15 March 2007 — According to a survey of chief executives of Russian major companies by PricewaterhouseCoopers as part of the 10th Annual Global CEO Survey, Russia’s business community shares common views with top managers around the world on the main problems and prospects for developing their businesses.

Future expectations

The survey findings reveal Russian executives’ strong confidence about their business’ future in the short and long terms. Similar to their colleagues in other countries, Russian executives are highly confident of prospects for their corporate revenue growth. Eighty-four per cent of Russian executives are confident (highly or sufficiently) of their corporate revenue growth in the 12 months and the next three years to come.

Business risks

Chief executives in Russia and around the globe share the same position when it comes to assessing their business risks. For both groups, of major concern is the shortage of staff with a required set of skills (76% of Russian top managers and 72% of their peers globally see this as a critical issue), excessive governmental control (65% and 73%) and growing state protectionism (65% and 48%), followed by price rises for natural resources and energy (61% and 58%). However, Russian business people are much less worried than their colleagues in other countries about topical issues such as terrorism, global warming and climate change, declining mineral resources and other problems with global implications.

The summarized responses of Russian executives about domestic risks provide a clear outline of the issues facing Russia’s economy today. They rated red tape and administrative barriers (86%), together with corruption (also 86%), as the biggest obstacles for business development. 70% of top managers state that they were seriously concerned by the lack of skilled workers. Over half of the respondents (59%) said that the macroeconomic factor of the strengthening rouble had become an obstacle in developing their businesses.

Globalisation and protectionism

There is a major difference between worldwide attitudes and those of Russian top managers to the statement that globalisation is equally beneficial for both developed and emerging markets. Only 45% of Russian top managers agree with this statement, while this indicator equals 73% worldwide and 89% in the USA. Compared with only 27% of respondents around the world, 57% of Russian top managers agree with the position that national governments should protect strategic industries from foreign control.

Foreign investments

Over two-thirds of Russian CEOs (69%) said that they intended to attract foreign investments within the next three years. However, they cited different underlying reasons for raising foreign capital. The underlying reasons for attracting foreign investments are rated as follows: the possibility of using foreign investments as additional financial resources for further development of their companies is of importance, to one extent or another, to more than 90% of the polled CEOs. 77% of respondents said that the attraction of foreign investments is important in the context of international and regional expansion and new market penetration. Nearly half of the respondents (48%) referred to technical or organisational innovations as a substantial motivator for attracting foreign investments. Political risk management is a significant motivator for 34% of respondents. Only 17% of the respondents stated that their decisions to attract foreign investments are based on an exit strategy.

Financing further development

More than half (57%) of Russian top managers are willing to finance further development through funds attracted in the debt capital market. This is the highest indicator among all countries and regions. This can be explained by the fact that within the last few years Russian companies have been able to attract debt financing (including overseas markets as well) with interest rates that are significantly lower than interest rates offered a few years ago. On the other hand, in all regions internal company funds (equity) are in first place among sources of financing. Of Russian top managers, 69% use this source to finance the development of their companies, which is less than in the USA (90%), and the BRIC countries overall (78%). About a quarter (26%) of Russian top managers are willing to use the stock market to attract funds, which is significantly higher than top managers worldwide (12%) and in particular compared with developed countries, where the majority of companies have already used this cash attraction mechanism in many ways. At the same time, the share of Russian companies intending to attract funds on the stock market is lower than in the BRIC countries overall (34%). This may indicate that Russian companies are less prepared to enter the stock markets.

Notes to editors

1. For more information please contact Vera Totskaya, PR Manager.
2. Survey methodology: PricewaterhouseCoopers experts conducted 1,084 interviews with top managers in 50 countries in the 4th quarter of 2006 as part of the 10^th annual global survey of major international companies.
   
   Fifty-one managers were surveyed in Russia. The companies surveyed were among the Expert-400 and Forbes-200 major private businesses for 2006.
   
   Telephone interviews were used for the Russian survey. The research was coordinated by the PricewaterhouseCoopers International Survey Unit located in Belfast, Northern Ireland, in conjunction with project managers and PricewaterhouseCoopers International Partners Advisory Committee.