9 November 2017

The Place of Russia in the World Bank's Ranking in 2017

For "Vzglyad"

How has Russia improved in its business in the past six years? What is the reason for this? Where and in what are the real shifts observed? Why are we growing in the ranking?

To understand how Russia has risen in the World Bank's ranking since 2011, it is important to first understand what the World Bank ranking means and how it is assessed. This is actually an assessment report of normative acts in 189 countries that regulate the activities of small and medium-sized enterprises, the adaptability of these acts and their application in practice. The criteria assessed include the establishment of enterprises, obtaining a building permit, connecting to the electricity supply system, obtaining loans, property registration, taxation, international trade and much more.

One of the main parameters of the World Bank is the cost of services and the level of bureaucracy, i.e. the number of stages to obtaining the result and the time spent. In 2011, the ruble exchange rate fluctuated in the range of 27.93 - 31.49 per 1 US dollar. Since 2015, the ruble rate has reached a noticeably new level and has barely fallen below the level of 50 rubles per 1 US dollar, from time to time reaching a range of 73-84 rubles per 1 US dollar. This abrupt movement in the exchange rate significantly reduced the cost of starting and operating a business for most foreign investors.

Since 2015, it became more profitable to deploy large-scale production for such companies, build factories for local and international consumption markets, have a convenient location, logistics, double revenues in the Russian currency and visible cooperation from the state. The catastrophe for the population after the December devaluation of the ruble in 2014 turned positive by attracting foreign capital to the Russian real sector of the economy, which paid attention to heavily depreciated assets, potential profits and minimum costs based on the weakened Russian currency. For example, the development of Russian-German economic cooperation over the past five years, despite sanctions against Russia.

With the growing interest by foreign investors, the demand for the local market also grows as large investors who come to the Russian market need help. On this point, the number of small and medium-sized enterprises, which are dependent on the international cooperation grows, and this in turn affects the position in the World Bank ranking. Thus, we can clearly see how Russia moved up to the 35th place, in 2017, from 51st place, in 2015. Such an achievement is due to the automation and simplification of the processes for registering and operating a business in Russia as compared to the past where, for example, a company was required to send its tax report, by hand, to the FNS office. Now, tax reports can be submitted easily through online systems.

In your opinion, what has improved over the past year that allowed Russia to advance in the World Bank ranking?

International trade indications, credit facilities interest rates and registering property have improved. Previously, the process for registering a property, for example, took a lot of time to be completed.

In view of doing business, it is necessary to continue working to strengthen the areas where Russia is not yet strong. What weaknesses still exist for Russia?

It is necessary to pay special attention to indicators such as investor protection, enforcement of contracts and, most importantly, transparency of processes for continued growth in the World Bank ranking.

Eldiyar Muratov President Castle Family Office Singapore