Russia Ranks on 48th Position in the Global Private Equity Country Attractiveness Index – is it High or Low?

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(Free-Press-Release.com) March 5, 2010 -- Moscow, March 5, 2010. Private Equity Russia&CIS Journal (http://www.percis.ru). – Professors of IESE Business School Alexander Groh and Heinrich Liechtenstein in their article for Private Equity Russia&CIS Journal (PERCIS) provided a special review of Russia’s attractiveness for institutional private equity investors, based on the research project undertaken at IESE Business School-Barcelona, sponsored by Ernst&Young and DLA Piper. Russia ranks on the 48th position out of 66 countries in the Global Private Equity Country Attractiveness Index.

The motivation of the project undertaken in IESE Business School was to contribute to solving the problem: where to invest in private equity assets. Summarizing the important determinants for institutional investors’ international private equity allocating decisions, six key drivers were detected: economic activity, depth of a capital market, taxation, investor protection and corporate governance, human and social environment, entrepreneurial culture and deal opportunities. The attractiveness of the country was measured by the mentioned above six criteria, 46 data series were aggregated in order to count these criteria. Totally ranking of 66 countries was determined.

Russia ranks on the 48th position out of 66 countries. The first three countries in the rank are USA, Canada and United Kingdom. The neighboring positions to Russia have Turkey (46th), Lithuania (47th), Mexico (49th), Croatia (50th). The position of Russia is rather surprising with respect to the size, the economic power, and the expected growth of the country. But, as the authors mention in the article, it should be taken in consideration that the competition among the countries that they cover is very strong, also Russia’s peers have some advantages – for example, the accession of the neighboring countries in the West to the European Union which facilitates economic development and immediately implemented a common European legal structure.

Alexander Groh and Heinrich Liechtenstein compared Russia with other BRIC countries and detected the following strengths and weaknesses of Russia. Russia scores very high with respect to taxation, it is also slightly ahead of its BRIC peers regarding economic activity and entrepreneurial culture and deal opportunities. Also Russia’s labor market can be considered less rigid than those of India, China, and Brazil. But at the same time, for example, Russia lags behind in terms of its investor protection and corporate governance. According to the authors Russia has two other weaknesses relative to her peers. The first one is the financial market sophistication. The second one is the perceived bribing and corruption and, related, the cost of crime.

The results of the research indicate how institutional investors might judge about Russia from distant offices when they analyze publicly available data. “Generally speaking, if 66 companies would come to one institutional investor - from different count