Business barometer 2013

1. Businessbarometer 2013 • SIVA International Management (www.sivaim.no) has carried out a temperature measurement for future foreign investment in N-W Russia in 2012 and 2013. • The questionnaire consists of 8 questions. • SIVA IM got 32 responses in 2012 and 29 responses in 2013.

2. Businessbarometer 2013 The company's country of origin:

3. Businessbarometer 2013 Was the company's business in Northwest Russia better in current year comparing to the previous year?

4. Businessbarometer 2013 Do you think the business in the next year will be better than in the last year?

5. Businessbarometer 2013 Are you planning new investments in Northwest Russia in the upcoming year?

6. Businessbarometer 2013 Are you planning to hire more staff in the upcoming year?

7. Businessbarometer 2013 Has the business climate improved in Northwest Russia in comparison with previous years?

8. Businessbarometer 2013 What is the biggest problem with conducting business in Northwest Russia (2012)? • Authorities ignore business’s needs; • Business cultural differences. Frequent changes in the legislation; • Totally corrupted public sector. No real commitment from the federation to infrastructure investments/guarantees. This prevents all P-P-P activities/investments aiming for infrastructure improvements; • Unclear situation with the Stockman; • Customs rules, federal bureaucratic procedures; • Lack of development in this region, relevant for businesses; • To loan money to invest; • Complexity of official procedures, the way routine inspections are done, underdevelopment of infrastructure; • Lack of understanding from the Authorities in the Murmansk region how to resolve the situation related to electric power in the city of Murmansk. • The government must modernize the bureaucracy, not half-heartedly as a Russian tradition, but wholeheartedly; • Russian bureaucracy is not large but are terribly inefficient and lack of expertise; • Often Russian companies do not have business culture, I mean, transparency in cooperation, ability to keep promises; • In the future we see that the Customs system can be the time-killing and the biggest challenge; • Bureaucracy and corruption; • Lack of basic approach for creation of a competitive investment climate in the region; • Recruitment of the correct competence and stable staff; • Short-term planning and absence of clear strategy of the country development from the Russian authorities; • Corruption and differences in culture and mentality.

9. Businessbarometer 2013 What is the biggest problem with conducting business in Northwest Russia (2013)? • Negative impression/reputation among foreign investors • Political system, not stable in a long term. Also change of rules and system is a problem for a foreign company. • Land question. We solved our main challenge after 3 years and 7 courts, we experienced that first top officials try to "steel" our property and when this was not possible they put a lots of obstacles for us. But at the end they gave up. • Much of "Black - Grey" business in building Industry, both for selling and for labor, last very much. • To understand that you are in Russia not the homeland, differences in tax rules, business culture, etc. • Trade procedures; Gap in culture; Bureaucracy • Unstable political situation. We as a consultant company has experienced that a lot of projects has stopped due to the political changes in Russia. • Inefficiency of governmental management, high corruption risks, misbalanced legal regulations/discrepancies between codes, the control/fiscal system which is aimed at punishment, not at development • Customs/unreliable time and cost to pass/get equipment passed. • Unpredictable development of the business sphere • The registration process takes long time. • The signals from the president give impression that it might be more difficult to cooperate over the borders. • Lack of transparency. You can never trust a law. You can never trust governmental institutions, there is always new problems when business gets profitable. • Lack of clear information about the possibilities for western investors: what terms and guarantees the local and regional authorities can provide to western investors to support their investments. • Complicated procurement and tendering procedures.

10. Businessbarometer 2013 • Conclusions: • Though the negative assessment of business climate and business prospects is not much higher comparing to previous year, the results demonstrate increased uncertainty in the future development of business in Russia. • In the open question “What is the biggest problem with making business in Russia” most of answers demonstrate the same problems as in the previous questionnaire, but we get more statements showing that business need more certainty about the situation irrespective to political changes and trends. • Major problems indicated by foreign business are: • corruption and complicated procedures in public sector, • inspections routines seem to be aimed for punishment and penalty collections, • frequent changes in regulations. • Electricity access and legal issues with land are mentioned as specific problems in Murmansk.

11. Businessbarometer 2013 THANK YOU FOR ATTENTION TAKK FOR OPPMERKSOMHET www.barentsnova.com www.sivaim.no