DOING BUSINESS IN RUSSIA HARDLY GETTING EASIER – WORLD BANK

Interfax News Agency
Russia & CIS Business and Financial Newswire
September 6, 2006 Wednesday 5:50 PM MSK

Russia has hardly improved in the past year as far as the conditions
for doing business are concerned, the World Bank and International
Financial Corporation (IFC) said in their latest report on Doing
Business 2007: How to Reform.

This is the fourth in a series of annual reports investigating the
regulations that enhance business activity and those that constrain it.

Doing Business presents quantitative indicators on business regulations
and the protection of property rights that can be compared across
175 economies – from Afghanistan to Zimbabwe – and over time.

Russia ranked 96th – one place below Bosnia & Herzegovina but one
above Ethiopia – according to an assessment of business conditions
conducted between January 2005 and April 2006.

Russian ranked 79th in last year’s survey of 155 countries, but
another 20 countries were included for the first time this year. The
method for calculating four of the indicators was also adjusted,
and Russia’s ranking among this year’s 175 countries would have been
97th last year, Simeon Dyankov, one of the report’s main authors,
told a press conference.

In other words, Russia moved up just one place this year.

Dyankov said the pace of reforms conducive to business had slowed in
the last two years, although there had been some improvements.

The unified social tax has been lowered and Russia has scrapped the tax
on securities transactions, the duty on the use of the words "Russia"
and "Russian Federation" and the tax on timber. Russia ranks 98th as
far as tax payments are concerned, Dyankov said.

It is also easier to start a business up. The requirement to register
a company stamp had been abolished, and the number of hoops had
been reduced from eight to seven. It now takes 28 days to register a
business, compared with 33 in the past, and the cost of registering
a business in per capita terms had gone down from 5% to 2.7%. This
catapulted Russia to 33rd out of the 175 countries for starting
up businesses.

The law on joint stock companies has been amended to give better
protection to minority shareholders, who now have the right to
challenge management decisions in court, for example.

"This is potentially a very important change but it will not be
possible to assess its full impact until the next survey," Dyankov
said.

If these changes are put into practice, shareholder protection in
Russia will be comparable with that of Britain and the United States,
and Russia’s ranking will go up, Dyankov said.

The report said that export and import operations and licensing are
the areas most in need of reform in Russia. Russia is ranked 143rd
and 163rd respectively here.

It costs $2,240 to dispatch one standard container from Moscow to
Frankfurt, and that does not include transport costs, but just $335
to send one from China to Frankfurt. It can take 39 days to complete
the paperwork and other procedures necessary to ship a container from
Russia, but 18 days from China.

Russia ranks among the top ten countries in terms of the high cost
of licenses and the length of time it takes to obtain them. It takes
as many as 22 procedures and 531 days and the equivalent of 275.3%
of per capita income to get a construction license in Russia, compared
with 18 windows, 69 days and 16% in the United States.

The report also said that Russia needed to make is easier to obtain
credits. Russia is near the bottom in 159th place in this respect.

Russia had the best terms for doing business among the BRIC countries
(Brazil, Russia, India and China) last year, but this year’s
front-runner is China, up from 108th to 93rd in the overall rankings.

China also ranked among the top ten countries in terms of the
implementation of reforms.

Georgia was the leader in terms of reforms, rising from 112th to 37th
in the overall rankings. Of all the CIS countries, only Armenia,
in 34th place, provides more business freedom. Russia also lags
behind Kazakhstan, which rose to 63rd from 82nd, and Kyrgyzstan,
up from 104th to 90th.

Belarus was 129th, Ukraine 128th, Tajikistan 133rd and Uzbekistan
147th.

Singapore topped the overall ranking this year, up from 2nd last year,
while New Zealand fell from 1st to 2nd and the United States remained
in 3rd place.

The Democratic Republic of Congo was again last.