Business climate in Russia
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Information about Russia
Economic situation
Investment potential in the
History
Automotive sector
Building and Construction
Communications and IT
Consumer Goods
Mining and Metals
Oil and Gas
Professional Services
Tourism and Leisure
Information on Murmansk region
Information on Arkhangelsk region
Useful links and reports
Official name: Russian Federation
System of government: Federal republic
Head of state: President Dmitry Medvedev (since May 2008)
Head of government: Prime Minister Vladimir Putin since May 2008)
Legislature: Bicameral Federal Assembly—Federal Council (Upper House) and State Duma (Lower House)
Currency: 1 Russian ruble (RUB) = 100 kopecks
Capital: Moscow
Major cities: Moscow (approximately 14 million), St. Petersburg (4.5 million), Nizhny Novgorod,
Russian Federation comprises 85 federal subjects
Total area: 17,075,200 square kilometres (Russia is the largest country in the world, covering more than an eighth of the Earth’s land area)
Land borders: 20,017 kilometres
Coastline: 37,653 kilometres
Arable land: 7.33%
Population: approximately 142.1 million (2007)
Population growth: -0.37% per annum (2005 estimate)
Birth rate: 9.8 births per 1000 population
Age structure:
Life expectancy: 62 years (men), 73 years (women)
Major religions: Russian Orthodox, Muslim, other
Major ethnic groups: Russian (79.8%), Tatar (3.8%), Ukrainian (2.0%), Chuvash (1.2%), others (10.5%).
Language: Russian
Literacy: 99.6%
Main exports: Oil and oil products, natural gas, wood and wood products, metals, chemicals, weapons and military equipment
GNI per capita: US $7,560 (World Bank, 2007)
International dialing code: +7
Internet domain: .ru, .su
Trade organisations: CIS, APEC, EURASEC
Economy
Statistics
- GDP (PPP) $1.709 trillion (2005 est.)
- GDP growth 7% (2007 est.)
- GDP per capita (PPP) $12,000 (2005 est.)
- GDP by sector agriculture (5%), industry (35%), services (60%) (2005 est.)
- Inflation 13.3% (2008 est.)
- Pop below poverty line 17.8% (2004 est.)
- Labour force 76.2 million, 53% of the total population (February, 2009)
- Labour force by occupation (agriculture 10.3%), (industry 21.4%), (services 68.3%) (2004 est.)
- Unemployment 6.4 million people, 8.5% of the labour force (February, 2009)
Main industries
Petroleum and petroleum products, natural gas, mining, machine building, defense, shipbuilding, agricultural machinery, construction equipment, consumer durables, textiles, foodstuffs, handicrafts
Foreign trade
- Exports $245 billion (2005 est.)
- Main partners: Netherlands 9.1%, Germany 8%, Ukraine 6.4% Italy 6.2%, China 6%, U.S. 5%, Switzerland 4.7%, Turkey 4.3% (2004)
- Imports $125 billion (2005 est.)
- Main partners: Germany 15.3%, Ukraine 8.8%, China 6.9%, Japan 5.7%, Kazakhstan 5%, U.S. 4.6%, Italy 4.6%, France 4.4% (2004)
Public finances
- Public debt $239.46 billion, 15.6% of GDP (2005 est.)
- External debt $230.3 billion (30 June 2005 est.)
- Revenues $176.7 billion (2005 est.)
- Expenses $125.6 billion (2005 est.)
- Economic aid (recipient) in FY01 from US, $979 million (including $750 million in
non-proliferation subsidies); in 2001 from EU, $200 million (2000 est.)
Investment potential in the
Rating of the areas in
Group:
Group: Leningrad region, Vologda region – medium risk – relatively high potential
Group: Kaliningrad region, Novgorod region, Pskov region – low risk, not so high potential
Group: Arkhangelsk region, Murmansk region – medium risk, medium potential
Group: Karelia, Komi – high risk, not high potential
Investment opportunities of the Murmansk region
| Name of the project | Volume of investments | Project initiator | Project volume of production and services | Number of employees | Project implementation period |
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History
Russia undertakes the transition with advantages and obstacles. Although only half the size of the former Soviet economy, the Russian economy includes formidable assets. Russia possesses ample supplies of the Communist Party, which controlled all aspects of economic activity. The central planning system left a number of legacies with which the Russian economy must deal in its transition to a market economy.
Much of the structure of the Soviet economy that operated until 1987 originated under the leadership of Joseph Stalin, with only incidental modifications made between 1953 and 1987.
The government’s role was to ensure that the plans were fulfilled. Responsibility for production flowed from the top down. At the national level, some seventy government ministries and state committees, each responsible for a production sector or subsector, supervised the economic production activities of units within their areas of responsibility. Regional ministerial bodies reported to the
The plans incorporated output targets for raw materials and intermediate goods as well as final goods and services. In theory, but not in practice, the central planning system ensured a balance among the sectors throughout the economy. Under central planning, the state performed the allocation functions that prices perform in a market system. In the Soviet economy, prices were an accounting mechanism only. The government established prices for all goods and services based on the role of the product in the plan and on other noneconomic criteria. This pricing system produced anomalies. For example, the price of bread, a traditional staple of the Russian diet, was below the cost of the wheat used to produce it. In some cases, farmers fed their livestock bread rather than grain because bread cost less. In another example, rental fees for apartments were set very low to achieve social equity, yet housing was in extremely short supply. Soviet industries obtained raw materials such as oil, natural gas, and coal at prices below world market levels, encouraging waste.
The central planning system allowed Soviet leaders to marshal resources quickly in times of crisis, such as the Nazi invasion, and to reindustrialize the country during the postwar period. The rapid development of its defense and industrial base after the war permitted the Soviet Union to become a superpower.
The record of Russian economic reform through the
Economists have struggled to achieve accurate measurement of the Russian economy, and they have questioned the accuracy of official Russian economic data. Although the market now determines most prices, the Government (Russia’s cabinet) still fixes prices on some goods and services, such as utilities and energy. Furthermore, the exchange rate of the ruble (for value of the ruble) to the United States dollar has changed rapidly, and the Russian inflation rate has been high. These conditions make it difficult to convert economic measurements from rubles to dollars to make statistical comparisons with the United States and other Western countries.
According to official Russian data, in 1994 the national gross domestic product (GDP) was 604 trillion rubles (about US$207 billion according to the 1994 exchange rate), or about 4 % of the United States GDP for that year. But this figure underestimates the size of the Russian economy. Adjusted by a
Economic Reform in the 1990s
Two fundamental and interdependent goals macroeconomic stabilization and economic restructuring mark the transition from central planning to a
Automotive sector
In 2007, sales on the Russian automotive market rose 35% on the previous year to 2.8 million cars. This was the fifth highest sales volume in Europe, after Germany, France, the UK and Italy. Over the past five years, the demand for cars has tripled in money terms, from $10 billion in 2002 to over $53 billion in 2007. The main reasons for such rapid growth are the steady increase in personal disposable income, better access to car loans and expansion of sales chains and dealership chains all over the country. The results of the first half of 2008 are 1.6 million units sold and $33.8 billion market volume, growth of 41% and 64% compared with the first half of 2007, respectively. Major industry experts anticipate further market growth and predict that in several years the Russian automotive market could become the largest in Europe.
Traditional Russian car manufactures are losing their market share to foreign brands that are imported or have assembly plants in the country. New foreign brands account for 78% of the market in money terms. The Russian Government has offered tax breaks to companies that start major assembly lines in Russia. Ford, Renault, GM, KIA, Great Wall, Hyundai, Fiat, SsangYong, and Isuzu are already assembled in Russia. Toyota, Suzuki, Nissan, Volkswagen, Peugeot/Citroen, Mitsubishi, Hyundai and others are constructing factories or have announced plans to set up assembly plants in Russia. An influx of foreign car component manufacturers in the next few years is expected. Practically the same tax remissions are on offer to
Building and Construction
Russia’s building market has been very attractive for foreign investors during the last five years. This is symptomatic of Russia’s rapid rate of overall economic growth with a commensurate boom in building and construction across residential, industrial and commercial categories. In addition, Russian government policy has also sought to encourage both foreign and local investment in construction. The Federal Agency of Building and Housing has set out a national framework through to the year 2010.
Impressive growth
The appeal of the Russian building industry for investors and developers is confirmed by official statistics. According to data from the Russian Ministry of Economic Development, Russia has experienced a significant increase in building activity as a result of continuous though slowing growth in capital investments. For the first six months of 2004, capital investments in building increased 12.6 per cent, although the final annual figure was somewhat lower at 10.9 per cent. This compared with an investment growth rate of 12.5 per cent in 2003. This slowing rate of growth was reflected in construction completions, which stood at 81.4 per cent for
For the first nine months of 2004, capital investments in building and construction in Russia totalled US$1.3 billion dollars. Foreign investment provided US$197 million of this.
A stable market
The construction market in Russia is relatively stable. The most successful development companies in the Moscow region include
Moscow is very much a ’closed’ building market, so most new investors are looking to other regions such as the Russian Far East. However, potential investors should take into account the lower solvency of potential partners and clients in these regions.
The Russian State Building Committee (Gosstroy) manages the system of state regulation and coordination. About 130,000 building and building materials industry organisations work within this regulated system.
For further information on the Russian building market, see the following websites:-
www.irn.ru
www.
www.rway.ru
Building materials industry in Russia
The building materials market is one of the most dynamically growing areas of the Russian economy, with building ceramics a particular area of growth. The primary explanation for this growth is the rapid development of the building industry and increasing consumption of building materials.
The year 2004 saw a 5.3 per cent increase in building materials production compared with 2003. Building ceramics production increased even faster, with a 15 per cent annual growth rate. This increase was caused by changes in the composition of building and material consumption, an increasing volume of contract works (up by 110.1 per cent on the year before).
Strong growth in ceramics
Since 1997, there have been strong annual increases in ceramic slab and sanitary ceramic goods production. Local Russian industry has managed to overcome foreign growing competition after modernising its business processes and technological equipment using modern plant made by leading firms from Germany, Italy and Spain. This collaboration has helped improve the quality improvement of domestic products, which now meet the requirements of the modern building industry.
For Norwegian companies, Russia presents significant opportunities in the building materials industry, including the sale of modern production equipment, technology transfer and joint ventures.
The Russian building ceramics industry today consists of some 29 independent enterprises and 22 business units within larger industrial organisations. The leading companies include Experimental Ceramic Factory, Nefrit Ceramics, Sokol, Stroypolimerkeramika, Velor, Volgograd Ceramic Factory and some others.
Building ceramics production is not spread evenly throughout the country. The majority of enterprises are situated in the European heartland of Russia, which houses 12 major plants. Together these organisations produce more than 50 per cent of Russia’s building ceramics. Total output of these factories is 35.7 million square meters of slab.
The need for quality raw materials
One problem still facing the industry is reliable supply of quality raw materials. Traditionally Russian quarries were disadvantaged by low production quality and the lack of technologies for enrichment of raw materials. Quarry technologies and management present significant opportunities for Norwegian companies with suitable solutions.
In 1990s, two quarries for refractory clay were developed (Fedorovsky quarry near
Industry priorities
The development priorities for the Russian building materials industry are:
- Development of energy and
resource-saving technologies and equipment for making ceramic slabs and sanitary ceramic goods capable to compete with international suppliers; - Development of new kinds of ceramic slabs and sanitary goods with improved quality and betters aesthetic appeal;
- Development of technology and equipment to enrich domestic raw materials;
- Production of
ready-made ceramic masses for central provision to factories; - Development of ceramic mass mixtures and glazes for production of building ceramic goods based on domestic raw materials;
- Changing the existing standards of ceramic slab to correspond to the European standards.
Each of these areas provides significant business opportunities for Norwegian exporters.
Communications and IT
The Russian communications and information technology sectors are developing rapidly and represent 4.5% of the country’s GDP. According to the Ministry for Information Technology and Communications, the communications industry’s revenues grew by 27%, reaching USD 73.9 billion in 2008.
By the end of 2008, the mobile telephone penetration rate had reached 129.4%. Russia had a total 187.8 million mobile subscribers, an increase of 15 million from a year earlier. Mobile penetration is growing particularly fast in the regions, stimulated by sharp competition among the three major national operators (Mobile TeleSystems, VimpelCom, and MegaFon). They are vying to buy up regional operators and develop new networks across the country and are actively expanding in the CIS and Europe.
The three largest Russian mobile operators have received 3G
licenses. MTS promised to invest $1 billion over the next three years, with the first services to be launched in 2007. MegaFon announced a similar investment, with services planned from 2008. VimpelCom has more modest plans, with investments of between $300 million and $350 million over the next 18 months.
The
Svyazinvest. Its privatisation has already been delayed several times.
The market for alternative operators is also developing rapidly in Russia. Market leaders, including Comstar United Telesystems, Peterstar and Golden Telecom, are growing fast and focusing on
In 2006, the government began liberalising the
market by granting alternative operators licenses for international and intercity calls. The key emerging competitors to Rostelecom, the former state monopoly, are Transtelecom, Golden Telecom and MTT (Multiregional TransitTelecom). Deregulation has also induced a wholesale change in access and interconnection rules. The Calling Party Pays (CPP) principle was first introduced on the Russian telecoms market in July 2006. The regional telecom companies began collecting money from subscribers for zonal
tariffs for local calls were introduced with, subscribers offered a choice of three basic tariff plans: unlimited, per minute and combined. The tariff rates are set by the operator within a range determined by the market regulator.
National internet penetration rates are rather low, with most
estimates putting the rate somewhere around 25%. In 2006, the
number of internet users was 25 million people. Revenue from
internet services reached USD 3.6 billion in 2006.
Hardware is the major IT segment, accounting for more than
50% of the sector’s revenue according to official statistical data, and is growing rapidly. Hardware sales grew by 22.6% and totalled USD 9.9 billion in 2007.
The software industry is also on the rise, with a growth rate of around 43.2% and sales reaching USD 3.1 billion in 2007.
In 2005, the Russian government initiated a pilot programme
for IT parks, with about USD 1 billion to be invested by the state from 2007 to 2011. IT parks are planned for Moscow, Tyumen, Nizhny Novgorod, Kaluga, Novosibirsk, St Petersburg and the Republic of Tatarstan.
In July 2007, a federal target programme for the development of nanotechnology in Russia for 2008 to 2010 was launched, with volume of investments at USD 1 billion.
Government initiatives to support the IT industry also include
possible additional tax breaks and the creation of a venture
capital investment fund that is designed to finance IT and
technology
sector, software piracy remains very high in Russia.
Consumer Goods
Russia’s economic boom has created a favourable climate for companies that sell consumer goods or produce components or raw materials for
Market overview
Russia is one of the fastest growing emerging markets in the world. Since 1999 it has enjoyed six consecutive years of economic growth, averaging almost 7 per cent per annum. In 2005, Russia achieved estimated GDP growth of 6 per cent and the forecast for 2006 is 5.6 per cent, according to the Economist Intelligence Unit.
While some economic analysts remain concerned at the economy’s dependence on international commodities, all major indicators are positive:
- Foreign investment in Russia is increasing;
- Household disposable incomes are growing quickly;
- Natural resources are very competitively priced;
- Russia has abundant skilled human capital.
For these reasons, international businesses are lining up to enter the Russian market. Furthermore, because Russia has few preferred trading partners, Norwegian companies have equal opportunity to compete and expand in this rapidly emerging market.
Within the consumer goods sector, vast opportunities are now available across a wide range of product areas.
Cosmetics
The Russian cosmetics market is continuing to enjoy dynamic development. In 2004, the market grew by 15 per cent, reaching total sales of approximately US$6.2 billion. Analysts believe the market is far from saturation and has the potential to grow to US$
Our
Norwegian products are accepted as healthy, natural and safe.
International products currently attract a
Food and wine deliver rapid return on investment
The
The Russian food industry currently consists of about 30
Meat products: growing demand, changing tastes
The production of meat and meat products is a key component of the Russian food market. Total meat consumption in Russia is officially estimated at 6.2 million tonnes. The Russian Meat Association forecasts meat consumption to reach 10 million tonnes by 2010. This growth can be attributed to rising disposable incomes and a growing trend toward the consumption of meat and meat products.
Domestic production capacity currently stands at 4.7 million tonnes and local production is expected to continue to decline, providing further opportunities for Norwegian meat exporters. Russia’s cattle and sheep numbers continue to decline.
Supply of meat and meat products is currently well below demand. Meat is subject to import quotas and domestic production is unable to keep pace with the market.
Traditionally, domestic meat producers have been small, personal farm holdings, although since 2002 there has been some movement towards state supply. In 2003, 54 per cent of the domestic meat market was supplied by personal farm holdings with 44 per cent supplied by the state sector.Traditionally, beef and pork were the two most popular meats in Russia, while consumption of lamb and mutton was rarer. Meat consumption levels closely reflect domestic production levels. Growing disposable incomes and the emerging
Subject to import quotas, there are a significant market opportunities for Norwegian meat producers to fill this demand, particularly in regard to beef, lamb and mutton. Imported meats from Australia, New Zealand and the United States enjoy great popularity in Russia.
Market experts predict that the ongoing development of the restaurant market, in addition to growing disposable incomes, will continue to drive the demand for meat and meat products forward.
Milk products: steady growth, established import culture
Consumption of milk and dairy products in Russia has been steadily increasing since the late 1990s. According to experts from the Milk Alliance, market growth fluctuates between 4 per cent and 5 per cent annually.
The Russian milk and dairy market can be divided between natural milk and
Cheese is also contributing to the overall market development. However, compared to other markets, cheese consumption in Russia is quite low, around
WimmBillDann and Yunimilk are the two largest
Experts predict consumer demand for milk and dairy products will continue to rise. Increased demand will be driven by regional market expansion, consumption growth and the introduction of new products such as
The Russian milk and diary market presents a significant opportunity for Norwegian exporters.
Fresh fruit and vegetables
The Russian market for fruit and vegetables continues to expand. Over the last five years, the share of fruit in the consumer basket of Russian citizens has grown considerably, especially in urban areas. According to some sources, fruit consumption per capita in Russia stands at 45.6 kg during the
The largest volumes of Russian fruit imports is accounted for by three types of products: bananas (27 per cent), apples (22 per cent) and oranges (14 per cent). Pears account for around 7 per cent and grapes around 5 per cent. Most imported fruit is supplied to Russia via fruit exchanges in the Netherlands. Some large fruit importers that have proper storage facilities import direct from the supplier.
At present, the largest suppliers of fruit to Russia are South Africa (which supplied US$60 million in 2004), Turkey, Israel, Egypt, Chile and Iran (mainly exotic fruit like figs, pomegranate and persimmon).
Wine market: compelling quality, receptive consumers
The wine market in Russia is currently estimated at
The leading import companies in the Russian market are
Traditionally, cheap Moldovan wines comprised the largest share of wine imports, although a recently released report from the State Customs Committee of the Russian Federation highlighted a shifting consumer trend towards more expensive wines. As a result, the market share of Moldavian wine producers decreased in the
In the same period, wine products from other regions grew in popularity and several
- Argentina (0.27 per cent to 5.08 per cent),
- Chile (0.31 per cent to 0.93 per cent),
- France (6.66 per cent to 9.56 per cent),
- Germany (0.86 per cent to 1.14 per cent).
The
Mining and Metals
Russia holds approximately
To date, approximately 20,000 mineral deposits have been explored, of which more than
Oil and oil
Privatisation and restructuring
Until the early 1990s, the mining industry in Russia was almost exclusively state owned and funded. Following the collapse of the Soviet Union, the situation deteriorated. The breakdown in trade and economic ties between Russian production enterprises and their CIS partners led to a widespread industry crisis and a significant reduction in mining and natural resource extraction. The industry was also left a legacy of obsolete technology, low productivity and a shortage of electricity to sustain increased extraction.
Mining companies entered the 1990s in a difficult position. Nevertheless, privatisation, management restructuring, foreign investment and record commodity prices have contributed to a dramatic turnaround in the fortunes of the Russian resources sector.
Since 2000, growing international demand for raw materials and energy has enabled the Russian mining industry to recover strongly. New exploration and investment in green field projects are now at record levels. International experts forecast Russia’s mineral production to increase
Problems and opportunities
Despite the global upturn, the Russian resources sector still has significant challenges to overcome. A persistent lack of investment in reconstruction and technical upgrades to facilities remains a major problem and one that impedes industry development. Compared to their western counterparts, Russian mining companies are often restricted by technical, technological, structural and managerial lags in both production and refinement.
At a structural level, the Russian Government and the industry are working to achieve stability and efficiency in production through:
- Development of new and existing sources of raw minerals;
- Improved cooperation between production companies and utility companies;
- Improving technical infrastructure and managerial expertise;
- Strengthening company finances.
The reconstruction of existing enterprises and construction of new plants is increasingly accomplished by the use of advanced technology for extraction and refinement, as well as the installation and utilisation of modern equipment and systems.
In order to accomplish these goals, the Russian mining industry is looking to collaborate with international partners in the following fields:
- Investment, including mergers and acquisitions;
- Technology transfer;
- Supply of mining plant such as trucks, loader gears and bulldozers, as well as spare parts, conveyer belts and large truck machinery;
- Leasing and acquisition of mining equipment;
- Business process consulting.
A vast market for Norwegian expertise and products
Norway is well placed to share its technical expertise with Russian resources clients. A significant number of Norwegian exporters are already realising the potential of the Russian market.With the rapid evolution of the Russian resources sector, Norwegian companies have an outstanding opportunity to share the benefits of their experience with their Russian counterparts for mutual profit.
Gold mining: rapid growth, improving investment climate
Russia’s gold mining industry is now among the fastest growing worldwide. Until recently, international investors did not pay much attention to gold mining in Russia because of industry disunity and the obsolete technology used for extraction. However, recent corporate consolidation and improvements in legislation such as the Agreement on Section Production have improved the investment climate considerably.
The gradual introduction of new extraction technology has drawn the attention of strategic and portfolio investors. Unlike the steel and
The gold mining industry in Russia extracted 181 tonnes in 2004, up from 143 tonnes in 2000—amounting to a 26 per cent increase over five years. Investment (including foreign investment) rose from US$40 million in 2002 to US$90 million in 2004, with a further rise to US$110 million expected in 2005. The cost price of the gold industry in Russia is on average 23 per cent below the world average.
Active gold ore deposits are located in several Russian regions:
- Krasnoyarsk region (27 per cent of total production),
- Khabarovsk region (17 per cent),
- Magadan area (13 per cent),
- Sakha (Yakut) Republic (7 per cent),
- Buryatiya Republic (5 per cent),
- Irkutsk and Amur areas (3 per cent),
- Sverdlovsk area (3 per cent),
- Chelyabinsk area (3 per cent),
- Other regions (22 per cent).
According to industry experts, the volume of gold extraction in Russia will grow 8.2 per cent per year on average over the next five years. The largest
Highland Gold, Peter Hambro and Celtic Resources are expected to develop into industry leaders. The
For foreign investors, the main restriction in industry development centres on politics. The Russian Government considers gold a strategic national resource and is extremely cautious about allowing foreign investors to develop gold ore deposits directly. Despite this, the
Oil and Gas
Russia is one of the world’s leading producers of oil and gas, holding 13 per cent of world reserves. Russia’s total continental shelf oil and gas concentrate reserves are estimated at 100 billion tonnes with an approximate value of US$15 trillion.
At this stage, only 15 per cent of Russia’s resources have been developed. The Russian Ministry of Natural Resources estimates national oil reserves at 44 billion tonnes, with 60 per cent of this found in the Ural region and Siberia. These areas also hold 40 per cent of gas reserves. The Russian Far East holds 6 per cent of oil and gas reserves. The balance of these deposits is dispersed throughout the country.
Total oil and gas condensate production for 2004 was 485 million tonnes, representing an increase over 8.9 per cent over 2003. This meant Russia reached the production level originally forecast for 2010 six years ahead of schedule. Moreover, a number of new pipeline projects have been approved or begun in the last year, including export lines targeting China and Japan.
The oil and gas industry is critical to the Russian economy as it generates the largest share of the country’s gross national product (GNP). Oil and gas account for 20 per cent of Russia’s industrial production, 49 per cent of exports and 29 per cent of Federal Government revenue. The Ministry of Economic Development expects the oil and gas industry to attract total investments of US$128 billion in production and transport alone by 2015. The continued development of this sector remains critical to national economic growth.
Industry profile
There are approximately 170 companies involved in oil and gas development in Russia. Of these, some 11 large vertically integrated companies (including the
- Bashneft
- Gazprom
- LUKoil
- Rosneft
- RuSSneft
- Sibneft
- Slavneft
- Surgutneftegaz
- Tatneft
TNK-BP - Yukos
International partners sought to help increase efficiency
Government and industry leaders are placing considerable emphasis on increasing industry efficiency. A
Modernisation and improved efficiency is closely connected to scientific and technological advances and the introduction of contemporary oil extraction technologies. It is in these areas that Russian businesses are seeking collaboration and investment from overseas partners.
High global oil prices and buoyant exports have given the Russian oil and gas industry sufficient funds to reinvest in itself and undertake these
Diverse opportunities for Norwegian companies
Russian oil and gas companies are enthusiastic about collaborating with Norwegian partners and suppliers. Opportunities for Norwegian companies exist in a number of areas, ranging from resource development to supplying the hardware, services and technical expertise needed to modernize existing oil and gas projects.
Key areas of interest include:
- Development of resources;
- Advanced extraction and refinery systems;
- Exploration and exploration technologies;
- Pipeline equipment, including valves and metering equipment;
- Production safety, OH&S, training aids and training to emergency services;
- Pipeline security and integrity technologies;
- Ecology and environmental security;
Anti-corrosion and advanced polymerisation technologies;- Gas analysers capable of handling multiple gas types;
- Software.
Professional Services
Russia offers significant business opportunities within the professional services sphere. With six years of strong economic growth and an increasing emphasis on quality of service, Russia today is fundamentally different from the past.
In 2004, services contributed more than 60 per cent of Russia’s gross domestic product (GDP), according to the State Statistics Committee of the Russian Federation. This represents strong growth over 2000, when services made up only 49 per cent of GDP.
Overview of the Russian professional services market
After evolving rapidly from a centrally planned economy to a free market,
Most Russian companies understand this need and are willing and able to pay for expert advice. Many businesses have a preference for proven commercial services, with price as a secondary consideration. This explains why Russia has become an important market for professional services firms around the world.
Market makeup
According to Expert rating agency, the value of the Russian professional services market is as follows:
- Information technology—43.6 per cent
- Legal and tax consulting—18.3 per cent
- Strategic planning—14.0 per cent
- Assessment—8.5 per cent
- Financial consulting—8.4 per cent
- HR consulting and recruitment—2.2 per cent
- PR and marketing—1.2 per cent
- Other—3.8 per cent
Emerging trends
In the past, most demand for professional services came from large industrial manufacturing companies such as highly profitable petroleum, chemical and multinational FMCG companies. However, in recent times there has been a clear shift in the market towards
Businesses in Russia are focused on developing and implementing strategies to ensure their
The focus on management infrastructure is creating significant opportunities for Norwegian professional services firms with relevant expertise and proven experience.
- Particular areas of demand for international expertise include:
- Appraisal of intangible assets and intellectual property (IP) for financial reporting according to IAS/GAAP standards;
- Analysis and development of marketing and brand strategies;
- Formulation of strategies to manage intellectual property assets more effectively through approaches such as licensing, franchising, etc.;
- Preparing companies for investment such as venture funding and mergers and acquisitions;
- Customer service and customer management.
Demand for professional services continues to grow as Russian businesses become more structured and more active in global investment markets.
Technology Equipment and Services
While the Russian economy has developed rapidly over the last five years, spending on information technology, process automation and productivity systems still lags considerably behind developed economies. This presents considerable opportunities for Norwegian IT and consulting companies to help Russian clients address technical and process changes needed to remain internationally competitive.
Russia is one of the fastest growing emerging markets in the world. Its economy has performed consistently well in recent years, achieving its sixth successive year of GDP growth in 2004. Russia’s average GDP growth rate of 7 per cent over five years is a rate that few other Central European countries have been able to match. In 2005, the official GDP growth forecast is 5.8 per cent.
Economic growth has been largely dependent on a number of external factors, including high world commodity prices for major Russian exports (oil, oil products, natural gas and metals). These export industries have carried the whole economy forward, encouraging new development in agriculture, industrial manufacturing and processing and consumer retail.
The birth of new enterprises and modernisation of existing facilities is encouraging rapid development of business infrastructure. Information technology, software, telecommunications, consulting and related services are in demand to fulfil Russia’s development ambitions. This provides outstanding opportunities for Norwegian companies. According to market experts, the Russian IT market in 2003 was worth US$
Currently Russian businesses spend on average just
Key areas of opportunity
The key areas of opportunity for Norwegian IT and consulting companies in the Russian and CIS markets include:
- Banking and financial software;
- Business applications and related services;
- Insurance systems;
E-government ;E-learning .
High growth in software and services
High
In 2004, IT services were greatly sought by financial services organisations, which accounted for 19 per cent of all services business. Demand for IT services was lower among manufacturing and telecommunication firms.
The Russian state sector is currently developing many new IT projects under a Russian Federal Government program called «Electronic Russia». The bulk of the IT services market is focused on
Increasing PC and internet penetration
Rising incomes and the need to upgrade business equipment have contributed to fast growth in IT hardware sales. Some
By 2007, it is estimated that 246 in every 1000 people will have a home computer. This will mean the number of home computers will have increased 2.7 times since 2002. The number of internet users is constantly growing and by 2007 will reach 32 million people. This exceeds the 2002 level
Booming telecommunications usage
Telecommunications is one of the most dynamic sectors in Russia, with estimated growth of 35 per cent in 2003. The telecommunications sector accounts for 2 per cent of GDP, compared to an average of 5 per cent in western countries. The combined value of telecommunications and related companies was estimated at US$28 billion in 2003. The small size of the domestic telecommunications manufacturing industry reflects customer demand for cheaper imported equipment or hardware supplied by manufacturers on credit.
Partnership opportunities abound
It is estimated that US$60 billion worth of investment is required to bring the Russian telecommunications industry up to international standards. While technical skills are in abundant supply, Russian IT companies often lack access to financing and management experience.
For this reason, the majority of Russian businesses requiring IT services prefer to use
Tourism and Leisure
For many decades, Russian people were greatly restricted in their international travel. With the collapse of the Soviet Union, overseas travel has become a popular leisure activity for Russians. Outbound tourism is a developing fast, with sales increasing by
Millions of Russians now take advantage of cheap charter packages to resorts in Egypt, Turkey and the Middle East. Other popular destinations include the Canary Islands, Cyprus, Croatia, the Seychelles, Spain and Tunisia.
Now, however, more and more Russians are looking beyond these cheap and traditional travel destinations in search of more exotic – and more expensive – destinations such as Africa, China, Cuba and South America. As Russian prosperity grows, people’s demand for new holiday destinations with concurrent levels of hospitality and service is also increasing.
Russian tourists have strong purchasing power
Travel statistics indicate that Russian tourists buy more organised group tours than their Western European counterparts. They also tend to be distinguished by their high purchasing ability. It is quite common for the Russian tourists to choose packages that include
Norway: a growing fascination
Norway is Europe’s great parkland: a dramatic mix of mountains, seas, forests and fjords. While the country has tidy cities, historic buildings and distinctive artists, nature is clearly its prime attraction. We think it’s one of the loveliest countries in the world, summer or winter, and the prime travel destination in Scandinavia.
The country has astonishing variety: The serene rural landscapes around Oslo are nothing like the deep fjords along the western coast, and the countryside along the zigzagging roads to Bergen could not be more unlike the stark, barren land around Alta or the sunny coves of the south coast.
Due to proximity of Russia a lot of people travel to Norway every year.
There are a lot of travel agencies providing buses to Kirkenes, but still there are not so many travel agencies providing guided tours to Norway.
INFORMATION ON MURMANSK REGION
Download reports about Murmansk region:
info compiled in cooperation with Finnbarents
Murmansk main development trends
Some figures and numbers on demography and social facts here and here
Murmansk airport – flights schedule:
International Flights
Domestic Flights
INFORMATION ON ARKHANGELSK REGION
info compiled in cooperation with Finnbarents
Download reports about Arkhangelsk region:
Arkhangelsk region – figures and facts
Severodvinsk. Sevmash. Zvezdochka.
Useful links and reports
Goskomstat (State Committee for Statistics)
www.gks.ru
In Russian and English.
The main objective of the Federal State Statistics Service is to meet the requirements of bodies of state authority and administration, media, general public, scientific community, commercial and international organisations for diverse, objective and exhaustive information. The system of state statistics covers district, regional and federal levels, as well as Moscow and St. Petersburg. It comprises 89 regional committees and 2,200 district departments. The Federal State Statistics Service employs about 30 thousand staff.
The Central Bank of the Russian Federation
www.cbr.ru
The Central Bank of the Russian Federation (Bank of Russia) was founded on July 13, 1990, on the basis of the Russian Republic Bank of the State Bank of the USSR. Accountable to the Supreme Soviet of the RSFSR, it was originally called the State Bank of the RSFSR.
Interstate Statistical Committee of the Commonwealth of Independent States (CIS STAT)
www.cisstat.com
Some current economic statistics for all of the CIS countries can be found here. Many categories go back to 1995. Good site for CIS countries such as Tajikistan or Russia that have little available online.
Cadastre authorities General information on cadastral districts and cadastral valuation of lands. http://eng.www.kadastr.ru/
General reports:
Doing business in Russia 2009 (PDF, 1.9 Mb)
under update
The information is compiled in cooperation with PricewaterhouseCoopers.
