Investment climate in Russia and challenges for foreign business: The case of Japanese companies

Abstract

The improvement of the investment climate in Russia and its positive effect on the inflow of foreign direct investment into the country's economy is being declared at the highest levels of the Russian government as an important objective for the further economic development of the country. One of the most important instruments for that improvement should be the consideration of foreign investor's opinions and ideas and reaction to the most urgent and critical issues which serve as obstacles to their investment activities in Russia. This paper considers the case of Japanese investors in Russia. It is based on the results of a survey of Japanese companies doing business in Russia (members of the Japanese Business Club Moscow) and content analysis of a set of interviews with the representatives of the Japanese business and academic community and also of non-governmental organizations. We identify which factors attract Japanese capital to Russia and which hinder investment activities. Studying Japanese investment in Russia reveals the particular challenges and obstacles that make Japanese companies reluctant to engage in business activities in Russia. The research reveals and systemizes the factors restricting the development of investment cooperation and their roots, and identifies possible ways of overcoming these challenges. The analysis shows that the constraining factors can be divided into 3 groups by the origin: external – associated with the problems of the investment climate in Russia, internal – associated with specific features of the Japanese production and management system, and other factors – non-economic factors which mainly concern business culture and informational issues.