Wealth Gap in South Africa

FDI in Russia by 2013

Executive Summary:

Canada Petrochem is weighing the costs and benefits of construction of a plant in Russia

by 2013. Based on current data, it is not recommended to proceed with construction.

Russian FDI:

Factors:

Russian FDI factors are rated on a scale of 1 to 10: 1 being least favorable, 10 being most favorable.

Table 1:

Corruption 2

Expected Growth 7

Political Stability 3

Entry Rules 8

Taxation of Foreign Companies 7

Corruption: The degree to which bribery and unethical practices are embedded in the Russian business culture.1

Expected Growth: The trend of 5-year growth in the energy industry in Russia.2

Political Stability: The long-term political climate of Russia.3

Entry Rules: The degree to which Russia courts FDI.4

Taxation of Foreign Companies: The tax rates for FDI in Russia.5

Benefits of Plant Construction by 2013:

Constructing a petrochemical plant in Russia by 2013 would expose Canada Petrochem to a rapidly growing Russian energy market and would be profitable due to consistently rising Russian oil prices. The Russian government actively courts FDI; however a foreign company can own only 11% of a Russian energy industry4. Companies that invest in Russia prior to unfavorable tax changes are subject to the Grandfather Clause which allows a 7 year grace period before the forced adaptation of the new tax rates by the company.5

Russian