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. Last Updated: 07/27/2016

Confidence Rebounds in June

Business confidence rebounded in June after the prolonged trial of Mikhail Khodorkovsky came to a close in May and the summer months set in, turning businessmen's thoughts away from politics and toward summer vacations.

The MT Business Confidence Index, compiled monthly from a pool of managers and market watchers, rose by 6 points to 32, following an equally large decline in May. On the MT scale, 10 represents the lowest confidence and 50 the highest.

The negative sentiment created by the sentencing of Khodorkovsky, former CEO of Yukos, appeared to clear quickly, according to the survey. Concerns over legal and tax vulnerability fell significantly.

"The Yukos case is history," said Olli Pohjanvirta, the general director of the Moscow bureau of ET Law Services, a firm specializing in legal issues surrounding foreign investment.

The conviction resulted in big headlines, but for businessmen worried about practical issues the case has been all but "gone since winter," he said.

Pohjanvirta said he saw growing interest from European firms in Russia, prompted by the country's booming economic expansion in contrast to Europe's sluggish growth. Besides high oil prices, which hit a record of $60 per barrel in June, foreign investors also see other positive trends, such as a booming retail sector, Pohjanvirta said.

"In Europe there is nothing going on, but Russians are buying their products," Pohjanvirta said. "When [exports to Russia] get big enough, they [European firms] have to think about establishing something in Russia."

Several respondents said that business conditions have in fact been relatively stable over the last few months, despite the recent large fluctuations in the index.

"I can't think of any objective reasons for a jump in confidence right now," said Matthew Roazen, a Moscow-based corporate lawyer. "Maybe it's just seasonal."

Data for the survey were collected between June 21 and 30.

One factor in May's low confidence rating was a major blackout that left much of Moscow in the dark.

The outage itself does not seem to have affected the plans to reform Unified Energy Systems, said Jakob Groeneveld, CFO of Interavtomatika, which modernizes power plants. But President Vladimir Putin's reaction to the outage -- ordering an inspection into UES tax payments -- was far from comforting, Groeneveld said, and apparently contradicted Putin's announcement in April that "tax authorities have no right to terrorize businesses."

The MT index is based on 10 indices measuring respondents' attitudes toward issues such as corporate governance, unemployment and inflation.

The personal business index, which measures respondents' confidence in their own enterprises, is on the same scale as the overall confidence index: A score of 10 shows the least confidence, while 50 indicates the most.

In the other nine core indexes, it is the reverse: At the lowest possible score of 10, no one is worried about it, while at 50 it is on everyone's mind.

Geoffrey Cox
Astera Group

As long as Russia doesn't go xenophobic and scare away investors, there is a great future for the country. Inflation is a worry, but the ruble has been quite stable recently. There is a sense of stability that Russian businessmen get from [President Vladimir] Putin. But the bad news is that when I go abroad, people always ask me about Yukos.

Daniel Burkard
General Director, Domodedovo Airport Development GSC

My challenge is finding qualified personnel -- especially in a holiday season. They're tougher to find compared with last year. Hiring new employees costs 30 percent more than two years ago. The economy seems to develop at a faster rate than universities are producing qualified graduates. It's definitely a job-seeker's market.

Staff Writer Anna Smolchenko and Alexander Duncan contributed to this report.

If you would like to participate in the MT Index, please go to www.tmt-index.ru