment climate in the country,
evidenced by absence of any significant differences in business climate
assessment between companies which did and did not make investments between
2011 and 2013, the researchers conclude.
September 21, 2015