(AL) 0PENNESS TO FOREIGN INVESTMENT

WHILE THE POLICY OF THE RUSSIAN GOVERNMENT IS TO ENCOURAGE FOREIGN INVESTMENT, IT HAS HAD DIFFICULTIES IN CREATING A STABLE AND ATTRACTIVE INVESTMENT CLIMATE. ECONOMIC AND POLITICAL UNCERTAINTY SERVE AS DISINCENTIVES T0 COMPANIES LOOKING FOR INVESTMENT OPPORTUNITIES. ALTHOUGH THERE ARE NO SIGNIFICANT LEGAL BARRIERS TO DOING BUSINESS IN RUSSIA, THE ABSENCE OF SUFFICIENTLY DEVELOPED CIVIL, COMMERCIAL AND CRIMINAL CODES IS A MAJOR CONSTRAINT. IN ADDITION, HIGH AND UNSTABLE TAXATION, A RISE IN VIOLENT CRIME, CAPITAL FLIGHT AND A LAG IN DEVELOPMENT OF LOCAL LONG- TERM CAPITAL ARE PROBLEMS FOR FOREIGN (AND RUSSIAN) BUSINESS. BUREAUCRATIC REQUIREMENTS CAN BE CONFUSING AND BURDENSOME T0 INVESTORS AND BUREAUCRATIC DISCRETION MAY BE CAPRICIOUS IN AWARDING TENDERS OR DEVELOPMENT RIGHTS TO COMPANIES. OWNERSHIP OF REAL PROPERTY IS STILL BEING LEGISLATED, AND VIOLATIONS OF INTELLECTUAL PROPERTY ARE SERIOUS AND
ON THE RISE. A DETERIORATED INFRASTRUCTURE ADDS TO THE DIFFICULTIES OF DOING BUSINESS -- TELEPHONES, ROADS AND TRANSPORT ARE ALL OF POOR QUALITY. CORRUPTION IN COMMERCIAL TRANSACTIONS HAS BECOME A MAJOR ISSUE IN THE LAST SEVERAL YEARS.

DESPITE THE PROBLEMS DETAILED IN THIS REPORT, MOST U.S. COMPANIES IN RUSSIA BELIEVE THAT IF REFORMS CONTINUE, OPPORTUNITIES JUSTIFY THE RISKS, UNCERTAINTIES AND CONSIDERABLE BUREAUCRATIC OBSTACLES. FEW ESTABLISHED FOREIGN COMPANIES ARE LEAVING AND MANY CONTINUE TO DEMONSTRATE AN INTEREST IN RUSSIA'S RICH GEOLOGICAL AND HUMAN RESOURCES, WORLD-CLASS HIGH-TECHNOLOGY AND LARGE POTENTIAL MARKET.

RUSSIAN FOREIGN INVESTMENT REGULATIONS REGARDING PERMISSIBLE ACTIVITIES, PRIOR AUTHORIZATION AND NOTIFICATION REQUIREMENTS ARE CONFUSING AND CONTRADICTORY. THE MINISTRY OF FINANCE, LOCAL AUTHORITIES AND/OR VARIOUS CENTRAL GOVERNMENT BODIES ALL REGISTER FOREIGN INVESTMENTS. PRIOR APPROVAL IS REQUIRED FOR INVESTMENT IN NEW ENTERPRISES USING ASSETS OF EXISTING RUSSIAN ENTERPRISES, FOREIGN INVESTMENT IN DEFENSE INDUSTRIES (WHICH MAY BE PROHIBITED IN SOME CASES), INVESTMENT IN THE EXPLOITATION OF NATURAL RESOURCES, ALL INVESTMENTS OVER 50 MILLION RUBLES, INVESTMENT VENTURES IN WHICH THE FOREIGN SHARE EXCEEDS 50 PERCENT, OR INVESTMENT TO TAKE OVER INCOMPLETE HOUSING AND CONSTRUCTION PROJECTS. ADDITIONAL REGISTRATION REQUIREMENTS EXIST FOR INVESTMENTS EXCEEDING 100 MILLION RUBLES. PROJECTS OF FOREIGN ENTERPRISES MAY ALSO BE SUBJECT TO EXPERT EXAMINATION FOR ECOLOGICAL CONSIDERATIONS OR WHERE A LARGE-SCALE CONSTRUCTION OR MODERNIZATION IS ENVISAGED.

THE 1991 INVESTMENT CODE GUARANTEES FOREIGN INVESTORS RIGHTS EQUAL TO THOSE ENJOYED BY RUSSIAN INVESTORS. HOWEVER, RUSSIAN LAW OFFERS FEW INCENTIVES TO FOREIGN INVESTORS. THOSE SET OUT IN THE 1991 INVESTMENT LAW, INCLUDING CERTAIN TAX BENEFITS, HAVE NEVER BEEN IMPLEMENTED, OR HAVE BEEN LARGELY ELIMINATED OR SUPERSEDED BY SUBSEQUENT LAWS AND DECREES.

RUSSIA'S POST-VOUCHER OR CASH PRIVATIZATION PROGRAM WAS ADOPTED BY PRESIDENTIAL DECREE IN JULY 1994. IT HAS BEEN AMENDED OR SUPPLEMENTED BY DECREE SEVERAL TIMES SINCE. THE 1994 DECREE EXPLICITLY GRANTED FOREIGNERS THE RIGHT TO PARTICIPATE IN CASH AUCTIONS AND TENDER COMPETITIONS. SENIOR GOR OFFICIALS HAVE RECONFIRMED MANY TIMES RUSSIA'S DESIRE TO ATTRACT FOREIGN PARTICIPATION IN PRIVATIZATION, BUT IN PRACTICE THE BOUNDS OF THE FOREIGN ROLE VARIES BY SECTOR AND REGION. FOR EXAMPLE, FOREIGN PARTICIPATION IS SHARPLY LIMITED IN CERTAIN "STRATEGIC" SECTORS, A RESTRICTION WHICH HAS BEEN ENFORCED MORE RIGOROUSLY OF LATE. FURTHER, IN LAST YEARS'S LOANS-FOR-SHARES PRIVATIZATION PROGRAM,
FOREIGN INVESTORS WERE BANNED FROM MOST OF THE MORE ATTRACTIVE OFFERINGS, INCLUDING THE OIL, GAS, AND PRECIOUS METALS SECTORS. THAT SAID, FOREIGN INVESTORS DO PARTICIPATE SUCCESSFULLY IN RUSSIAN PRIVATIZATION AND HAVE BEEN WELCOMED AT THE FEDERATION LEVEL IN CERTAIN SECTORS AND AT THE REGIONAL LEVEL BY SOME OBLAST AND REPUBLIC LEVEL OFFICIALS. FOREIGN PARTICIPANTS IN RUSSIAN PRIVATIZATION PROGRAMS ARE ADVISED TO ESTABLISH CONTACTS WITH LOCAL OFFICIALS IN THE REGION IN WHICH THEY SEEK TO INVEST AND TO WORK CLOSELY WITH APPROPRIATE FEDERATION LEVEL OFFICIALS AS WELL.

THE TREATMENT OF FOREIGN BANKS IN RUSSIA HAS IMPROVED DRAMATICALLY IN THE LAST YEAR. A NOVEMBER 1993 PRESIDENTIAL DECREE HAD IMPOSED A TWO-YEAR MORATORIUM ON THE OPERATIONS OF FOREIGN BANKS IN RUSSIA. FURTHER DECREES ISSUED IN JUNE 1994 AND APRIL 1995 CONFIRMED THAT THE ORIGINALLY-LICENSED FOREIGN BANKS HAD FULL BANKING POWERS, THOUGH NEW ENTRANTS WERE NOT ALLOWED. THE NEW COMMERCIAL BANKING BILL, WHICH BECAME EFFECTIVE JANUARY 1996, NOW EXPLICITLY PERMITS FOREIGN BANKS TO ESTABLISH FULL-SERVICE SUBSIDIARIES IN RUSSIA, THOUGH GIVES THE CENTRAL BANK OF RUSSIA (CBR) THE ABILITY TO USE RECIPROCITY AS A CRITERIA FOR GRANTING APPROVAL. THE NEW BILL ALLOWS THE CBR TO IMPOSE A CEILING ON THE TOTAL AMOUNT OF FOREIGN BANK CAPITAL AS A PERCENTAGE OF THE AGGREGATE BANKING SYSTEM CAPITAL IN RUSSIA. HOWEVER, FOREIGN BANKS' CAPITAL IS WELL BELOW THE CURRENT LIMIT OF 12 PERCENT.

THE PAST YEAR HAS SEEN A NUMBER OF SIGNIFICANT CHANGES IN THE RUSSIAN OIL AND GAS SECTOR. IN APRIL 1996, THE GOVERNMENT LOWERED EXPORT TAXES ON OIL BY HALF, FROM 20 ECUS TO 10, AND IT ELIMINATED THE OIL EXPORT TAX JULY 1 IN ACCORDANCE WITH THE IMF'S EFF PROGRAM. AT THE SAME TIME, EXCISE TAXES ON OIL PRODUCTION HAVE BEEN INCREASED AND A SUPPLEMENTAL OIL PIPELINE FEE IMPOSED TO OFFSET THE REVENUE LOSS FROM THE ELIMINATION OF THE EXPORT TAX. THE CHANGES HAVE BEEN HIGHLY CONTROVERSIAL AND HAVE LED TO DEMANDS BY A NUMBER OF PROMINENT RUSSIAN OIL COMPANIES FOR TAX RELIEF. AS OF THE TIME OF WRITING, THE GOVERNMENT HAS SAID THAT IT INTENDS TO PREPARE A DIFFERENTIATED EXCISE TAX SCALE THAT WILL REFLECT THE GEOLOGICAL CONDITIONS AND OTHER COSTS ASSOCIATED WITH EACH OIL FIELD.

IN FEBRUARY 1995, PRESIDENT YELTSIN SIGNED INTO LAW A BILL AMENDING THE 1992 SUB-SURFACE RESOURCES LAW. THE AMENDMENTS MAKE IT EASIER TO OBTAIN AND TRANSFER OIL AND GAS PRODUCTION AND EXPLORATION LICENSES, AND SUBSTITUTE MORE MODEST ROYALTIES FOR THE 10 PERCENT MINERAL REPLACEMENT TAX. ON DECEMBER 30, 1995, PRESIDENT YELTSIN SIGNED THE LAW ON PRODUCTION SHARING AGREEMENTS (PSAS). THIS IS AN IMPORTANT STEP TOWARD ATTRACTING UPWARDS OF USD 70 BILLION IN DIRECT FOREIGN INVESTMENT TO THE RUSSIAN OIL AND GAS SECTOR. HOWEVER, WESTERN AND RUSSIAN OIL COMPANIES HAVE IDENTIFIED A NUMBER 0F PROVISIONS IN THE LAW WHICH THEY BELIEVE MUST BE AMENDED BEFORE THEY CAN PROCEED BEYOND THE PRELIMINARY STAGES OF THEIR PSA PROJECTS. THE GOVERNMENT AND A SPECIAL LEGISLATIVE WORKING GROUP ARE LOOKING INT0 THE POSSIBILITY OF SUBMITTING TO THE STATE DUMA A BILL AMENDING THE PSA LAW. A BILL WHICH WOULD BRING OTHER EXISTING LEGISLATION INTO CONFORMITY WITH THE PSA LAW IS ALSO UNDER CONSIDERATION. IN THE MEANTIME, A WESTERN CONSORTIUM HAS ANNOUNCED THE COMMENCEMENT OF THE FIRST PHASE OF THE SAKHALIN II PSA PROJECT; OTHER PROJECTS ARE CLOSE TO COMMENCEMENT, THOUGH THE FINAL DECISION IN THOSE CASES WILL DEPEND LARGELY ON THE ADOPTION OF THE AMENDMENTS TO THE PSA LAW.

(A2) CONVERSION AND TRANSFER POLICIES

AS OF MAY 17, 1996, RUSSIA INTRODUCED A CRAWLING PEG EXCHANGE RATE REGIME WHICH PROVIDES A TRADING CORRIDOR FOR THE RUBLE AGAINST THE DOLLAR UNTIL DECEMBER 1996. THE DOLLAR IS TRADED FREELY ON THE MOSCOW INTERBANK CURRENCY EXCHANGE (MICEX) AND IN THE OFF-EXCHANGE INTERBANK MARKET. THE OFFICIAL CENTRAL BUY AND SELL RATES ARE ANNOUNCED BY THE CENTRAL BANK NO LATER THAN 10 AM EACH TRADING DAY. THE SPREAD BETWEEN THE BUY AND SELL RATES IS 0.75 PERCENT, AND THE CENTRAL BANK INTERVENES TO ENSURE THAT THE RUBLE STAYS WITHIN THE SMALL BANK EACH DAY.

THE RUBLE HAS BEEN FULLY CONVERTIBLE WITHIN RUSSIA AND CIS COUNTRIES FOR A NUMBER OF YEARS. ON MAY 27, 1996, RUSSIA ANNOUNCED ITS INTENTION TO COMPLY FULLY WITH ARTICLE VIII OF THE IMF ARTICLES OF AGREEMENT REGARDING FULL CONVERTIBILITY ON CURRENT OPERATIONS BY JULY 1, 1996. ADHERENCE TO ARTICLE VIII WOULD MAKE THE RUBLE CONVERTIBLE ON ALL CURRENT OPERATIONS WORLD WIDE.

THERE ARE CURRENTLY NO RESTRICTIONS ON PROFIT REPATRIATION, EXCEPT FROM INVESTMENT IN SHORT-TERM GOVERNMENT SECURITIES. FOREIGN AND DOMESTIC COMPANIES MAY ACQUIRE, HOLD AND SELL FOREIGN EXCHANGE FREELY, ALTHOUGH HARD CURRENCY CASH TRANSACTIONS FOR GOODS AND SERVICES PROVIDED WITHIN RUSSIA ARE PROHIBITED. RUSSIAN RESIDENTS MUST CONVERT 50 PERCENT OF HARD CURRENCY EARNINGS INTO RUBLES WITHIN 14 DAYS OF RECEIPT.

WITHOUT SPECIAL PERMISSION, IT IS ILLEGAL FOR RUSSIAN COMPANIES OR CITIZENS TO MAINTAIN A BANK ACCOUNT 0UTSIDE OF RUSSIA FOR PURPOSES OTHER THAN OPERATING EXPENSES. LICENSES ARE REQUIRED FOR OFFSHORE ACCOUNTS AND CAN BE DIFFICULT T0 OBTAIN. NON-RESIDENTS CAN OPEN INDIVIDUAL AND COMMERCIAL RUBLE ACCOUNTS FOR SERVICING IMPORT/EXPORT OPERATIONS (REFERRED TO AS "T-ACCOUNTS') AND FOR INVESTMENT (REFERRED TO A "I ACCOUNTS"). HOWEVER, RUBLE BALANCES IN T-ACCOUNTS MAY NOT BE RECONVERTED INTO HARD CURRENCY.

(A3) EXPROPRIATION AND COMPENSATION

THE 1991 INVESTMENT CODE PROHIBITS THE NATIONALIZATION OF FOREIGN INVESTMENTS EXCEPT FOLLOWING LEGISLATIVE ACTION AND WHERE DEEMED TO BE IN THE NATIONAL INTEREST. SUCH NATIONALIZATIONS MAY BE APPEALED TO THE COURTS OF THE RUSSIAN FEDERATION, AND ARE TO BE PAID WITH PROMPT, ADEQUATE AND EFFECTIVE COMPENSATION.

WHILE THE DOMESTIC POLITICAL SITUATION REMAINS AMBIGUOUS, THE CURRENT CENTRAL LEADERSHIP IS UNLIKELY TO NATIONALIZE FOREIGN INVESTMENT OR ENGAGE IN EXPROPRIATION. HOWEVER, LOCAL GOVERNMENT INTERFERENCE IN SEVERAL CASES APPEARS TANTAMOUNT TO EXPROPRIATION; ARBITRATION OR LEGAL PROCEEDINGS ARE PENDING IN SOME OF THESE CASES.

(A4) DISPUTE SETTLEMENT

RUSSIA HAS A BODY OF CONFLICTING, OVERLAPPING AND RAPIDLY CHANGING LAWS, DECREES AND REGULATIONS WHICH HAS RESULTED IN AN AD HOC AND UNPREDICTABLE APPROACH TO DOING BUSINESS. INDEPENDENT DISPUTE RESOLUTION IN RUSSIA IS DIFFICULT TO OBTAIN; THE JUDICIAL SYSTEM ISPOORLY DEVELOPED. REGIONAL AND LOCAL COURTS ARE NOT ACCUSTOMED TO ADJUDICATING EITHER COMMERCIAL OR INTERNATIONAL MATTERS, AND THEY (AS WELL AS COURTS IN MOSCOW) ARE OFTEN SUBJECT TO POLITICAL PRESSURE.

MOST WESTERN ATTORNEYS STILL REFER THEIR WESTERN CLIENTS WHO HAVE INVESTMENT OR TRADE DISPUTES IN RUSSIA TO INTERNATIONAL ARBITRATION IN STOCKHOLM OR TO COURTS ABROAD. HOWEVER, A FOREIGN ARBITRATION AWARD CAN ONLY BE ENFORCED IN RUSSIA IF THERE IS A RECIPROCAL TREATY BETWEEN RUSSIA AND THE COUNTRY WHERE THE ORDER WAS MADE, OR, IF NO SUCH TREATY EXISTS, IF A RUSSIAN COURT REVIEWS THE PROCEDURES WHICH LED TO THE GRANTING OF THE AWARD AND AGREES THAT IT WAS PROPERLY MADE AND CAN BE ENFORCED.

IT IS THEREFORE WORTH CONSIDERING THE ALTERNATIVES AVAILABLE IN RUSSIA. ONE CHOICE IS THE ARBITRATION COURT OF THE RUSSIAN FEDERATION, WHICH IS PART OF THE COURT SYSTEM. IT HAS SPECIAL PROCEDURES FOR SEIZURE OF PROPERTY BEFORE TRIAL, SO PROPERTY CANNOT BE DISPOSED OF BEFORE THE COURT HAS HEARD THE CLAIM, AS WELL AS FOR THE ENFORCEMENT OF FINANCIAL AWARDS THROUGH THE BANKS. ADDITIONALLY, THE INTERNATIONAL COMMERCIAL ARBITRATION COURT AT THE RUSSIAN CHAMBER OF COMMERCE AND INDUSTRY WILL HEAR CLAIMS IF BOTH PARTIES AGREE TO REFER DISPUTES THERE. APPLICATIONS CAN BE MADE BY PARTIES T0 FOREIGN TRADE AGREEMENTS AND BY COMPANIES WITHFOREIGN INVESTMENTS. THE WEAKNESS IN THE SYSTEM IS THE LACK OF DIFFERENTIATION IN OUTCOMES. ALL AWARDS AND ORDERS ARE ENFORCED BY THE OFFICIALS OF THE DISTRICT COURT WHOSE PROCEDURES HAVE NOT BEEN MODERNIZED TO TAKE ACCOUNT OF CHANGES IN BUSINESS. THERE IS HOPE THAT A DRAFT LAW ON ENFORCEMENT WILL RESULT IN MORE EFFECTIVE LITIGATION. RUSSIA IS A MEMBER OF THE INTERNATIONAL CENTER FOR THE SETTLEMENT OF INVESTMENT DISPUTES AND ACCEPTS BINDING INTERNATIONAL ARBITRATION.

(A5) PERFORMANCE REQUIREMENTS/INCENTIVES

RUSSIAN LAW OFFERS FEW INCENTIVES TO FOREIGN INVESTORS. THOSE SET OUT IN THE 1991 INVESTMENT LAW, INCLUDING CERTAIN TAX BENEFITS, HAVE NEVER BEEN IMPLEMENTED, OR HAVE BEEN LARGELY ELIMINATED OR SUPERSEDED BY SUBSEQUENT LAWS AND DECREES.

PERFORMANCE REQUIREMENTS ARE NOT IMPOSED BY RUSSIAN LAW, AND ARE NOT WIDELY INCLUDED AS PART OF PRIVATE CONTRACTS. HOWEVER, THEY HAVE APPEARED IN THE AGREEMENTS OF LARGE MULTINATIONAL COMPANIES INVESTING IN NATURAL RESOURCES.

INVESTORS ARE NOT REQUIRED TO DISCLOSE PROPRIETARY INFORMATION TO THE RUSSIAN GOVERNMENT AS PART OF THE REGULATORY PROCESS.

(A6) RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT

BOTH FOREIGN AND DOMESTIC LEGAL ENTITIES MAY ESTABLISH, PURCHASE AND DISPOSE OF BUSINESSES IN RUSSIA. INVESTMENT IN THOSE SECTORS AFFECTING THE NATIONAL SECURITY (INSURANCE, BANKING, NATURAL RESOURCES) MAY BE LIMITED.

(A7) PROTECTION OF PROPERTY RIGHTS

THE CONSTITUTION AND A PRESIDENTIAL DECREE ISSUED IN 1993 GIVE RUSSIAN CITIZENS GENERAL RIGHTS TO OWN, INHERIT, LEASE, MORTGAGE, AND SELL REAL PROPERTY (USUALLY NOT INCLUDING THE LAND ON WHICH IT STANDS); HOWEVER, LEGISLATIVE GAPS AND AMBIGUITIES IMPEDE THE GENERAL EXERCISE OF THESE RIGHTS. RUSSIA DOES NOT YET HAVE A LAND CODE T0 REGULATE LAND USE AND OWNERSHIP. THUS FAR, RUSSIAN LAW AND PRACTICE APPEAR TO RESTRICT OR PROHIBIT FOREIGNERS FROM OWNING REAL ESTATE. THE PRESIDENTIAL DECREE OF 1993 GAVE JOINT VENTURES WITH FOREIGN PARTICIPANTS THE RIGHT TO OWN REAL PROPERTY, AND A PRIVATIZATION DECREE ISSUED IN THE SUMMER 0F 1994 PERMITTED FOREIGN OWNERS OF PRIVATIZED COMPANIES TO RECEIVE TITLE TO ENTERPRISE LAND; HOWEVER, SUCH RIGHTS HAVE NOT BEEN CODIFIED AND LEGISLATION REGULATING LAND USE CURRENTLY BEING CONSIDERED BY THE DUMA WOULD LIKELY PROHIBIT FOREIGNERS FROM OWNING LAND. THE RIGHTS OF RUSSIAN CITIZENS TO OWN AND SELL RESIDENTIAL, RECREATIONAL, AND GARDEN PLOTS IS CLEARLY ESTABLISHED WITH OVER 40 MILLION PROPERTIES OF THIS TYPE UNDER PRIVATE OWNERSHIP. ALTHOUGH A PRESIDENTIAL DECREE IN THE SPRING OF 1996 PERMITS THE OWNERSHIP AND SALE OF LAND, INCLUDING AGRICULTURAL LAND, THE DUMA MAINTAINS THAT THE DECREE IS NOT CONSTITUTIONAL. UNCERTAINTY ABOUT MORE GENERAL RIGHTS TO LAND TITLE AND MINERAL RIGHTS WILL PERSIST UNTIL THE DUMA ADOPTS CLEAR AND COMPREHENSIVE LEGISLATION TO REGULATE LAND USE AND OWNERSHIP.

IN 1992-93 RUSSIA ENACTED LAWS STRENGTHENING THE PROTECTION OF PATENTS, TRADEMARKS AND APPELLATIONS OF ORIGINS, AND COPYRIGHT OF SEMICONDUCTORS, COMPUTER PROGRAMS, LITERARY, ARTISTIC AND SCIENTIFIC WORKS, AND AUDIO/VISUAL RECORDINGS.

THE PATENT LAW, WHICH ACCORDS WITH THE NORMS OF THE WORLD INTELLECTUAL PROPERTY ORGANIZATION, INCLUDES A GRACE PERIOD, PROCEDURES FOR DEFERRED EXAMINATION, PROTECTION FOR CHEMICAL AND PHARMACEUTICAL PRODUCTS, AND NATIONAL TREATMENT FOR FOREIGN PATENT HOLDERS. INVENTIONS ARE PROTECTED FOR 20 YEARS, INDUSTRIAL DESIGNS FOR 10 YEARS, AND UTILITY MODELS FOR FIVE YEARS. THE LAW ON TRADEMARKS AND APPELLATION OF ORIGINS INTRODUCES FOR THE FIRST TIME IN RUSSIA PROTECTION OF APPELLATION OF ORIGINS AND PROVIDES FOR AUTOMATIC RECOGNITION OF SOVIET TRADEMARKS UPON PRESENTATION OF THE SOVIET CERTIFICATE O F REGISTRATION.

THE LAW ON COPYRIGHT AND NEIGHBORING RIGHTS, ENACTED IN AUGUST 1993, PROTECTS ALL FORMS OF ARTISTIC CREATION, INCLUDING AUDIO/VISUAL RECORDINGS AND COMPUTER PROGRAMS AS LITERARY WORKS FOR THE LIFETIME OF THE AUTHOR PLUS 50 YEARS AND IS COMPATIBLE WITH THE BERN
CONVENTION. THE SEPTEMBER 1992 LAW ON TOPOGRAPHY OF INTEGRATED MICROCIRCUITS, WHICH ALSO PROTECTS COMPUTER PROGRAMS, PROTECTS SEMICONDUCTOR TOPOGRAPHIES FOR 10 YEARS FROM THE DATE OF REGISTRATION.

RUSSIA HAS ACCEDED TO THE UNIVERSAL COPYRIGHT CONVENTION, THE PARIS CONVENTION, THE BERN CONVENTION, THE PATENT COOPERATION TREATY, THE GENEVA PHONOGRAM CONVENTION, AND THE MADRID AGREEMENT. UNDER THE U.S.- RUSSIAN BILATERAL INVESTMENT TREATY (NOT YET RATIFIED BY THE RUSSIAN SIDE) RUSSIA HAS UNDERTAKEN T0 PROTECT INVESTORS' INTELLECTUAL PROPERTY RIGHTS. THE U.S.- RUSSIA BILATERAL TRADE AGREEMENT MANDATES PROTECTION OF THE NORMAL RANGE OF LITERARY, SCIENTIFIC AND ARTISTIC WORKS THROUGH LEGISLATION AND ENFORCEMENT.

WHILE THE RUSSIAN GOVERNMENT HAS SUCCESSFULLY PASSED GOOD LAWS 0N PROTECTION OF INTELLECTUAL PROPERTY, ENF0RCEMENT OF THOSE LAWS HAS BEEN A L0W PRIORITY. RUSSIAN AUTHORITIES ARE ENGAGED IN A COMPREHENSIVE REVISION 0F THE RUSSIAN CRIMINAL AND CIVIL CODES, INCLUDING SECTIONS PERTAINING TO INTELLECTUAL PROPERTY RIGHTS WHICH WOULD PROVIDE STRENGTHENED PENALTIES, THE ESTABLISHMENT OF SPECIALIZED COURTS, PARTICULARLY A PATENT COURT, WITH TRAINED AND EXPERIENCED JUDGES AND ATTORNEYS, AND TRAINED POLICE AND CUSTOMS OFFICERS. UNTIL THESE MEASURES BECOME REALITY, HOWEVER, THERE IS WIDESPREAD MARKETING OF PIRATED U.S. (AND OTHER) VIDEO- CASSETTES, RECORDINGS, BOOKS, COMPUTER SOFTWARE, CLOTHES AND TOYS. LOSSES TO MANUFACTURERS, AUTHORS AND 0THERS ARE ESTIMATED TO BE IN THE HUNDREDS 0F MILLIONS 0F D0LLARS.

IN LATE 1995 THE RUSSIAN GOVERNMENT CREATED AN INTERAGENCY COMMISSION ON INTELLECTUAL PROPERTY RIGHTS ENFORCEMENT. THE LEAD AGENCIES IN THE COMMISSION ARE THE STATE ANTI-MONOPOLY COMMITTEE AND THE RUSSIAN FEDERATION COMMITTEE ON PATENTS AND TRADEMARKS (ROSPATENT).

(A8) REGULATORY SYSTEM: LAWS AND PROCEDURES

THE LEGAL SYSTEM IN RUSSIA IS IN A STATE OF FLUX, WITH VARIOUS PARTS OF GOVERNMENT STRUGGLING TO CREATE NEW LAWS ON A BROAD ARRAY OF TOPICS. IN THIS ENVIRONMENT NEGOTIATIONS AND CONTRACTS FOR COMMERCIAL TRANSACTIONS ARE COMPLEX AND PROTRACTED. RUSSIA HAS IMPLEMENTED ONLY PART OF ITS NEW COMMERCIAL CODE (CONTAINED WITHIN THE CIVIL CODE), AND INVESTORS MUST CAREFULLY RESEARCH ALL ASPECTS OF RUSSIAN LAW TO ENSURE THAT EACH CONTRACT CONFORMS WITH RUSSIAN LAW AND EMBODIES THE BASIC PROVISIONS OF THE NEW, AND WHERE STILL VALID, OLD CODES. CONTRACTS MUST LIKEWISE SEEK TO PROTECT THE FOREIGN PARTNER AGAINST CONTINGENCIES WHICH OFTEN ARISE. KEEPING UP WITH LEGISLATIVE CHANGES AND PRESIDENTIAL DECREES IS A DAUNTING TASK. UNEVEN IMPLEMENTATION OF LAWS CREATES FURTHER COMPLICATIONS; VARIOUS OFFICIALS, BRANCHES OF GOVERNMENT AND JURISDICTIONS INTERPRET AND APPLY REGULATIONS WITH LITTLE CONSISTENCY AND THE DECISIONS OF ONE MAY BE OVERRULED OR CONTESTED BY ANOTHER. IN ADDITION, WHILE A FOREIGN INVESTOR MAY WIN A FAVORABLE DECISION FROM A RUSSIAN COURT, ENFORCEMENT OF JUDGMENTS IS PROBLEMATIC.

LEGAL REQUIREMENTS MAY BE LESS BURDENSOME THAN REACHING FINAL AGREEMENT WITH LOCAL POLITICAL AND ECONOMIC AUTHORITIES; REGISTRATION CAN BE A LENGTHY, BUREAUCRATIC PROCESS, PARTICULARLY WHERE NATURAL RESOURCES OR DEFENSE PRODUCTION ARE INVOLVED. CORRUPTION IS WIDESPREAD AND THE FEARS OF SOME RUSSIAN OFFICIALS THAT FOREIGNERS WILL PURCHASE RUSSIAN ASSETS AT BELOW-MARKET RATES CAN IMPEDE BUREAUCRATIC APPROVAL.

THE RUSSIAN GOVERNMENT IS IN THE PROCESS OF ESTABLISHING A PROCUREMENT REGIME. SO FAR THAT REGIME CONSISTS OF A SINGLE LAW PASSED IN DECEMBER 1994, WHICH IS CURRENTLY BEING REVISED. SEVERAL IMPLEMENTING REGULATIONS ARE CURRENTLY IN PREPARATION, WITH ONE, NO. 594, HAVING BEEN ISSUED IN JULY 1995. RUSSIAN OFFICIALS HAVE SOUGHT TO MAKE THE LAW COMPATIBLE WITH WTO STANDARDS AND NOTE THAT IT DOES NOT PREVENT MARKET ACCESS BY FOREIGN ENTERPRISES. HOWEVER, IT ALSO GIVES PREFERENCE TO DOMESTIC SUPPLIERS AND ALLOWS THE FEDERAL GOVERNMENT TO DICTATE SUPPLY IN CERTAIN CASES. OFFICIALS ALS0 SAY THAT RUSSIA IS CONSIDERING SIGNING THE WTO PROCUREMENT CODE AS PART OF WTO ACCESSION.

THE TAX SYSTEM CONTINUES TO BE A MAJOR COMPLAINT OF FOREIGN INVESTORS IN RUSSIA. THE NUMBER OF TAXES, THE HIGH TAX BURDEN, INSTABILITY IN THE TAX REGULATORY ENVIRONMENT, AND POORLY STRUCTURED TAXES HAVE CONTRIBUTED TO FOREIGN INVESTORS; SENSE THAT THE TAX SYSTEM IN RUSSIA IS AN ALMOST INSURMOUNTABLE OBSTACLE. INDEED, IT IS POSSIBLE FOR A COMPANY'S TAX BURDEN TO EXCEED TOTAL PROFITS -- A PROBLEM NOT CONFINED TO JUST FOREIGN INVESTORS. DUE PROCESS IS ALSO WEAK, AND ALTHOUGH FOREIGN FIRMS HAVE SUCCESSFULLY APPEALED TO THE COURTS, THE TAX AUTHORITIES HAVE BEEN SLOW TO IMPLEMENT COURT DECISIONS. PENALTIES FOR NON- COMPLIANCE ARE CONSIDERED CONFISCATORY, AND THE TAX AUTHORITIES DO NOT DIFFERENTIATE BETWEEN CRIMINAL INTENT AND HONEST MISTAKES WHEN LEVYING FINES AND PENALTIES.

SOME STEPS HAVE BEEN TAKEN TO ADDRESS ISSUES OF OVERWHELMING CONCERN TO THE FOREIGN INVESTMENT COMMUNITY. THE EXCESS WAGE TAX, A 38 PERCENT TAX ON WAGES EXCEEDING ROUGHLY USD 80 PER MONTH, WAS ELIMINATED STARTING IN 1996. VAT IS NO LONGER CHARGED ON INTERCOMPANY LOANS. A TAX CODE, WHICH WILL UNIFY THE 20-SOME LAWS THAT CURRENTLY COMPRISE THE TAX SYSTEM, HAS BEEN DRAFTED AND IS UNDER CONSIDERATION BY THE GOVERNMENT AND DUMA. IT IS EXPECTED TO BE IMPLEMENTED IN 1998 AND PROMISES T0 ADDRESS MANY OF THE INCONSISTENCIES WHICH CURRENTLY PLAGUE RUSSIA'S INVESTMENT CLIMATE.

(A9) EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT

ALTHOUGH UNDERVALUED RUSSIAN EQUITIES ARE ATTRACTIVE TO BOTH DOMESTIC AND FOREIGN INVESTORS, SIGNIFICANT BARRIERS CONTINUE TO INHIBIT THE FULL DEVELOPMENT OF RUSSIA'S CAPITAL MARKETS. MARKET CAPITALIZATION AT THE END OF 1995 WAS ESTIMATED AT USD 20 BILLION, WITH ROUGHLY 50 COMPANIES TRADED ON A REGULAR BASIS.

WITH THE ESTABLISHMENT OF THE RECENTLY RENAMED RUSSIAN FEDERATION COMMISSION FOR SECURITIES MARKETS (FCSM) IN NOVEMBER 1994, THE PROCESS OF REGULARIZING THE DEVELOPMENT OF THE CAPITAL MARKETS BEGAN IN EARNEST. THE FCSM MOVED STRONGLY IN 1995 TO INCREASE OVERSIGHT OF RUSSIA'S CAPITAL MARKETS. INFRASTRUCTURE DEVELOPMENT, INCLUDING THE ESTABLISHMENT OF AN INDEPENDENT LARGE REGISTRAR AND OF AN ELECTRONIC OVER- THE-COUNTER TRADING SYSTEM, HAS MOVED FORWARD. SECURITIES LEGISLATION THAT WOULD CREATE A SOUND LEGAL BASIS FOR THE SECURITIES MARKET WAS SIGNED INTO LAW IN THE SPRING OF 1996. THE FEDERAL LAW "ON JOINT STOCK COMPANIES" TOOK EFFECT ON JANUARY 1, 1996, AND INTRODUCES A NUMBER OF REQUIREMENTS IN THE AREA OF SHAREHOLDERS' RIGHTS, CORPORATE GOVERNANCE, AND SHAREHOLDERS' REGISTRIES. IN JULY 1995, THE LEGAL BASIS FOR THE CREATION OF MUTUAL FUNDS WAS ESTABLISHED BY PRESIDENTIAL DECREE, AND THE FCSM HAS BEGUN ISSUING THE FIRST LICENSES TO FUND MANAGEMENT COMPANIES.

(ALO) POLITICAL VIOLENCE

THE POLITICAL CLIMATE IN MOSCOW IS CURRENTLY STABLE BUT UNPREDICTABLE OVER THE MEDIUM TO LONG TERM. AFTER THE VIOLENT POLITICAL CONFRONTATION OF LATE 1993, POLITICS HAVE RETURNED TO THE FLOOR OF THE LEGISLATURE AND THE OFFICES OF GOVERNMENT. POLITICAL DEMONSTRATIONS REMAIN MODEST IN SIZE AND GENERALLY PEACEFUL. THE WAR IN CHECHNYA, WHICH BEGAN IN DECEMBER 1994, RAISED FEARS OF TERRORISM BY THE CHECHEN DIASPORA, AND A FEW INCIDENTS HAVE OCCURRED IN MOSCOW. THE THREAT OF SUCH INCIDENTS WILL REMAIN UNTIL A SOLUTION IS REACHED IN CHECHNIA.

(ALL) CRIME AND CORRUPTION

CRIME HAS BECOME ONE OF THE MOST FREQUENTLY CITED CONCERNS OF FOREIGN (AND RUSSIAN) BUSINESS, PARTICULARLY THOSE INVOLVED WITH LARGE AMOUNTS OF CASH AND GOODS. WHILE ORGANIZED CRIME IS NOT NEW TO RUSSIA, RECENT YEAR S HAVE SEEN AN INCREASE IN THE RANGE AND FREQUENCY 0F CRIMINAL ACTIVITY. UNFORTUNATELY, LEGAL AND JUDICIAL REFORMS HAVE NOT KEPT PACE WITH CRIMINAL ADVANCES. MUCH CRIME IS TIED TO COMMERCIAL ACTIVITY, WITH ONE HALF OF ALL ENTREPRENEURS IN A RECENT SURVEY REPORTING THAT THEY MUST PAY KICKBACKS AND PROTECTION TO STAY IN BUSINESS. FAILURE TO MAKE THESE PAYMENTS CAN BE FATAL AND MAY GENERALLY PROVE A DISINCENTIVE TO THE CREATION OF NEW BUSINESSES.

PRESIDENT YELTSIN AND HIS GOVERNMENT ACKNOWLEDGE THAT CRIME AND CORRUPTION ARE MAJOR PROBLEMS AND HAVE ASKED THE DUMA TO SPEED ADOPTION OF NEEDED LEGISLATION. CORRUPTION IS DEEPLY EMBEDDED IN RUSSIAN CULTURE, AND U.S. FIRMS HAVE IDENTIFIED CORRUPTION AS A PERVASIVE AND GROWING PROBLEM, BOTH IN NUMBER OF INSTANCES AND IN THE SIZE OF BRIBES SOUGHT. THERE ARE LAWS AND REGULATIONS AGAINST BRIBERY AND OTHER FORMS OF CORRUPTION, BUT PENALTIES ARE INSUFFICIENT TO ACT AS A DETERRENT. MANY PROMINENT NAMES HAVE BEEN ASSOCIATED WITH BEING ACCUSED OF CORRUPTION IN THE HEADLINES, BUT THESE ACCUSATIONS ARE FREQUENTLY ASSOCIATED WITH POLITICAL MANEUVERING AND FEW CASES EVER RESULT IN SERIOUS PUNISHMENT. PRIME MINISTER CHERNOMYRDIN ANNOUNCED THAT THE GOVERNMENT WILL ADOPT TOUGHER MEASURES AGAINST OFFICIAL CORRUPTION, AND THE PRESIDENT HAS RECENTLY NAMED A SECURITY TSAR, ONE OF WHOSE RESPONSIBILITIES IS TO REDUCE CRIME AND CORRUPTION. IT REMAINS TO BE SEEN, HOWEVER, WHETHER HIS EFFORTS WILL BE MORE EFFECTIVE THAN PREVIOUSLY PUBLICIZED ATTEMPTS TO CLEAN UP CORRUPTION. ACCORDING TO MOST U.S. BUSINESSMEN, THEY RELY ON THE FOREIGN CORRUPT PRACTICES ACT TO AVOID PAYING BRIBES AND HAVE FREQUENTLY EXPRESSED GRATITUDE THAT THEY HAVE IT AS A SHIELD AGAINST SOLICITATION ATTEMPTS.

(B) BITS

RUSSIA INHERITED FROM THE SOVIET UNION BILATERAL INVESTMENT TREATIES (BITS) WITH AUSTRIA, BELGIUM AND LUXEMBOURG, GREAT BRITAIN, GERMANY, ITALY, SPAIN, CANADA, THE PEOPLE'S REPUBLIC OF CHINA, KOREA, THE NETHERLANDS, FINLAND, FRANCE, AND SWITZERLAND. RUSSIA HAS SINCE NEGOTIATED ANOTHER 17 AGREEMENTS, ALL BUT THREE OF WHICH HAVE BEEN RATIFIED BY THE DUMA. THE U.S./RUSSIA BIT IS ONE OF THE THREE AWAITING RATIFICATION.

(C) OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS

IN AN AGREEMENT RATIFIED AT THE JUNE 1992 SUMMIT, THE U.S. OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC) WAS AUTHORIZED TO PROVIDE LOANS, LOAN GUARANTEES AND INVESTMENT INSURANCE AGAINST POLITICAL RISKS TO U.S. COMPANIES INVESTING IN RUSSIA. OPIC GENERALLY INSURES AGAINST THREE POLITICAL RISKS: EXPROPRIATION, POLITICAL VIOLENCE AND CURRENCY INCONVERTIBILITY. IN 1994 OPIC DID NOT PROVIDE INCONVERTIBILITY INSURANCE IN RUSSIA, ALTHOUGH IN MID-1995 IT ANNOUNCED THAT IT WOULD BEGIN SUCH COVERAGE ON A LIMITED BASIS. IN 1994, TO MEET THE DEMANDS OF LARGER PROJECTS IN RUSSIA (AND WORLDWIDE), 0PIC DOUBLED THE AMOUNT OF INSURANCE AND QUADRUPLED THE AMOUNT OF FINANCE SUPPORT - TO USD 200 MILLION IN EACH CASE - IT CAN COMMIT TO AN INDIVIDUAL PROJECT. THROUGH MARCH 1995, OPIC HAD COMMITTED OVER USD 2.2 BILLION IN FINANCE AND INSURANCE TO 41 PROJECTS IN RUSSIA. TOTAL INVESTMENT INTO THESE PROJECTS SHOULD REACH USD 3.4 BILLION. IN DECEMBER 1994, OPIC ALSO COMMITTED T0 PROVIDE UP TO USD 500 MILLION TO SUPPORT DEFENSE CONVERSION PROJECTS.

RUSSIA IS A MEMBER OF THE MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA).

D) LABOR

THE RUSSIAN LABOR MARKET CONTINUES TO UNDERGO A SLOW AND PAINFUL TRANSITION. THE MAJORITY OF RUSSIA'S WORK FORCE IS SUITED TO THE NEEDS OF THE SOVIET-ERA COMMAND ECONOMY AND ILL-SUITED TO NEEDS OF AN EMERGING MARKET ECONOMY. UNEMPLOYMENT CONTINUES TO GROW STEADILY, AVERAGING 8.1 PERCENT OF THE WORK FORCE IN 1995. IN ADDITION, ANOTHER FIVE PERCENT OF THE WORK FORCE ARE UNDEREMPLOYED, FORCED TO WORK SHORT WEEKS, OR ON EXTENDED FURLOUGHS. THERE IS A GROWING PROBLEM OF NON- PAYMENT OF WORKERS IN THE PUBLIC SECTOR AND IN THE LARGE ENTERPRISES FORMERLY ENGAGE IN DEFENSE RELATED PRODUCTION. ALTHOUGH A LARGE SUPPLY OF SKILLED WORKERS EXISTS IN MOST RUSSIAN INDUSTRIES, THE DEMAND FOR THEIR SKILLS IS FALLING RAPIDLY. ON THE OTHER HAND, EMPLOYMENT IS GROWING RAPIDLY IN BANKING, INSURANCE AND OTHER BUSINESS SERVICES.

LABOR-MANAGEMENT RELATIONS IN RUSSIA ARE STRAINED. ECONOMIC RESTRUCTURING HAS CAUSED RISING ANXIETY AND UNREST AMONG RUSSIAN WORKERS, AND TRADE UNIONS ARE GENERALLY WEAK AND INEFFECTIVE. MOST OF THE "OFFICIAL" LABOR UNIONS, FORMERLY THE COMMUNIST TRADE UNIONS, OPERATE IN A SUBSERVIENT ROLE TO ENTERPRISE MANAGEMENT, IN MUCH THE SAME WAY THEY DID IN SOVIET TIMES. WORKERS HAVE LITTLE CONFIDENCE IN TRADE UNIONS AND MOST FEEL POWERLESS T0 CHALLENGE MANAGEMENT. THE INDEPENDENT UNIONS ARE MUCH MORE EFFECTIVE AT THE ENTERPRISE LEVEL, BUT BECAUSE THEY REPRESENT A SMALL PERCENTAGE OF TOTAL WORKERS THEIR NATIONAL CLOUT IS VERY SMALL.

THE RUSSIAN GOVERNMENT GENERALLY ADHERES TO ILO CONVENTIONS PROTECTING WORKER RIGHTS, BUT ENFORCEMENT IS INADEQUATE. PERHAPS THE MOST TROUBLING WORKER ISSUE IN PRESENT DAY RUSSIA IS THE ABYSMAL STATE OF WORKER SAFETY. EMPLOYERS HAVE GENERALLY REDUCED SPENDING ON SAFETY EQUIPMENT AND GOVERNMENT ENFORCEMENT OF SAFETY REGULATIONS IS VERY POOR.

(E) FOREIGN TRADE ZONES/FREE PORTS

RUSSIA HAS LEGISLATION FROM BOTH THE SOVIET ERA AND SINCE 1991 CREATING FOREIGN ECONOMIC ZONES. UNFORTUNATELY, THE LAWS AND THEIR IMPLEMENTATION HAVE LED TO A DISORGANIZED AND POORLY FUNCTIONING REGIME, WITH 0NLY TW0 ZONES 0FFICIALLY CREATED - IN KALININGRAD AND NAKHODKA. THE KALININGRAD ZONE IS GOVERNED BY ITS 0WN LAW. THE DEVEL0PMENT OF NAKHODKA HAS BEEN HAMPERED BY THE FAILURE OF MOSCOW TO GRANT FEDERAL-LEVEL INVESTMENT INCENTIVES. THE RUSSIAN GOVERNMENT AND THE DUMA HAVE BEEN WORKING FOR SOME TIME ON NEW LEGISLATION T0 REGULARIZE AND REGULATE FREE ECONOMIC ZONES; THIS LAW PASSED ITS FIRST READING IN EARLY JUNE 1996, WHICH INCREASES THE PROBABILITY THAT IT MAY FINALLY CLEAR THE DUMA BEFORE THE END OF 1996.

(F) CAPITAL OUTFLOW POLICY

WITHOUT PERMISSION IT IS ILLEGAL FOR A RUSSIAN LEGAL ENTITY OR CITIZEN TO MAINTAIN A BANK ACCOUNT OUTSIDE OF RUSSIA FOR MORE THAN OPERATING EXPENSES; LICENSES ARE REQUIRED FOR OFFSHORE ACCOUNTS AND CAN BE DIFFICULT TO OBTAIN. LITTLE LEGITIMATE OUTWARD INVESTMENT IS OCCURRING; MOST CAPITAL OUTFLOW IS THE RESULT OF SIMPLE CAPITAL FLIGHT RATHER THAN A GROWTH IN CRIMINAL TRANSACTIONS.

CAPITAL FLIGHT IS A SIGNIFICANT PROBLEM, WITH AN ESTIMATED USD 45-50 BILLION HAVING LEFT THE COUNTRY IN RECENT YEARS; INCLUDING SOME USD 17 BILLION IN 1994, WHEN THE 0UTFLOW PROBABLY PEAKED. THE ONLY TRUE METHOD T0 CURB CAPITAL FLIGHT IS TO STABILIZE THE RUSSIAN ECONOMY, REDUCE INFLATION AND MAKE IT A MORE ATTRACTIVE ENVIRONMENT IN WHICH TO INVEST -- ALL AREAS IN WHICH THE GOVERNMENT HAS MADE PROGRESS IN THE LAST YEAR.

(G) FOREIGN DIRECT INVESTMENT STATISTICS

ESTIMATES OF THE AMOUNT OF FOREIGN INVESTMENT IN RUSSIA VARY WIDELY. ACCORDING TO GOSKOMSTAT, RUSSIA HAD ACCUMULATED A STOCK OF FOREIGN DIRECT INVESTMENT OF ABOUT USD 5.53 BILLION BY THE END OF 1995, REPRESENTING OVER 16,063 FIRMS WITH FOREIGN PARTICIPATION. GOSKOMSTAT PUTS FOREIGN DIRECT INVESTMENT FLOWS IN 1995 AT USD 1.9 BILLION. ITS NET PORTFOLIO INVESTMENT STATISTICS (USD 30 MILLION IN 1995) BY ALL ACCOUNTS GROSSLY UNDERESTIMATE ACTUAL FLOWS. ABOUT 51 PERCENT 0F 1995 FOREIGN INVESTMENT WAS ACCOUNTED FOR BY FOUR SECT0RS: TRADE (17.1 PERCENT), FINANCE (14.3 PERCENT), FOOD INDUSTRY (10.1 PERCENT), AND FUEL INDUSTRY (9.3 PERCENT). GE0GRAPHIC AREAS RECEIVING THE MOST FOREIGN MONEY INCLUDED MOSCOW, MOSCOW REGION, TATARSTAN, AND ST. PETERSBURG.

STATISTICS FROM THE RUSSIAN GOVERNMENT INDICATE THAT THE FOLLOWING COUNTRIES ARE LEADING INVESTORS IN RUSSIA:

1995 1995 ACCUMULATED
COUNTRY PCT TTL (DOLS MILL) (DOLS MILL)
USA 29.1 812.1 2,039.8
SWITZERLAND 15.0 419.8 518.7
GERMANY 10.5 293.5 763.9
BRITAIN 5.8 161.4 994.4
LIECHTENSTEIN 4.1 114.4 --
BELGIUM 3.8 105.3 199.1
FRANCE 3.4 95.9 596.9
NETHERLANDS 3.0 83.3 320.7
JAPAN 2.7 74.1 --
AUSTRIA 2.6 71.8 210.6
ITALY -- -- 351.8
CANADA -- -- 196.1 trailers/mainfp.trailer 6-August-1996