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International Business Article
The Background To Doing Business With Russia

As the Russian economic giant emerges from the shadow of its 20th Century incarnation as part of the USSR, so its integration with the rest of the developed economic world has continued apace. National governmental organisations, larger Multi-National Corporations and even some small and medium sized enterprises based in Western Europe and the US have demonstrated an increasing willingness to trade with, and carry out business within, the Russian Federation.

Russia is the world’s largest country, stretching over nine time zones and with an effective market of over 140 million customers. It boasts a literate and well educated workforce and, as economic reforms within the federation begin to take effect, provides the basis for a high level of effective demand for a wide range of consumer goods, particularly as the country continues to move away from its traditional reliance on heavy industry and extraction of natural resource.

In many ways, the economic climate in Russia is such that there’s never been a better time to look to invest there. Between 1999 and 2008, GDP rose on average at 7.2% per annum. While Russia was not immune to the financial crisis which overtook the rest of the developed world, output and earnings had largely returned to pre-2008 levels by the end of 2012. Indeed, per capita GDP was the highest for any of the BRICS countries in 2011 standing at around US$13,000 according to the World Bank WDI database. Russian President Putin has suggested that this is expected to almost triple by 2020 to US$35,000 – an achievement which would make Russia the largest single European market and the fifth largest economy in the world in terms of Purchasing Power Parity corrected GDP.

Any company or organisation looking to expand into new business territories would clearly be well advised to seek help from experts within the jurisdiction. Clearly, as a rapidly emerging world-class economy, this is particularly true of a firm looking to trade within the Russian Federation for the first time. There are a number of local specialists with a good track record in assisting new market entrants in issues such as management information IT systems, Enterprise Resource Planning and taxation in Russia. For companies based in most western trading nations, national government will provide assistance and advice. In the UK, for example, the Department for Business UK Trade and Investment (UKTI) arm, which has local bases in three diplomatic and trade missions in Moscow, St Petersburg and Ekaterinburg, has part of its mission statement to “Help British companies to increase their competitiveness through overseas trade with Russia”. Finally, the Russian Federation itself, primarily through the Ministry of Finance and the Ministry of Economy offers support and guidance for foreign investors looking to do business with Russia.

In many respects, the indications are that Russia represents an excellent opportunity for foreign investors. The World Bank’s 2013 Doing Business report, for example, concluded that “Russia has taken important steps in the last year to narrow the gap in the quality of the business environment with respect to that existing in high-income economies.” The Russian president has declared that improving the climate for business with Russia is “(his) administration’s most important priority”. Or, as Michael McFaul, the US Ambassador to Russia quoted in the Moscow Times, put it, “Those doing business in Russia are already fairly satisīŦed… But there’s another 98 percent of American Businesses that don’t come here, don’t know anything, have stereotypes about what the climate is here. We’ve gotta’ reach those folks”.

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