Wealthy Russians affected by uneasing corruption and deteriorating business climate

Russia’s super-rich think the country’s business climate is  deteriorating and that corruption is currently more of an acute  problem than in recent years, according to a survey released Tuesday by Swiss banking giant UBS and Campden Research.

As many as 95 percent of the wealthy respondents believe that  the current environment is not encouraging innovation  and entrepreneurship, up from 42 percent in 2011 and 36  percent in 2009. Nor is corruption easing. While just 4 percent of those contacted  in 2009 identified graft and bribery as a key challenge  for their businesses, this year that figure has risen to 55 percent  and become the most pressing problem ahead of cash flow, slowing  demand and access to credit.

The research polled 22 businessmen domiciled in Russia who have  a net worth of about $50 million each. The total revenue  of the businesses of 14 of the respondents was between $50  million and $100 million. In 2011, the survey sampled 19 people  in a similar wealth bracket.

As in recent years of the UBS-Campden project, participants show  a marked reluctance to develop long-term plans for when they  cease to personally control their businesses — and they are not  bothered by an unwillingness on the part of their children  to become involved in the family assets. In 2011, 90 percent of respondents said they had not implemented  a succession plan; this year the figure was 95 percent.

And the country’s super-rich have not lost any of their traditional  preferences: Switzerland was the favored offshore wealth management  location for 89 percent of those surveyed. Over 90 percent said that  if their children are educated abroad, they’d choose schools in the United  Kingdom.

In a departure from previous years, however, outside private equity  investors are seen as a growing source of capital by the richest  businessmen. Private equity overtook debt in this year’s research as  the funding source of choice for 46 percent of those  surveyed, but it was still behind internal cash flows at 68 percent.  In 2009, just 12 percent were considering private equity.

“Sources of liquidity have become scarcer and … international  markets are becoming more difficult,” said Gregg Robins, head of wealth  management for UBS in Russia.

Forbes estimates that Russia’s 200 wealthiest businessmen have a net  worth of $499 billion. Moscow has more resident billionaires than either  London or New York.  In contrast, 13.5 percent of the country’s population, 19.1 million  people, are surviving on less than 6,307 rubles ($204) per month, according  to the latest available data from the State Statistics Service.

adapted from The Moscow Times

Palm Beach ocean front mansion owned by Russian billionaire Dmitry Rybolovlev