Transcript No Slide Title

The “R” in BRIC – Russia as a
Strategic Emerging Market
U.S. Commercial Service
Your Key To Russia
The U.S-Russia Chamber of Commerce of New England
May 3, 2007
U.S. Commercial Service
Russia
PERCEPTION:
“Russia is a riddle, wrapped in a mystery
inside an enigma.” Winston Churchill,
1939.
“Russia is an engine of growth for
American companies” Andrew Somers,
President of AmCham Russia, 2007
U.S. Commercial Service
Russia
Russia in the Western Press:
Politkovskaya/Litvinenko Cases
Backtracking on Democracy
Beslan/Chechnya
Yukos/Khordikovsky
U.S. Commercial Service
Russia
Reality:
Russia is a Developing Country.
Significant progress over past 15 years.
Impressive economic growth since 1998.
Substantial structural, administrative,
and economic reforms implemented.
Strategic market with significant assets.
8 Consecutive Years of Economic
Growth
GDP (US$ bn)
Real GDP growth (% )
Consumer price
inflation (av; % )
Exports of goods fob
(US$ m)
Imports of goods fob
(US$ m)
Current-account
balance (US$ m)
Foreign-exchange
reserves excl gold (US$
m)
2002
2003
2004
2005
2006
345.1
4.7
15.8
431.5
7.3
13.7
588.8
7.2
10.9
763.6
6.4
12.7
986.6
6.6
9.7
107,302
135,930
183,207
243,570
309,856
-60,965
-76,069
-97,383
-125,303
-161,104
29,116
35,410
58,592
83,185
108,177
44,054
73,175
120,809
175,891
296,131
U.S. Commercial Service
Russia
Macroeconomic Snapshot:
Average GDP growth:
6.7% per yr. since ’98
GDP 2006:
$987 Billion
PC GDP 2006:
$6929 ($1,339 only 6 years ago)
Inflation:
9-10%
Unemployment:
6.6%
U.S. exports 2006:
$4.7B to Russia (+20%)
U.S. imports 2006:
$19.8B from Russia (+29.5%)
AmCham Survey Results
Did you know that . . .
• Half of American companies surveyed report sales
increases of 200%+ in Russia from 2001 to 2005
• 97% of U.S. companies in Russia project continued
growth in sales during the next 3 years.
• 92% of U.S. companies in Russia believe that
continued engagement with Russia is positive for
American Business and 86% believe Russia’s
membership in WTO will bring new opportunities.
What Executives of
American Businesses are
saying about Russia
• Our sales grew 80% in 2006 – Johnson & Johnson
• During 2006 our sales have increased by 70% with a strong
trend for future growth – Delta Airlines
• Russia now ranks in the top 5 among 180 countries in which
we do business. – Wrigley
• Ford became the #1 selling foreign brand in Russia in 2006.
• We have exceeded $1B in sales w/ latest annual growth
rates of 20-30%. – P&G
• Russia represents the largest subsidiary in the Europe
Region for Mary Kay w/53% of 2006 net sales for the region.
What Executives of
American Businesses are
saying about Russia
• Our business is now growing at a yearly average of about
40%. – Dow Chemical
• Since our office opened in 2002 we have grown at over 70%
annually and growth in increasing. 80% of our products sold
in Russia come from U.S. factories in Illinois and Iowa. –
John Deere
• 3M Russia is a very important subsidiary for 3M Worldwide.
Our business results, growth and profitability have been
outstanding over recent years and have been some of the
highest in 3M subsidiaries.
Commercial Ties Critical to
Bilateral Relationship
“While political issues between our nations
tend to garner the most headlines,
economic interests should not be ignored.
U.S.-Russia commercial ties are stronger
and more dynamic than ever before,
providing stability to our overall
relationship.” - Secretary of Commerce
Carlos Gutierrez, Moscow April 2007
U.S. Commercial Service
Russia
Oil and Gas Economy:
Moscow awash with money; record oil/gas
prices driving economy. Trickling down to regions.
Russia will continue to be major player in the
global energy market:
World’s largest natural gas reserves and
largest gas exporter.
Neck-in-neck with Saudi Arabia for oil
production; 2nd biggest oil exporter.
World’s 3rd largest energy consumer.
U.S. Commercial Service
Russia
Oil and Gas Economy (cont’d):
Putin wants to bring greater share of energy
sector under state control.
Simultaneously trying to diversify economy away
from reliance on petrodollars.
Energy remains strategic focus of bilateral
dialogue and Presidential initiatives.
Putin’s Last Year
(State of the Nation Address)
• Call to spend hundreds of billions of dollars on new power
stations, roads, other infrastructure over next 12 years.
• Russia needs 2/3 more electricity by 2020 to ensure
sustainable economic growth. 26 nuclear + hydro,coal plants
• Start using “stabilization fund” now at $108 billion.
• Improve housing – “It is inadmissible for a country with such
reserves accumulated from its oil and gas revenues to be at
peace with the fact that millions of its citizens live in slums”.
• Pensions to increase 65% by 2010
Russia’s Automotive Market
• Russia fastest growing market for new car
sales in Europe and one of most dynamic
markets in the world.
• $33 billion car sales in Russia in 2006 (6
times 2001 figure)
• Russian car models cannot compete with
foreign models.
• Consumer preference shifting to more
expensive cars. Access to Credit.
• High end niche 70% growth 2005-06.
Car Sales in Russia
(thousands of vehicles)
Over 2 million vehicles
sold in 2006, a 20%
increase from 2005
2500
2000
Domestic assembly of foreign
makes
1500
Domestic
Used imports
1000
New imports
500
0
2003
2004
2005
2006
Manufactured near
St. Petersburg
since 2002
72,000 Ford Focus
produced in 2006
6 month waitlist for
new Focus.
Its not just Moscow
anymore
Russia: 145 Million People
•
•
•
•
•
•
Largest country in world but heavily urbanized
Moscow 11 million - St. Petersburg 5 million
13 cities over 1 million people
32 cities over 500,000 people
100+ cities over 100,000 people
Outside of Moscow and St. Petersburg retail market
underdeveloped.
• Enormous Scope for Retail Growth
Opportunities for Retail
Expansion
Lenta’s Drive to the
Regions
• Lenta founded in 1993. HQ in St. Petersburg, Russia.
• Operates 14 hypermarkets - 15 sites under construction.
• Ten of the existing retail complexes are in St Petersburg, two
in Novosibirsk and one each in Astrakhan and Tyumen.
• First big-box Russian retailer to expand into Western Siberia
and the Volga regions.
• Stores under construction in Barnaul, Nizhny Novgorod,
Novgorod, Novosibirsk, Omsk, Petrozavodsk, Rostov-onDon, Ryazan, St. Petersburg, Togliatti, and Volgograd
• EBRD $50 million unsecured loan to finance new regional
outlets
Retail Lending –
Consumer Access to Credit
•
•
•
•
Credit card business still in infancy in Russia
Increased 128% in 2006 to 5.7 million cards issued
Car loans doubled 2005-2006 to almost $10 billion
Mortgage lending increased almost 4 times 20052006 from $3.8 billion to $13.5 billion
St. Petersburg
Northwest Russia
• Total Population – Approximately 15 million
• St. Petersburg – 4.8 million
• St. Petersburg and surrounding Leningrad
Region constitutes the second largest
regional market in Russia, as well as a
base for operations throughout the NW.
St. Petersburg
• Founded by Peter the Great in 1703 as a window to
the west. Also known as the “Venice of the North”
• Maintains a western atmosphere and is an important
international marketplace due to its close proximity to
the Baltic countries, Scandinavia and the rest of
Europe
• Major intellectual, cultural, financial, commercial, and
industrial center of the Russian Federation
St. Petersburg
• Natural transportation center for the entire Northwest
• St. Petersburg seaport is Russia's largest
commercial port by volume
• Port handles over a third of all of Russia's imports
• Extensive rail network connecting to Europe,
Moscow and key regions in the country
Foreign Investment in St.
Petersburg
•
•
•
•
Over $6 billion in new FDI announced in 2006
U.S. Largest Foreign Investor in NW Russia
U.S. Investors in St. Pete/LenOblast:
Ford, Gillette, Wrigley, Kraft, International Paper,
Philip Morris, Caterpillar, Motorola, Otis, Intel, HP,
Sun Microsystems, General Motors
• Retail investment: IKEA, Shopping Malls, Franchises
• Increase in business/tourist visitors = new hotels
St. Petersburg
Foreign Investment
370,8%
6
5.3
5
Billions of Euro
4
3
143,9%
2
79,0%
141,6%
1.4
1
0.7
0.9
0
2003
% of previous year
Source: AmCham, St. Petersburg Administration
2004
2005
2006
St. Petersburg/Leningrad Region
Key industrial investment projects
The city covers an area of 1,439 kм2
International Paper
Nissan
Pepsi-Cola
Baltika
Ford
Gulf of Finland
Sea port
SaintPetersburg
JTI
Ring road
Bosch-Siemens (BSH)
Wrigley General Motors
Gillette
Severstal
Kraft Coca-Cola Toyota
Elcoteq
Caterpillar, Roca, Henkel
Best Prospects for U.S.
Companies in NW Russia
 Automotive Parts and
Equipment
 Building Materials and
Construction Equipment
 Oil and Gas Equipment
and Services
 Information Technology
 Franchising
 Port Equipment and
Services
 Food Processing and
Packaging
 Forestry, Woodworking
and Pulp and Paper Eq
 Safety and Security
Equipment
 Tourism
 Medical Equipment
 Retail Equipment
U.S. Commercial Service
Russia
Advice for Doing Business in Russia:
Perform detailed market research; identify specific
sector opportunities.
Find a qualified local partner; conduct due diligence.
Be patient: maintain a long-term timeframe for plan
implementation.
U.S. Commercial Service
Russia
Advice for Doing Business in Russia (cont’d):
Know your trade financing options: make use of
TDA, EXIM, OPIC.
Consider regions – ground floor opportunities (13
cities w/populations > 1m).
U.S. Commercial Service
Russia
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• CS Moscow, CS St. Peterburg, CS Vladivostok
• Includes: CS, BIS, BISNIS, OPIC/EXIM, SABIT
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Contact Us
Keith L. Silver
Principal Commercial Officer
U.S. Consulate General
St. Petersburg, Russia
Tel:+7(812)326-2560
Fax: +7(812)326-2561
Email: [email protected]
http://www.buyusa.gov/russia/en