by Cynthia Corbin

Created on: November 12, 2009

Investing in Russsia: Risky yes, but for global enterprises, the country is too big and rich to ignore. Why would anyone invenst in Russia? The economy is expected to decline, and will be slow in recovering. Inflation is in the double digits. Yet many multinational companies refuse to pullout of Russia. Instead they are digging in for the long haul. Among merging markets, Russia has moved to the top of the list. Even companies that have taken a beating there, say they will keep investing for major global corporations, Russia is simly too big and rich to ignore. Abudndance in reserves, i.e., oil, metal, and timber still lure multinationals eager to export those, commodities, even though such investments are often found with difficulties. Russia is not just a ploy for resource companies. Years after the fall of the Soviet Union, demand for everything from kitchen cabinets to pharmaceutical is still strong, and Russia has the dollars to pay for them. Disposable household income in Russia is 40% higher than Brazil's almost four times that of China's and much more than that of India. The Kremlin's Stimulus Plan, fueled by oil and gas money, is spurring demand. That's a boon for companies investing there, which reported double digit growth in Russia during the first half of the year.

Russia's Soviet tradition of education, which is superb in math and the difficult sciences and excellent in languagwes, still producrs intelligent workers. While Russian salaries had been rising sharply before the crisis, they've now flattened out and multinationals can still find workers for a fraction of the cost in the west.

Considering giant Intel, which moved to Russia in 1999 and since have invested millions of dollars, it now employs more engineers at research centers, including it's largest research and software development group outside of the United States. Because of Russia's excellent math skills, Intel assigns engineers more complex work than it gives specialist in other outsourcing venues.

The companies that succeed in this inviting but hostil environment follow strict rules. As in Real Estate, Location is important. While corruption and red tape hobble business in cmuch of Russia, some city and regional authorities are beginning deal with the problem. Any savvy investor know the horror stories of doing business there. Investors should choose carefully, among the country's regions, the situation in some areas probably won't improve until old-style politicians leave office.

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