ELENA ILINA

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Russia (Overview and Business Environment)

• ELENA ILINA
• Associate Professor, PhD (Economics)
• Plekhanov Russian Academy of Economics

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• LECTURE OUTLINE
• Historical Overview
• Geography and Resources
• Population, Language and Major Cities
• Political System and Government Administration
• The Russian Business Environment
• Re-emergence of the Russian Economy
• Growing Purchasing Power
• Limited Production of Consumer Goods
• Surge in Foreign Trade
• Selling Products to Russia
• Selling Services in Russia
• Buying from Russia
• Investing in Russia
• Doing Business with Russia
• Setting up a Company in Russia
• Russia - Business Culture
• Russia's Unique Business Environment

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OBJECTIVES AND READINGS

• Objectives To provide insight into Russian
  Business Environment and basis for understanding
  of Why and How to do business with / in Russia
• Mandatory readings http//www.rbcnews.com
• Additional readings http//eng.expert.ru/

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HISTORICAL OVERVIEW

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• GEOGRAPHY AND RESOURCES
• vast but sparsely populated country
• population of over 140 million, residing in a
  large territory of
• 2
• 17,075,200 km
• geographical location - a significant obstacle to
  development
• over 70 of the population lives in urban areas
• about 1,095 cities in the country
• only around 15 cities have a population of over
  one million
• Time Zone
• GMT 3 - behind Hong Kong by 5 hours
• GMT 4 (summer time) - behind Hong Kong by 4
  hours
• 
  ( Moscow and St. Petersburg)
• Climatic Information
• Because of Russia's vast territory, weather
  conditions across the country vary with both
  distance and season

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GEOGRAPHY AND RESOURCES

• Natural Resources
• Only 8 of the area is arable land
• Abundant natural resources, including oil, coal,
  natural gas and other mineral deposits
• The country's crude oil and natural gas output
  accounts for 17 and 25-30, respectively, of the
  world's total production
• Russia produces about 6 of the world's
  bituminous coal, 17 of its commercial iron ore,
  and 10-20 of non-ferrous, rare and noble metals
• Russia is also among the major suppliers of other
  minerals, including gold, silver, platinum,
  cobalt, antimony, zinc, mercury, and copper and
  nickel ores, as well as precious stones like
  diamonds
• As some 40 of the territory is covered by
  forest, Russia is endowed with abundant resources
  of timber. Total timber reserves in the country
  are estimated to be 79 billion cubic meters
• In addition, Russia has significant fish reserves
  (and also oil and natural gas) on its sea shelf,
  thanks to a 37,653 km long coastline along the
  Arctic and Pacific Oceans, as well as the Baltic,
  Black and Caspian Seas

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POPULATION, LANGUAGE AND MAJOR CITIES

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• Total population about 143 million
• Major language Russian
• Major religion Christianity (Orthodox)
• Largest ethnic groups include Russians (82),
  Tatars (4), Ukrainians (3), Chuvash (1),
  Bashkir (1), Byelorussians (1), Moldavians
  (1), etc.
• Administratively, the Russian Federation is
  divided into seven Federal Districts. They are
  Central (with Moscow being the centre), North
  West (St. Petersburg being the centre), South
  (Rostov-on-Don being the centre), Privolzhsky
  (Volga) (Nizhny Novgorod being the centre), Urals
  (Yekaterinburg being the centre), Siberian
  (Novosibirsk being the centre) and Far East
  (Khabarovsk being the centre)
• The country has 1,095 major cities and towns, but
  with less than 15 of them inhabited by one
  million or more people each. The largest cities
  are Moscow, St. Petersburg, Novosibirsk,
  Yekaterinburg and Nizhny Novgorod

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POPULATION, LANGUAGE AND MAJOR CITIES
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POLITICAL SYSTEM AND GOVERNMENT ADMINISTRATION

• Country name Russian Federation
• Head of State President (elected by universal
  vote for a four-year term)
• Head of Government Premier (appointed by the
  President with the approval of the Duma)
• The Legislature Federal Assembly (i.e. the
  Parliament) composed of two houses (1) the
  Federation Council that comprises representatives
  from the federal administrative units of the
  Russian Federation (2) the State Duma which
  consists of 450 deputies elected by proportional
  representation from party lists winning in the
  election for the term of four years.
• The Judiciary Judges of the Constitutional Court
  and Supreme Court, the final court of appeal, are
  appointed by the Federation Council on the
  recommendation of the President

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THE RUSSIAN BUSINESS ENVIRONMENT

• Is Russia a good place to do business?
• What is the effect of the recent economic reforms
  in Russia?
• What is the effect of the political stabilization
  in Russia?
• What is the single most important factor in
  success?
• Is Russia a safe place to do business?
• Is Russia an expensive place to do business?
• Are Russian businessmen honest?

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RE-EMERGENCE OF THE RUSSIAN ECONOMY
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GROWING PURCHASING POWER
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LIMITED PRODUCTION OF CONSUMER GOODS
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SURGE IN FOREIGN TRADE
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SURGE IN FOREIGN TRADE
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SELLING PRODUCTS TO RUSSIA

• What are the sectors of consumer goods most in
  demand in Russia?
• What is the level of market now in terms of
  quality and price?
• Aren't Russians poor?
• If Russians have spending power why is payment
  still a problem?
• Which is more important price or
  payment/delivery terms?
• What is market for ex-stock goods or closeouts?
• What is the role of brand names in the Russian
  market?
• What are the main issues in selling into Russia?
• What are market conditions for Capital goods /
  Equipment / Raw Materials?

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SELLING SERVICES IN RUSSIA

• What services are in demand in Russia?

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BUYING FROM RUSSIA

• What can be bought from Russia?
• What are Russian prices like?
• What are the main problems?
• Are spot buys of raw materials possible?
• What about OEM manufacturing?

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INVESTING IN RUSSIA

• What is the investment climate in Russia?
• What about stock market investments?
• And direct investment?
• What about investment incentives?

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DOING BUSINESS WITH RUSSIA

• Overview
• Russian market offers 'surprising' opportunities

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SETTING UP A COMPANY IN RUSSIA

• Should I set up a company in Russia?
• How does one open a company in Russia?

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RUSSIA - BUSINESS CULTURE

• Overview
• Russian Culture - Key Concepts and Values
• Collectivism
• Egalitarianism
• Dusha
• Doing Business in Russia
• Working in Russia
• Doing business
• Russian business etiquette

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Russian Culture Quiz - true or false

• It is considered good luck to shake hands over
  the threshold of the doorstep
• False. It is considered bad luck to shake hands
  over a threshold and should be done either inside
  or outside
• When taking flowers as a gift you must only take
  an odd number
• True. Even numbers of flowers are only given at
  funerals and are a sign of bad luck
• If you leave something behind in Russia it means
  you're coming back
• True. A Russian superstition that is still
  present today
• In business negotiations Russians view compromise
  as a sign of weakness
• True
• In Russia, the 'OK' symbol with the thumb and
  forefinger touching in a circle means everything
  is fine
• False. The Western sign for 'OK' is considered
  rude in Russia

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RUSSIA'S UNIQUE BUSINESS ENVIRONMENT

• Dealing with Business Problems
• Ability to Operate in Changing Conditions and to
  Withstand Failure
• Business Teams and Self-Expression

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BRINGING CAPITALISM TO RUSSIA

• The Ideology of Capital and Capitalization
• Is the Companys Goal to Make Money or Change the
  World?
• The Birth of Capital and Management of Capital
• Why does Enterprise Need Ideology?
• The Development of Capitalism in Russia
• Relevance and Alternatives of Capitalism
• Is Capitalism Possible and does Russia Need It?
• Why has Russian Capitalism been Unable to Make
  Russians Prosperous?

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"NEW BUSINESS ENVIRONMENT" IN RUSSIA

• The Banking System
• Movement of Capital and Goods
• Energy
• Taxation