Doing Business in Russia

ex air and Investment Chapter 5 Trade Regulations, Customs and Standards Chapter 6 Investment humor Chapter 7 Trade and Project Financing Chapter 8 Business excursion Chapter 9 Contacts, Market Research and Trade Events Chapter 10 Guide to Our go 1 6/7/2013 check to table of confine Chapter 1 Doing Business in Russia Market Overview Market Challenges Market Opportunities Market inlet Strategy Market Fact Sheet Link Market Overview fade to topWith a vast landmass, extensive natural resources, more than 140 zillion consumers, a growing fondness class, and to the highest degree unlimited substructure needs, Russia dust one of the most promising and eexciting marts for U. S. exporters. Russia is the earths 11th largest miserliness by nominal gross domestic product (GDP) and 7th largest by purchasing power parity (PPP). It has the highest per capita GDP ($13,400) of the BRICS countries (Brazil, Russia, India, China, and South Africa). Russia is an upper middle income country, with a passing educated and trained workforce and sophisticated, discerning consumers.Russias economy is still recovering from the stinting crisis that began in 2008, with GDP harvesting estimated at 2. 8% for 2013. In terms of trade in goods, Russia was the fall in States 27th largest export market and the 16th largest exporter to the United States in 2012. Russia was the Statess 21st largest trading partner overall. U. S. exports to Russia in 2012 were $10. 7 meg, a new record and an increase of almost 30% from 2011. This is six time more than the growth rate for overall U. S. exports worldwide, which rose by 5%. Russian exports to the United States in 2012 were $29 billion, a decrease of 15% from 2011.Russias leading trade partners were recently Netherlands, China, Germany, Italy, Ukraine, and Turkey. U. S. accumulated investment in Russia is approximately $10 billion. According to Russian data, the United States is Russias tenth largest foreign investor. Russia joi ned the World Trade Organization (WTO) in disdainful 2012. This brought the worlds largest economy outside the WTO into the organization and bound it to a set of rules governing trade. Congress also enacted legislation to extend indissoluble normal trade relations to Russia in the same year.Russias social rank in the WTO go away liberalize trade with the rest of the world and clear opportunities for U. S. exports and investments. For industrial and consumer goods, Russias average bound tariff rate declined from almost 10% to under 8%. U. S. manufacturers and exporters will comport more sealed and predictable access to the Russian market as a publication of Russias commitment not to raise tariffs on any products higher up the negotiated rates. For American line of merchandisees, Russias accession to the WTO will also bring the undermentioned 3 More liberal treatment for service exports and service providers.Sthronger commitments for egis and enforcement of IPR. Ru les-based treatment of agricultural exports. Market access under country-specific tariff-rate quotas. Improved hydrof oil color in trade-related rule-making. More effective WTO dispute resolution mechanisms. The United States is running(a) vigorously to expand bilateral trade and investment cooperation to benefit twain Russia and the United States. In the last several years, the imperative atmosphere resulting from the readjust of bilateral relations has led to an unprecedented advance in economic cooperation between our countries.From 2009 to 2011, U. S. exports to Russia rose markedly by about 57%, and wide-cut United States-Russia trade increased by more than 80%. thither is much more room for growth in this important relationship. revert to top Market Challenges Russia is the largest country in the world, spanning nine time zones and embrace over 17 million square miles. Seriously underdeveloped infrastructure poses logistical challenges, especially in accessing market s outside of major cities.An incomplete pitch contour from central planning has led to an insufficiently iintegrated economy and disparities in wealthiness distribution, both geographically and demographically. Conducting business might be impeded by burden most regulatory regimes inadequate intellectual property rights (IPR) protection and enforcement general corruption and inadequate rule of law inconsistent application of laws and regulations wish of transparency and the go on presence of large state-owned, or state-controlled, enterprises in strategical arenas of the economy.Investments in strategic sectors of the Russian economy are subject to Russian Government control. Recent reforms make it easier for companies to hire expatriate employees, but the Russian immigration and visa system requires time and patience for business travelers to halt necessary permissions to do business in Russia. English is not widely spoken although knowledge of the language is expanding es pecially in the major cities. recurrence to top Market Opportunities In alphabetical order Agricultural Equipment get dressed Automotive Parts and function Equipment/Accessories Aviation 4 Chemicals/Plastics Construction Consumer electronics galvanizing Power Generation and Transmission Equipment Energy Efficiency/Green come on Medical Equipment Refinery Equipment Safety and Security Equipment Travel and Tourism to the United States Return to top Market Entry Strategy Commit time, personnel, and capital seriously, as developing business in Russia is resource-intensive. Conduct market research, such as with the U. S. Commercial Services Gold Key or transnational Partner Search services, to identify opportunities and potential Russian business partners.Conduct payable diligence, such as with the U. S. Commercial Services International party Profile service, to ascertain the reliability of business partners. Consult with U. S. companies already in the market , as well as with the U. S. Commercial Service and business organizations such as the American Chamber of Commerce in Russia and the U. S. -Russia Business Council. impart regularly with Russian business partners to ensure common understanding of expectations. rat travel to Russia is sthrongly recommended in order to establish and master(prenominal)tain relationships with partners and to understand break market conditions. Maintain a long-term timeframe to implement plans and achieve positive results. Return to table of contents 5 Return to table of contents Chapter 2 Political and Economic Environment For background information on the political and economic environment of the country, please click on the unite below to the U. S. Department of State Background Notes. http//www. state. gov/r/pa/ei/bgn/index. htm learning on Russia can be found at the following crosstie http//www. state. gov/r/pa/ei/bgn/3183. tm Return to table of contents 6 Return to table of contents Cha pter 3 Selling U. S. Products and Services employ an Agent or Distributor Establishing an Office Franchising Direct Marketing vocalise Ventures/Licensing Selling to the Government Distribution and Sales Channels Selling Factors/Techniques Electronic Commerce Trade Promotion and Advertising Pricing Sales Service/Customer Support Protecting Your Intellectual Property Due perseverance Local Professional Services Web Resources Return to top employ an Agent or DistributorEncompassing nine time zones, Russia is the largest country in the world by landmass. Therefore, many businesses tend to approach the Russian market on a regional basis. Most new entrants start in capital of the Russian Federation and then move into the regions either through an existing distributor or by seeking new distributors in those topical anaesthetices. As both capital of the Russian Federation and St. Petersburg are major community and business centers, many Western firms have representativ es there. The Northwest Federal District consists of the northern part of European Russia and includes 8 federal subjects (equivalent to U.S. states), including Russias second largest city, St. Petersburg. St. Petersburg and the surrounding Leningrad Region are home to Russias largest port facilities, and the area has significant natural resources, especially in forest products and oil and gas. The regions population of over 13 million provides a stable and highly educated workforce. In addition, the region shares a long border with Finland, and to the highest degree 40% of European Union-Russia trade takes place along this border.American companies have do significant investments in northwest Russia Caterpillar, Ford, GM, International Paper, Kraft Foods, Wrigley and ConocoPhillips are some of the U. S. brand names with investments there. Some companies have successfully entered the Russian market by starting distribution in other key regions introductory because of market feat ures and industry sector concentrations (e. g. , woodworking in northwest Russia and cypher projects in Sakhalin and western Siberia) and then expanding elsewhere. Well-organized distribution channels are naturalized in western Russia, especially in Moscow and St.Petersburg, and continue to 7 develop rapidly in southern Russia, the Volga region, Urals, Siberia, and Russian far East. With a high concentration of mineral resources (diamonds, gold, silver, tin, tungsten, lead and zinc), fishing, and timber resources, the Russian Far East also represents business opportunities for U. S. exporters. The Russian Government is promoting a deracination in the region to deep processing of natural resources and fostering topical anaesthetic production of high value-added products, while preserving a reasonable focus on resource extraction.Deep processing is focused on the timber, fishing, and agricultural (meat and milk production) industries and will create a need for equipment in these a reas. Local and international environmental groups are supporting this strategy, aimed at more sustainable economic outgrowth in the region. The Russian Government has mega-projects in the fuel and energy sectors, including continued development of the major Sakhalin oil and gas project at a cost of over 1. 8 trillion rubles. Chemical production facilities utilise natural gas will likely be built along the pipeline routes.A large-scale petro- and natural gas chemical industry is pass judgment to develop in the Russian Far East along the main pipeline routes to include methanol, ammonia, and fertilizer products, as well as manufacturing of polymeric plastics. These new projects will require procurement of equipment and machinery to support their production. The mining sector is also expected to be developed, including continued development of gold deposits in the Amur and Magadan regions and the Chukotka Autonomous Region.New projects in the mining sector will drive up the demand for expanded fleets of road construction machinery, and other equipment by local companies. The development of regional aviation as a mearns to connect population centers in the Russian Far East is another Government priority. A new Federal program (adopted in April 2013) plans to allocate 101 billion rubles to support regional aviation, including the upgrade of local dromes infrastructure. This will create business opportunities for suppliers of regional aircraft and equipment, as well as for service providers specializing in airport modernization.