Russias Image Among Foreign Investors Key findings from survey and focus group research conducted April – May 2007 by HART RESEARCH P e t e r D ASSOTESCIA

Russias Image among Foreign Investors – May 2007/Hart Research for 2 Methodology Quantitative Surveys among 106 current foreign investors (fieldwork conducted by CESSI, Institute for Comparative Social Research) and 51 potential foreign investors, conducted April – May 2007 Qualitative Focus group among potential foreign investors, conducted in New York, NY, and in-depth, one-on- one interviews among current and potential foreign investors, conducted May 2007

Russias Image among Foreign Investors – May 2007/Hart Research for 3 Context For The Research

Russias Image among Foreign Investors – May 2007/Hart Research for 4 Key Details About Current Investors Sample More than two-thirds of their companies have global sales over $1 billion, including 24% that have sales over $50 billion. 51% of the companies that responded are head- quartered in the U.S., 36% are in Western Europe, 4% are in Asia. 31% entered the Russian market before 1991; 23% entered within the past eight years. In 2006, 58% invested over $10 million in the Russian market, including 38% that invested $50 million/more. More than two-thirds (70%) say they invested more in Russia in 2006 than in 2005.

Russias Image among Foreign Investors – May 2007/Hart Research for 5 Key Details About Potential Investors Sample Half of their companies have global sales over $1 billion, including 12% that have sales over $50 billion. A large majority (86%) of the companies that responded are headquartered in the U.S., 6% are in Western Europe, 4% are in Asia. Half say there is a good chance their company will consider investing in Russia.

Russias Image among Foreign Investors – May 2007/Hart Research for 6 Dollars Drive Investment Decisions Biggest Attraction to Investing in Russia ReturnRussian consumers Russian resources 12% 8% Current investors Potential investors Current investors 43% Potential investors 40% Current investors Potential investors 21% 27%

Russias Image among Foreign Investors – May 2007/Hart Research for 7 Direction Of Economic Policies And Laws Russian Economic Policies and Laws that Encourage Foreign Investment Current InvestorsPotential Investors Headed in the right direction Difficult to say Gotten off track in past year

Russias Image among Foreign Investors – May 2007/Hart Research for 8 Russias Integration Into The Global Economy Russias Ratings on Integrating Itself into Todays Global Economy Current InvestorsPotential Investors * zero-to-ten scale

Russias Image among Foreign Investors – May 2007/Hart Research for 9 The Case For Russia

Russias Image among Foreign Investors – May 2007/Hart Research for 10 Majority Satisfied With Investment In Russia Companys Level of Satisfaction with Decision to Invest in Russia Current Investors High (8-10)* Medium (6-7)* Low (0-4)* Mixed (5)* * zero-to-ten scale

Russias Image among Foreign Investors – May 2007/Hart Research for 11 Return On Investment Assessment of Russias Return on Investment, as Compared with Emerging Markets in General Current InvestorsPotential Investors

Russias Image among Foreign Investors – May 2007/Hart Research for 12 Key Economic Factors Increasing consumer purchasing power Growing GDP Skilled, well-educated labor force Russias Top Economic Strengths

Russias Image among Foreign Investors – May 2007/Hart Research for 13 Positive Investment Factors Macroeconomic situation Access to qualified personnel Investment climate in general Which factors have the most positive impact on the investment climate?

Russias Image among Foreign Investors – May 2007/Hart Research for 14 Positive Investment Factors Access to qualified personnel Macroeconomic situation Investment climate in general Which factors have the most positive impact on the investment climate?

Russias Image among Foreign Investors – May 2007/Hart Research for 15 Messages About Russias Advantages Extremely/Quite Persuasive Reason For Investing Large consumer market with expanding credit, increased saving, rising income; in top third in per capita GDP Stable economy with sustained GDP growth, expanding consumer credit, trade surplus, inflation under 10% in 2006 Current foreign investors rate highly as place to invest, with good returns/profits and strong/growing market for goods/services Highly educated work force, high productivity from executive professionals to skilled laborers

Russias Image among Foreign Investors – May 2007/Hart Research for 16 Extremely/Quite Persuasive Reason For Investing Strong base of technological and scientific potential driven by strong education system Poised to become member of World Trade Organization: compete as equal in world markets, further integrate into global trade system Ready supply of affordable energy Government has effectively transitioned to capitalist model: 6.7% average economic growth for eight years Messages About Russias Advantages

Russias Image among Foreign Investors – May 2007/Hart Research for 17 Challenges Facing Russia

Russias Image among Foreign Investors – May 2007/Hart Research for 18 Investment Risks Assessment of Investment Risks in Russia, as Compared with Emerging Markets in General Current InvestorsPotential Investors *2% not sure for both

Russias Image among Foreign Investors – May 2007/Hart Research for 19 Evaluation Of Efforts To Recruit Foreign Investment How much do you think Russia goes out of its way to recruit and attract new foreign investment? Current InvestorsPotential Investors Russia does a great deal to attract foreign investment (8-10)* *zero-to-ten scale Russia does little to attract foreign investment (0-4)* Russia undertakes some efforts to attract foreign investment (5-7)*

Russias Image among Foreign Investors – May 2007/Hart Research for 20 Negative Investment Factors Corruption Bureaucracy and red tape Inconsistent application of legislation Licensing/administrative procedures Rule of law and judicial system Which factors have the most negative impact on the investment climate? Major Factors Medium Factors

Russias Image among Foreign Investors – May 2007/Hart Research for 21 Negative Investment Factors Corruption Bureaucracy and red tape Security/protection of property rights Inconsistent application of legislation Lack of enforcement and protection of business rights Which factors have the most negative impact on the investment climate? Major Factors Medium Factors

Russias Image among Foreign Investors – May 2007/Hart Research for 22 Non-Economic Factors: Implications For Investments

Russias Image among Foreign Investors – May 2007/Hart Research for 23 Media Coverage Is Having A Negative Impact How has what you have heard or read about Russia in the media in the past 12 months made you feel about the countrys investment climate? Current InvestorsPotential Investors More reassured More concerned No impact

Russias Image among Foreign Investors – May 2007/Hart Research for 24 Confidence In Russias Potential Confidence in Russias Ability to Become One of the Premier Countries in the International Market Current InvestorsPotential Investors High level of confidence (5-7)* Low level of confidence (1-3)* *one-to-seven scale

Russias Image among Foreign Investors – May 2007/Hart Research for 25 Conclusions 1. Proactively tell Russias positive story. Promoting the countrys economic success Promoting the consumer market Promoting the labor force Availability of countrys energy for growth & production

Russias Image among Foreign Investors – May 2007/Hart Research for 26 Strategic Conclusions 2. The State has to make more consistent and strong efforts in addressing corruption and bureaucracy

Russias Image among Foreign Investors – May 2007/Hart Research for 27 Conclusions 3. Re-energize joint efforts of investors and government in encouraging FDI

Russias Image Among Foreign Investors Key findings from survey and focus group research conducted April – May 2007 by HART RESEARCH P e t e r D ASSOTESCIA