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Bureaucracy, economic woes hamper growth of Russian economy

Wednesday, March 27, 2013

Bureaucracy, economic woes hamper growth of Russian economy

In light of continued economic uncertainty in Europe and North America, many organizations are eyeing Brazil, Russia, India and China as potential growth markets. Despite the pronounced effects of the global financial crisis, the economies of these nations have proven to be extraordinarily resilient, with China and India leading the way in terms of expansion. Until recently, Russia was seen as a force to be reckoned with, but according to The Moscow Times, heightened levels of bureaucracy threaten to destabilize Russia's relationship with other key markets worldwide.

Labyrinthine policies
Doing business on an international level comes with a degree of red tape. Obtaining a visa can be relatively complex in countries such as the U.S., but compared to doing the same in Russia, the task may seem effortless. The news source reports that many business travelers are subject to complex rules that can often be difficult to interpret. International visitors can face numerous restrictions on their movements within Russia, and depending on where executives happen to be, these regulations may be overlooked or even ignored by companies and law enforcement agencies responsible for upholding them.

Another potential area of concern to individuals seeking to do business in Russia is the fact that the situation seems unlikely to change, or even improve, at any point in the foreseeable future.

"In [some] regions the tendency is towards more restrictions for foreigners, irrespective if they are European or not," Frank Schauff, head of the Association of European Businesses in Russia, told the news source. "I don't see any changes coming in this direction at the moment."

Aside from the potential complications business travelers face upon being admitted into the country, Russia's prohibitive regulations can restrict some professionals from visiting the country solely for business purposes. The country's Health and Social Development Ministry maintains a list of approximately 150 professions that limits visitors' time in the country to just 10 days. Individuals with careers not covered by this list are forbidden from making business trips to Russia entirely, and face fines of more than $26,000 if they are found to be violating these regulations.

Although the restrictions on Russian business travelers are often complex and highly subjective, certain individuals are exempt. Visitors earning more than $66,400 per year and those considered "highly qualified specialists" may not be subject to the same regulations as people who do not fall into to either of these categories. Regardless, the situation could become a thorn in Russia's side, especially at a time when global collaboration and international expansion are so vital to the tentative economic growth observed around the world.

Aggressive expansion
Russia's complex immigration policies may ultimately hurt some companies' plans for expansion, but they do not seem to be deterring several major players in the hospitality industry from increasing their presence in the country. According to Travel Daily News International, the number of hotel rooms at chain properties in Russia is expected to double by 2018.

In its latest report, "International Hotel Operators in Russia," global financial consultancy KPMG predicted that Russian hotel inventory will increase from 21,885 in October 2012 to 47,534 by 2018. Major financial centers such as Moscow and St. Petersburg are expected to lead much of this growth, and renewed interest in Russia due to the impending 2014 Winter Olympics and the 2018 FIFA World Cup will also spur demand for accommodations.

While this is likely to be welcome news for developers and Russian businesses, it may not bode well for executives planning to visit the country. Additional demand for rooms could also drive average nightly rates up even further. As a result, executives may want to explore more cost-effective alternatives to corporate suites in chain hotels, such as serviced apartments and corporate housing.