1. Rajashri/Partha/Sunil

2.  Promising Market
 With over 140 million consumers, a growing middle class, and almost unlimited
infrastructure needs, Russia remains one of the most promising markets
 World’s 11th largest economy
 Highest per capita GDP ($15,900) of the BRIC countries.
 Upper middle income country, ; highly educated workforce and
sophisticated, discerning consumers
 GDP Forecast of 4.3% in 2011
 GDP growth at 4.0% for 2010. Slightly less than anticipated due to drought and
wildfires, which disrupted agriculture, commerce and industry.
 Anticipates joining the WTO in 2011, which would liberalize trade with the rest
of the world
 Challenges
 Geographically vast market, spanning nine time zones
 Underdeveloped infrastructure poses logistical challenges, especially accessing
markets outside of major cities
 Incomplete transition from central planning
 burdensome regulatory regimes; inadequate IPR protection; extensive corruption
and lack of rule of law, inconsistent application of laws and regulations; lack of
transparency; and excessive government interference in business matters
 Eng Language; Long Visa Process

3. Socio-Political- Economic Indicators
Geographical Situation
 Purchasing Power of Population -
 Geographic Allocation GDP
 Population  Rate of Inflation
Balance of Payment Position
 Social Environment 
 Balance of Trade Position
 Preferences in Tastes and  Strength of Local Currency
Consumption  Controls on Exchange Rates
 Social Unrest  Foreign Exchange Reserves
 Peace and Protection  Debt Burden
 Political Environment  Fiscal Policy of the Government
 Role of Opposition  Trade Cycles
 Work Ethics  Investment Trends
 Risks to Investments
 Hofstede's Cultural Taxation Policies and Dual Taxations
Dimensions 
 Commitment to Multilateral Trade
 Availability of labor  Ability to attract Foreign capital
 Labor Law  Status of Infrastructure
 Trade Union Practices  IT Industry

6.  Covering more than 17 million square kilometers in Europe and Asia.
Europe which occupies about one-quarter of the country's territory. Vast
tracts of land in Asian Russia are virtually unoccupied.
 11 time zones.
 Capital: Moscow.
 Shares border with 14 countries majorly with China, Finland, Korea,
Mongolia, Norway, Poland and other countries of former USSR
 And, at the far northeastern extremity, eighty-six kilometers of the
Bering Strait separate Russia from a fifteenth neighbor--the United States
 Much of Russia covered by snow six months of year.
 Weather usually harsh and unpredictable. Average annual temperature of
European Russia 0°C, lower in Siberia.
 Coastline makes up 37,653 kilometers of border. Arctic, Atlantic, and
Pacific oceans touch shores
 Land Use: 10(7.17) percent arable, 45 percent forest, 5 percent
meadows and pasture, and 40 percent other, including tundra.
 Administrative Divisions: Twenty-one autonomous republics, forty-nine
oblasts (provinces), six territories (kraya; sing., kray), ten autonomous
regions (okruga; sing., okrug), one autono-mous oblast. Cities of Moscow
and St. Petersburg with separate status at oblast level.

7.  Size:142,905,200
 Population Growth Rate: -0.47% (2011 est.)
 Major Cities: MOSCOW (capital) 10.523 million; Saint Petersburg
4.575 million
 Russia‘s population is forecast to continue to decline
 Ethnic Groups: Russian 81.5 percent, Tatar 3.8 percent,
Ukrainian 3.0 percent
 Religion: 75 percent of believers in Russia considered themselves
Russian Orthodox, 19 percent Muslim, and 7 percent other
 Education: 98% of population over age 15 literate. Private
schools and universities emerging in mid-1990s
 Health: Health care free of charge in principle, but adequate
treatment increasingly depends upon wealth. Urban areas vs
rural areas have great disparity
 Labor Force: 57% of population working age. Work force
relatively well-educated but ill-suited for challenges of post-
Soviet economy

8.  20 %of the Russian population lives below the poverty
line -- defined as a monthly income of 1,000 rubles
(less than 30 Euros, or $38)
 160 Different ethnic Groups
 Russians are proud of their country.
. Patriotic songs and poems extol the virtues of their
homeland
. Accept that their lives are difficult and pride
themselves on being able to flourish in conditions
that others could not
. Take great pride in their cultural heritage and
expect the rest of the world to admire it
 Communal Mentality
 Russian Ballet, Literature, Theater, Martial Arts, Art
and Handicrafts

9.  Majority of Russians still fit the ‗traditional‘ mould, characterized by simple
lifestyles and spending patterns
 Lately a shift towards greater affluence and sophistication is seen
 Largest concentration of higher income consumers today in Moscow and St
Petersburg
 Strong middle class has been emerging since 1990s. Makes 35% of population
 Mobile, flexible, well-educated, and careerist
 No expense is spared, particularly when it comes to restaurants, clothes, cosmetics and
mobile phones. Technology and media is also catching up
 Nevertheless: a strong urban-rural gap exists
 Growth of private consumption (which accounts for half of GDP) is presaged by
a number of factors
 Consumers are regaining confidence is also reflected in a slight improvement in
household lending which could continue because of the low level of household
indebtedness
 The rise in real wages is projected to continue apace and the government is expected
to adhere to its plan to keep pensions on an upward path almost on a par with wages
 Propensity to save is not expected to increase beyond the relatively lofty level already
reached during the recession

10.  Ethnic Conflicts
 Conflict with Georgia
 Georgia's strategic position has ensured it is of vital military and economic significance to Russia.
 Georgian territory also contains vital Black Sea ports and sits astride potential routes for Russian controlled oil and gas
pipelines.
 Russian military bases in Georgia. Russia wants a stable Georgia . So helped its settle its internal 3 ethinc strife.
 Lately Russia's recognition of Abkhazia and South Ossetia Caused concern to Georgia; Russia is upset about Georgia
rebuilding military
 North Caucasus-based terrorism
 Occupation of the North Caucasus has been a cause of conflict for three centuries.
 2 wars with Chechnya from the mid-1990s on, attempting to repress local independence movements, stem a pan-Islamic
movement from taking hold there, and maintain access to the oil wealth of the Caspian sea.
 Roots of this conflict lie in a long history of violent repression and impoverishment in Chechnya
 Installed Pro-Moscow regime
 Siberia
 Conflicts over resources are heated in parts of Siberia and the Far East. The Sakha (Yahut) are trying to claim rights to
some economic benefits from the vast diamond, oil, gold, and other mineral wealth in their republic.
 Blocked by Russian central control over the resource extraction industries, and by the strategic relocation of tens of
thousands of Russians to Yakutia in the Soviet period.
 This battle over resources is associated with a growing nationalist movement.
 Environmental issues play a significant role, too, as people fight to prevent or reverse the spoiling of rivers, lakes, and
soils by the oil and mining industries.
 Internal migration and displacement has contributed greatly to ethnic tensions and prejudice, as several million Russians have
returned from newly independent states in Central Asia, the Caucasus, and the Baltics, feeling themselves unwanted guests in
those places, or in some cases (Tajikistan, Armenia, and Azerbaijan) escaping civil wars.

11.  Russia is 147 on Global Peace Index
 Human traffiking – Source and destination. Russia failed to
show evidence of increased efforts to combat trafficking;
 Terrorism attacks, nationalism, racism exists
 Russian Mafia

12.  Semi-authoritarian state
 President wields considerable executive power.
 Bicameral legislature consists of the lower house (State Duma) and the
upper house (the Federation Council).
 President nominates the highest state officials, including the prime
minister, who must be approved by the Duma.
 President can pass decrees without consent from the Duma. He also is
head of the armed forces and of the Security Council.
 Putin and Dmitry Medvedev will remain president at least until May 2012
and will continue to exercise tight control over the federal government,
most of regional leaders and parliament.
 Formidable influence on the judiciary, mass media and much of civil
society.
 Radicalization of ―non-systemic opposition‖ is set to continue, with many
opposition figures joining forces to challenge authorities in spite of
political differences. Public disturbances and clashes with police will also
likely continue
 These law agencies are capable of effectively quelling opposition protests
to secure a smooth transfer of power or Medvedev‘s re-election in 2012

13.  There are currently a total of seven political parties registered with the Russian Ministry of
Justice:
 United Russia
 The Communist Party of the Russian Federation (KPRF)
 The Liberal Democratic Party of the Russian Federation (LDPR)
 Patriots of Russia
 Yabloko
 Just Russia
 Right Cause
 Russian elections are organized in such a way that no one party can take for granted its
ability to overcome the extremely high 7% electoral threshold.
 Outspoken criticism of the authorities during an election campaign can irritate them and
result in the organizers removing a percentage of its votes from a party, which then makes
it easy to deprive it of its representation.
 For this reason the Russian 'system' opposition parties are all extremely ready to
compromise with the authorities.
 This manifests itself in an unwillingness to criticize the main government figures or their
policies, and also in their choice of candidates.
 On the whole the 'system' opposition is made up of niche parties. Each one has a narrow
support group and induces feelings of antagonism in the main body of voters. This is why
the 'system' opposition suits the Kremlin: voters don't have to vote for 'United Russia'
because they like it, but because they like the others even less. The rules of the game in
Russia are such that almost no one likes the 'system' opposition.

14.  For Russians, under the Soviet system, the government found them a job or
they got a job through personal contacts
 Relationships are more important than time
 Being late is part of the Russian makeup. Being late was a way of showing
contempt for the system and of asserting self. To Russians, appointments are
guidelines.
 Poor Time management
 Personal Benefits and Advantages
 Patience is the major Russian virtue
 Dual Ethics
 Respect is everything
 Build personal relationship
 Using Local Consultants
 Business Ethics are different
 Emphasize Exclusiveness
 Russians prefer to deal with those, who occupy important positions
 Hope for the best but prepare for the worst
 Approach Problem even without solution
 Ready to work in dynamic environment
 Group mentality  Team Building

15.  Moderate in individualism, masculinity, and
power distance
 Fairly high in uncertainty avoidance.

16.  Russian labor force was nearly 76 million workers
in 2009
 By the end of 2010, unemployment rate falling
to 7.4% (Unemployment rate is not in top 100 )
 Brain-drain is an issue
 7,000,000 immigrants working in Russia. Half of
these were from Ukraine, while the remainder
was mostly from Central Asia. Only 3 million or
less than half of all the immigrants are legal.
Illegal immigrants number 4 million, mostly from
Tajikistan, Uzbekistan and Moldova
 By 2025, Russian "economically-active"
population may decrease by 12,9%, think the
experts

17. Code review record
 Key insights on labor law in Russia:
 Regulations
 Employers should consider opinions of trade unions if such unions exist. Trade
unions in Russia are typically formed at the company level.
 Employment conditions
 Overtime for employees should not exceed four hours in two successive days and
120 hours per year.
 Employees are entitled to 12 paid public holidays and an annual leave of at least
28 calendar days.
 An employee may terminate their labor contract with a two-week advance
notice.
 Employers are to pay salaries to employees at least twice per month and have
the right to notify the employer and stop working if salary payment is delayed by
more than 15 days.
 Non-monetary payment may not exceed 20 percent of total salary.
 Foreign citizens working in Russia
 A work permit is mandatory for most foreign citizens and can take more than
four months to obtain.
 A simplified procedure for highly-qualified specialists (HQS) whose salaries
exceed RUB 2,000,000 ($68,652.00

18. Code review record
 Initially economy was based on the state ownership of the
means of production and strict centralised control of
wages, prices, employment and production.
 Trade unions had been an integral part of the state socialist
system, not as representatives of the interests of the workers
in opposition to their employer, the state
 In Capitalist, its a body with not much
 Trade unions channel conflict into symbolic protests and
bureaucratic and judicial forms of conflict resolution
 Weakness of unions is management dominance of primary
organisations
 Numerous trade union complains are registered with ILO
 Unions current focus on standardizations, migration policies
etc

20.  GDP(by PPP) : $2.223 trillion (2010 est.)
 7th in the world after Europe
Union, US, China, Japan, India, Germany
 GDP – per capita (PPP) : $15,900 (2010 est.)
 GDP – Composition by sector:
 agriculture: 4.2%
 industry: 33.8%
 services: 62% (2010 est.)
 Russia is the most prosperous of the BRIC
countries (Brazil, Russia, India and China). About
73% of the population is urban and makes up 85%
of the purchasing power.

21. GDP - per capita (PPP) (US$).
Russia ranks 69th
GDP - per capita (US$)

22.  Last reported at 9 percent in July of 2011
 The Bank of Russia has clearly specified in this document its principal aim
for 2011–2013 – hold down inflation at 5-7% annual.
 Inflation's effects on an economy are positive and negative. Negative
effects of inflation include
 a decrease in the real value of money and other monetary items over time,
 uncertainty over future inflation may discourage investment and savings,
 Shortages of goods if consumers begin hoarding out of concern that prices will
increase in the future.
 Positive effects include ensuring central banks can adjust interest rates and
encouraging investment in non-monetary capital projects

23. • Balance of payments will be balanced if the oil price continues to
rise.
•If it rises by 2 percent annually in real terms, experts estimate
deficit could rise to 10 percent of GDP by 2020 (from 0–2 percent
currently) if today‘s tax burden and economic growth rate hold and
the government enacts all programs
•

24.  Trade surplus equivalent to 15.1 Billion USD in July of
2011
 Metals and energy make up more than 80 percent of Russia's
exports
 World’s largest oil producer and biggest exporter of natural
gas, nickel and palladium
 Imports vehicles, machinery and equipment, plastics,
medicines, iron and steel, consumer goods, meat, fruits and
semi finished metal products.
 Main trading partners are: European Union (Germany, Italy,
France), China and Ukraine

25.  Ruble appreciated 1.50 percent against the US Dollar during the last 12 months
 From 1993 until 2011 the USDRUB exchange averaged 22.68 reaching an historical
high of 36.37 in February 2009
 Rouble hit fresh 16-month highs against the euro dollar currency basket last week
 Analysts suggest the government should not spend the reserve fund to cover deficit-
and should borrow at home rather than abroad. This would bring the Rouble down.
And revenues from oil sales should again be filtered into reserve funds – just as
before the crisis – to avoid pumping up the economy.

26.  Historically, strict currency control regulations had been used to
protect the ruble against devaluation and discourage "capital
flight―
 Ruble floating exchange rate
 Iinflation targeting effectively will require a free-floating
currency. But letting the ruble float will not give monetary
authorities full control over the money supply, which will also
depend on the oil price and capital flows. Moreover, volatile oil
prices will lead to a volatile current account balance and almost
any fluctuation in oil prices will affect the exchange rate.
 In addition, a freely floating currency could more actively subject
Russia to today‘s heightened currency tensions. So far, Russia‘s
political uncertainty and worsened investment climate has spared
it from the significant capital inflows that have made other
countries worry about ―currency wars.‖
 Does it make sense to raise interest rates as a means of fighting
inflation when oil prices are rising and the ruble is thus growing
stronger?

27.  Russia‘s International reserves was $ 532.0
billion as of September 16 , 2011
 Foreign exchange reserves to expand by tens
of billions of dollars each year due to higher
interest rates on the world's markets

28.  External Debt of the Russian Federation as
at the end of June 2011 (estimate)
(millions of US dollars)
External Debt as of June'11(USD in
millions)
540,000 532,222
520,000 509,912
500,000
480,000
460,000 467,245 463,411 457,421 476,639 489,043
440,000
420,000
(estimate)
Total
Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11

29.  Fiscal position will continue to benefit from higher oil prices
 Plus Recovering corporate profit leaves the government in a
comfortable position.
 Non-oil deficit will remain high
 Progress in the area of minimizing the pro-cyclical nature of
public finances is of paramount importance  reducing Russia‘s
vulnerability to future downturns/ correction in energy prices
 Current cyclical recovery in revenues + higher tax rates in the
extractives industry + sale of minority stakes in state assets
Helping plug deficit
 More important is the message of openness and receptiveness
which has implications for long term growth.
 "It is absolutely critical that we
maintain our macroeconomic stability.
This is currently one of our major
competitive advantages, a resource to
spur development, attract long-term
investment and stimulate business. We
need a highly responsible and stable
budget. We cannot afford to spend
more than we earn.― – Putin

30. The alternating periods of
expansion and contraction in the
economic activity has been called
business cycles or trade cycles.
The period of high income, high
output and high employment is
called as the Period of
Expansion, Upswing or
Prosperity.
The period of low income, low
output and low employment is
called as the Period of
Contraction, Recession, Downs
wing or Depression.

33.  Demand for automotive products, household
goods, financial services, retail products and a medical
equipment and services;
 Major construction boom is creating a need for equipment
and materials
 Franchise businesses are growing in both the food and non-
food sectors
 Opportunities for services and equipment for infrastructure
upgrades in power generation and telecommunications are
growing
 High energy prices are driving demand for oil and gas field
equipment and services
 Major investor is Cyprus. that most of this is Russian
capital ―round tripping‖
 Latest: Representatives of major global investors worth more than $2
trillion met with Russian Prime Minister Vladimir Putin, ahead of the
launch of a $10 billion Russian investment fund

34.  Main Areas of FDI being:
 Agriculture, Forestry, Fishing
 Mining and Quarrying
 Manufacturing FDI Trends
 Electricity, Gas 160,000 142,172
140,000
 Water Supply 120,000
99,304
 Construction 100,000
80,000
60,511 55,619
60,000 44,428
42,868 42,794
38,368
40,000 25,159 30,962
18,134 16,082
11,405 13,754
20,000 7,975 10,159 7,406 12,825
0
Net
Net
Net
Net
Net
Net
Inflows
Outflows
Inflows
Outflows
Inflows
Outflows
Inflows
Outflows
Inflows
Outflows
Inflows
Outflows
 S/W: creation, development and
 maintenance activities represent a
 total of 15% FDI in Europe but do not r Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 Q1 2011
 ank in the top 10 for FDI in Russia. Total

35.  Dynamic political risks – Russia being 9th in a list
of 11 extreme risk countries
 Heightened activity of militant Islamist separatists in the Northern
Caucasus and their ambition to strike targets elsewhere in the country
 Devastating terrorist attacks
 Also compounded by its ‗extreme risk‘ ratings for its business
environment, corporate governance and the endemic nature of
corruption, which is prevalent throughout all tiers of government
 Ineffective legal and regulatory system
 Scores well for the long term on resource
security, infrastructure readiness and education
 Russia has approximately 140m consumers and
an expanding economy. IMF figures reveal that
Russia‘s real GDP growth amounted to 4% in 2010
and expects it to expand by 4.3% in 2011

36.  Main profit tax rate — at 20% — is one
of the lowest amongst the major economies
• 2%, payable to the Federal budget
 18%, payable to the Regional budget
 Tax incentives are becoming more common.
For example with the expansion of special
economic zones
 Meanwhile, large capital investment projects
continue to receive VAT and customs duty
breaks.
 Oil and Gas Taxation and Mining is separate
 Transfer Pricing Law

38.  After more than 17 years, the WTO saga may
finally be coming to an end.
 Possibility of a member state veto remains;
Jan 2012 is the possible date
 Greatly contribute to the opening of new
opportunities to do business with and in
Russia and
 Strengthen the international competitiveness
of the Russian economy by harmonizing its
economic regime with global trading rules

39.  A level playing field: State is divesting its shares Ongoing dominance and large market
share of state-supported companies hurts both Russian and foreign companies
 Institutional changes: To attract foreign investment and protect entrepreneurs at
home, Russia must create a more friendly business climate by strengthening intellectual
property rights and increasing transparency
 Positive policy direction: Overall economic policy direction. Medvedev has prioritized
modernization in five sectors:
 Energy efficiency
 Nuclear technology
 Information technology and telecommunications
 Aerospace
 Pharmaceuticals
 Russia reports good figures for trade balance and inflation and has a small sovereign debt.
Of course, there is the factor of high oil prices but still, Russia should objectively be one
of the most attractive countries for investors
 Political stability
 Frequent changes in Laws
 Encourage:
 Innovation industry - We certainly tell them that Russia is a country of educated people and fundamental science  Need
motivation,
 Administrative barriers should be removed
 A favorable climate for small and midsize business, economic diversification, and especially the development of
innovation sectors, will be an uphill job. The thing is that innovations are most often proposed by small businesses; big
business only supports and boosts innovative models after small business generates them.
Business in Russia often operates in a very narrow timeframe; in other words, there is no confidence that you will still
have your business in three, five or ten years.. Fear shoud go to get people invest in fixed assets

40.  Railway system includes a total of 150,000 kms (93,210 miles) - extensive
railway systems in the world. Of these only 87,000 kms is in "common carrier"
service. The remaining 63,000 kms (39,148 miles) serve specific industries
 Highway system includes a total of 948,000 kms of road including 416,000 kms
that serve specific industries or farms and are not maintained by
governmental highway maintenance departments. Of the total road
system, only 336,000 kms are paved
 Russia has some 630 improved airport facilities, 50 of which are capable of
accommodating international flights
 Extensive oil and gas pipeline system, with some 48,000 kms of pipelines for
crude petroleum, 15,000 kms designed for shipment of refined petroleum
products, and 140,000 kilometers designed for shipment of natural gas.
 Electricity production need to be improved
 Areas of Infrastructure Development
 Infrastructure associated with the export of commodities (pipelines, ports and
transport infrastructure to support oil and gas output in East Siberia)
 Investment in ports in northern Russia
 Furthermore, the Football World Cup in 2018 and Sochi Winter Olympics in 2014 will
drive substantial infrastructure spending, which in turn should benefit the economy

41.  Largest IT market in the whole CEE region – approx. €10bn in 2010
 IT industry has recorded a record year of growth concentrating on high end niches like
algorithm design and microelectronics
 Russia is now the world's third biggest destination for outsourcing software behind India
and China
 Russia's strength is its engineering and scientific talent.
 3,500 engineers for every 1 million people, nearly the same ratio as the United States
 Technical skills of the Russian workforce go beyond basic programming and extend to complex
engineering tasks
 To take advantage of this talent, companies such as
Sun, LG, Google, Oracle, Siemens, Intel, Boeing, IBM, Dell, Motorola and Citibank have established a
presence there.
 It has more personnel working in R&D than any other country in the world and ranks 3rd in
the number of scientists and engineers per capita. According to the World Bank, Russia has
one million specialists waiting in the wings who are capable of quickly joining its IT sector
 The domestic outsourcing industry is maturing. Currently, more than 250 Russian-based
companies are active in offshore software development.
 Major software development centres (Moscow, St.-Petersburg, Novosibirsk) have adequate
telecommunications infrastructures
 IT & outsourcing market has been growing at a rate of more than 20% since the past few
years. The Russian IT hardware market, accounting for more than 50% of total IT
spending, continues to dominate the total IT market.
 Country's emergence as an IT Outsourcing (ITO) center, thanks to its close proximity with
Europe, similar time zone, and availability of high quality workforce at low cost.
 Russian government is increasing its IT investments in order to expand and develop the IT
infrastructure in the country

42.  While the economic indicators are
healthy, the socio-political situation seems
shaky
 Law and Order situation is a big concern
 Unreasonable means of handling people
found to be critics of government is a
discouraging aspect
 However with the entry into WTO, Russia will
have to follow internationally acceptable
trade laws
 Therefore socio-political factors is a risk but
an upbeat forecast for economic factors.
Jump in if you can face the risks!