Russian regions top major cities for investment climate - World Bank

By bne IntelliNews June 28, 2012

bne -

Moscow may exert an almost overwhelming force of gravity on investment in Russia, but a new report says it's the worst city in the country for doing business, whilst Ulyanovsk, Saransk and Vladikavkaz take the top spots.

According the new "Doing Business in Russia" rating presented by the World Bank at the St. Petersburg Economic Forum, major cities, such as St. Petersburg, Yekaterinburg, Novosibirsk, Samara and Khabarovsk come bottom of the list for the overall ease of doing business in Russia.

Moscow ranks last among the 30 cities selected for assessment, which drags on Russia's country ranking in the global "Doing Business" index - an issue President Vladimir Putin has made a priority for his new administration. Represented by the capital, Russia currently ranks 120th out of 183 countries in the list.

In May, Putin ordered the government to work towards improving that posting by 100 places to enter the top 20 by 2018, and is eyeing improvement in specific indicators included in the ranking to achieve that goal.

Moscow clearly has a lot of work to do, given that it lags in nearly every instance. By way of contrast, other major cities perform well in individual indicators. St Petersburg ranks first and Volgograd second for the ease of registering a new business for instance. Saint Petersburg's placing is due to an improved "one-stop" service:, which means entrepreneurs have all necessary certificates in hand immediately after completing registration.

The number of interactions to start a business ranges from seven in Kirov, Murmansk, Perm, Petrozavodsk, St Petersburg, Stavropol, Yakutsk and Yaroslavl, to 12 in Vladikavkaz. The time needed varies from 16 days in Kaliningrad to 33 in Yekaterinburg.

Meanwhile, starting a business costs 2.3% of income per capita on average across the 30 cities studied, says the report, placing Russia among the 30 cheapest global economies for this indicator. At the same time, Russia is also in the top 30 for economies that have made the most progress in making regulation more business-friendly over the last seven years. The authors especially note improvements in enforcing contracts and registering property.

They also praise the Russian cities' promotion of small and medium-size firms as an engine of growth. "In 2010 the government invested $600m in start-up grants, micro loans, support for youth entrepreneurship, and business training, and 140,000 jobs were created. Still, small and medium-size firms account for 20% of employment in Russia, less than in Brazil (25%), Turkey (35%) or USA (42%)" say the authors.

The process to obtain a construction permit is another central indicator for the World Bank ranking, and also varies greatly across Russia. For example, 16 steps are needed in Murmansk and 20 in Novosibirsk; Moscow's 47 makes it a Herculean task.

Should an investor achieve it, the capital is also the most expensive city in Russia to get your building hooked up to the electric grid. The cheapest is Omsk, whilst Rostov-on-Don comes in second.

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