The financial crisis has been hard on Russia, with direct foreign investment dropping 45% in the first half of 2009 to $6.1 billion. The economy is expected to shrink 8.5% this year and inflation is in double digits. Some commentators have even begun to refer to the “Bic” economies (Brazil, India, China) rather than the former “Bric”.
However, as BusinessWeek points out, the multinationals – “big, battle scarred companies, veterans of coups in Brazil and hyperinflation in Turkey” – are refusing to pull out.
Indeed John Deere, Unilever and HSBC have all begun major expansion into the country. The attraction? Disposable household income in Russia is 30% higher than Brazil’s, almost 4 times China’s and 10 times that of India.
“Among emerging markets, Russia has moved to the top of our list,” says Chief Executive Matthew E. Rubel. Even companies that have been beaten up in Russia, like BP and Ikea, say they’ll keep investing.
Russia is simply too big—and too rich—to ignore. Equities are surging, the bond market is picking up fast and brokers predict a mass return of Russian companies to international equity markets. In all “Russia Inc.” may attempt to raise nearly $100bn over two years.
The Kremlin’s $280 billion stimulus plan, fuelled by oil and gas money salted away in better times, is spurring demand. That’s a boon for companies such as Unilever, which reported “strong double digit growth” in Russia during the first half of the year. Russia Inc. is back on track and – once again – an essential market for investment.