Harsh climate: 81% of Russian businessmen do not believe in protection of private property

Large and medium-sized businesses are afraid of such conflicts as the dispute between Rosneft and AFK Sistema. Almost 60% of enterprise managers believe that in case of conflict with a larger company, protection of rights is possible only if there is an administrative resource.
02.08.2017
Forbes
Origin source
Private property in Russia today is only formally protected or not protected at all, 81% of entrepreneurs believe. Medium business is concerned about the litigation of large companies and sees a link between the deterioration of the country's business climate and such uncertainty. This is evidenced by the results of the research conducted by the Analytical Center of NAFI, which Forbes was familiar with.

The authors note that the relevance of the study is dictated by statistics on the growth of capital outflows, as well as dissatisfaction of private business representatives with the protection of private property in Russia. The study, conducted in July 2017, was attended by 500 senior executives from medium and large businesses in eight federal districts of the country.

In early July, it was reported that for the fourth consecutive month, foreign investors have reduced investments in Russian assets. During this period, they withdrew more than $ 1.6 billion from Russian stocks - the maximum outflow for the last three and a half years. The investors' flight is connected with unrealized expectations about the rapprochement between the US and Russia, the aggravation of the corporate conflict between Rosneft and AFK Sistema, as well as the fall in oil prices.

The largest amount of funds Russian funds lost only three and a half years ago. At that time, investors were concerned about the US Federal Reserve's efforts to curtail monetary incentives, as well as low growth rates of the economies of developing countries, including Russia. Since August 2013, for seven months of almost continuous flight of investors, Russian funds have lost $ 2.47 billion, and all funds focused on emerging markets have lost more than $ 44 billion.

According to the NAFI survey, about half of the top managers of medium and large companies monitor the news of Russian corporate conflicts. The most famous conflict this summer was the dispute between private company AFK Sistema and state corporation Rosneft. Also, the disputes between Rosneft and Gazprom (14%), between Sberbank and Transneft (4%) were often mentioned. Representatives of both medium and large organizations are equally aware of such situations.

Most of the top managers who are informed about corporate conflicts in Russia (62%) believe that they raise the risks of doing business. Heads of medium-sized businesses more often than top managers of large companies point to the additional risks of such situations.

A quarter of entrepreneurs who are informed of major conflicts (26%) believe that they have a negative impact on the business climate, especially among medium-sized businesses. In addition, the survey results show that more than half of Russian entrepreneurs believe that the law on the protection of private property in Russia is not fully implemented in practice (51%). Another third think that it is not protected at all at the legislative or executive level (30%). Only 11% hold the opposite opinion.

As explained by Forbes director of research at the Analytical Center of NAFI Timur Aimaletdinov, the business climate in Russia is influenced by other external factors that, combined with problems in the domestic market, create a difficult environment for investors.

"The business climate in Russia is currently going through difficult times. In recent years, it has been heavily influenced by external factors - exchange rate fluctuations, sanctions policy, international conjuncture for exported goods. The carried out research has shown, that besides external, there are also no less serious factors of an internal order. Large corporate conflicts are one of them. The loudest conflict this summer, no doubt, is Rosneft against AFK Sistema. His coverage in the media seriously influences the assessment of the current business environment in Russia by the business community, "Aimaletdinov said.

In his opinion, in this context, the question of the role of the administrative resource as a guarantee of the protection of rights is especially acute. More than half (59%) of business leaders believe that in case of conflict with a larger company, protection of rights is possible only if there is an administrative resource. Not more than a third of entrepreneurs (29%) believe in justice and believe that the Russian court will make a fair decision without the availability of administrative resources.