Doing Business In Russia

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Researching the Market

Taking the Strategic Approach

Often, new exporters will feel a bit overwhelmed about trading with Russia. Doing business in any new market can seem daunting to those new to the country, but taking a strategic approach is key to making the process manageable. You should spend some time thinking about business objectives and researching your plan and strategy.

UK Trade & Investment can help you with market research through its Overseas Market Introduction Service (OMIS).

Map Russia

The questions listed below should help you to focus your thoughts.

  • Why do you wish to sell to Russia?

  • What are the unique selling points (features and benefits) for your product or service?

  • Do you know if there is a market for your product or service in Russia?

  • Do you know if you can be competitive in Russia?

  • Do you have the time and resources to handle the demands of communication, travel, product delivery and after-sales service?

  • Do you know how to secure payment for your products or service?

  • Do you know where in Russia you should start?

  • Do you know how to locate and screen potential partners, agents or distributors?

Why Russia?

Russia is a market of over 140 million people and the largest country in the world in both total area and geographic extent, constituting more than one-ninth of the world's land surface. Russia's geographic extent, severe climate and remoteness from major sea lanes impede even economic and social development of the country's territories, with large parts of the country having almost no population and development, while some major cities gradually developing into large agglomerations.

Russia is an attractive target for exporters, with favourable cross-sector opportunities, some unique in scale. The government's economy modernisation and infrastructure development agenda, underpinned by 140 million consumer's appetite for quality services and goods produces a need for international expertise and products.

Russia has a long way to go in the process of improving the business climate, and combating bureaucracy. Corruption is a major barrier to business in Russia, which costs Russia a noticeable percentage of its GDP.

Bribery is illegal. It is an offence for British nationals to bribe anywhere in the world. Challenges do exist for companies thinking about business in Russia but the long-term prospects for the Russian economy are positive and the growth in exports shows companies are not being put off by Russia's reputation. UK exports to Russia in 2011 increased by 39% from 2010 and equalled £4.78 billion, making Russia UK's 11th largest export market in 2011.

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Where are the opportunities?

For more detailed information on developments and business opportunities in various Sectors go to: www.ukti.gov.uk/ukti/russia

 

Oil and gas are at the heart of the Russian economy, responsible for around 25% of GDP, 50% of Federal budget revenues and 80% of exports. Russia is the second largest oil producing country in the world, with up to 14% of global proven oil reserves. It is the largest gas producer, with the largest known reserves. An estimated $23-25 billion will need to be invested annually to develop Russia's oil and gas industry, including for the new offshore oil projects. Russia will need to invest more than $1 trillion by 2030 to meet demand. Exporting opportunities include supply of related machinery and technologies. Russia is also one of the most mineral rich countries in the world, and a favourable market for the suppliers of mining equipment and machinery.

Russian heavy industry is in need of updating its manufacturing technologies and equipment.

Annual market demand for new metal-machining equipment is estimated at over 50,000 units or $1 to $1.5 billion. Russia demands manufacturing technologies, advanced materials, machine-tools and tooling, spare parts, components for manufacturing and assembly across sectors - Aerospace, Automotive, Shipbuilding, Transport, and Power Engineering. The Russian Federal and Regional Governments strongly promote localisation and guarantee all kinds of support and benefits to localisation of international OEMs (Original Equipment Manufacturers) in all sectors.

One of Russia's priorities is modernising its transport infrastructure; improving current cargo import/export, transit shipment schemes, developing the network of ports, airports, rail links, improving transport safety and security. Public transport systems of major cities in Russia including Moscow and St Petersburg also need major overhaul, local administrations have launched modernisation programmes. Business opportunities include supply of transport equipment and vehicles, IT, services and consulting.

A strong driver into infrastructure upgrade is Russia's ambition to become a leading global sports arena. Russia is preparing to host a number of major sporting events, including the 27th Summer University Games (Universiade 2013) in Kazan, Sochi 2014 Winter Olympics, IIHF World Hockey Championship in 2016 and the FIFA World Cup in 2018. These events offer major opportunities for UK companies in architecture, construction, engineering, project management, event management and associated services.

Given the major infrastructure projects planned for the next decade and beyond, the Russian government is keen to develop appropriate financing and legal mechanisms, including Public Private Partnerships (PPP) - an area where UK is a natural leader and extremely well positioned to contribute to Russia's modernisation agenda. Russia's financial & legal services sector is quite young and offers a range of opportunities for international companies, particularly in the light of Russian Government plans to develop Moscow as an International Financial Centre.

Russia is one of the world's top ten pharma markets, with a global market share of about 3%, and estimated market of approx $18 billion. The Russian government announced ambitious plans to modernise the country's healthcare system and build a strong pharmaceutical industry. There are opportunities for UK suppliers of innovative drugs and for UK exporters of equipment for GMP production.

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Russian telecommunications market showed strong development in recent years and is expected to grow further. The mobile communications segment takes about 44% of overall market share, replacing fixed-line communications. The development of 3G and 4G networks will bring new growth opportunities for the market. Future market development is triggered by the increase in internet and data transmission services as well as value added services.

A growing middle class and taste for western products has seen the consumer goods sector grow rapidly. The total number of non-food sales in Russia increased by 22% in 2010, reaching $274 billion. Russia is the fastest growing market for food and drinks in Europe, and should be the biggest one in Europe by 2015. Russia's food and drinks sector relies heavily upon imports. Russia is the largest retail market in the world - having surpassed Brazil, Mexico, Spain and Italy in recent years - and the second-largest market in Europe, behind only France. It remains rather unsaturated and offers outstanding export opportunities.

UK companies are well positioned to support Russian ambitions to develop other vital sectors of the economy such as energy efficiency, education, agriculture, publishing, and many others.

High Value Opportunities

Designated trade teams work on assisting UK companies willing to engage with large-scale opportunities arising in overseas markets. The High Value Opportunities (HVO) programme is a new approach to identifying, prioritising and supporting businesses to access large scale overseas procurement opportunities. In Russia we work on a number of HVOs which include

  • Olympics 2014

  • FIFA 2018

  • Rail Modernisation Programme

  • Skolkovo Innovation Park

You can see more details on the programme and individual projects at the UKTI Website: www.ukti.gov.uk

Source - UKTI

 

Strategic Partners