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Friday, June 09, 2006

Support for Russia Among Foreign Investors Plummets, Crushed by Poland

Despite the soaring price of oil, Russia's reputation among foreign investors is plummeting according to the Moscow Times (readers of La Russophobe, of course, can hardly be surprised, nor can those who've been watching the Russian stock market, the bottom of which recently dropped out):

Russia is no longer seen as one of the world's most attractive investment destinations, according to Ernst & Young's global survey of business executives, released on Thursday. Russia, which had held on to the No. 8 spot for the past two years, disappeared from the list of top 10 most-attractive countries for foreign direct investment this year. The ranking is based on the perceptions of 1,019 executives polled around the world. "Success for Russia is not a given yet," Marc Lhermitte, an author of the annual report, said Thursday. "Competition is tough, and progress needs to be made." Analysts attributed the slip in the rankings to a lack of significant improvements in the country's business climate, recent public relations flops and increasing competition from other locations. Investors are "impatient" to see Russia's business climate become more rules-based and more transparent, Lhermitte said by telephone from E&Y's Paris office. "I wouldn't say that investors lost interest in Russia, but there have been more dynamic countries." China and the United States shared first place, followed by Germany and India in joint second, and then Poland, according to the European Attractiveness Survey's top-10 list for 2006. "Nothing has really changed fundamentally" in the past two years, said MDM Bank's chief economist, Peter Westin. But Russia had some bad publicity this year, he said, stemming from the spat over gas with Ukraine and negotiations with the United States on joining the World Trade Organization. Gazprom drew fire for cutting gas supplies to Ukraine during a price dispute in January, leading to supply shortfalls in Europe and doubts about Russia's reliability as an energy supplier.
Media reports also focused on the country's lax protection of intellectual property rights, which remains a sticking point in Russia-U.S. talks on Russia's accession to the WTO. "Some of the criticism has been justified," Westin said. Perhaps surprisingly, Russia has the seventh-best image in Europe as an investment destination, two places ahead of its No. 9 ranking in terms of the number of foreign direct investment projects carried out last year. Germany is perceived as Europe's best investment destination, but comes in third by the number of investment projects. Poland, which is viewed as the most attractive after Germany, is in fourth place by number of projects. Image outpacing reality "expresses future intent," Lhermitte said.

Poland destroys Russia in attracting foreign investment. Ukraine goes to the FIFA World Cup, but not Russia. Every year, Russia's population declines by 1 million. The average salary is $300 per month. Yet "President" Vladimir Putin's approval rating tops 70%. Does anyone see anything wrong (that is, classically Russian) with this picture?

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