High Growth Markets Programme. New UKTI programme from April 2007 Learn and disseminate reasons about why experienced exporters and established companies with the necessary resources are not more active in high growth markets
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
High Growth Markets Programme New UKTI programme from April 2007 • Learn and disseminate reasons about why experienced exporters and established companies with the necessary resources are not more active in high growth markets • Develop and deliver tailored support services and other policy proposals on the basis of the above • Generate more activity and interest in high growth markets by UK-based companies
Specific Programme activities • 13 specialists working with UKTI’s regional and global networks to raise the profile within the high growth markets of UK capabilities and to facilitate engagement by mid-corporate companies (employing 250+ employees) • Develop and implement a campaign to inform UK-based companies of HGM opportunities and how these can be accessed • Provide a more intensive level of support to targeted companies that will act as “trail blazers” • Recommend new UKTI research to underpin wider policy development on high growth markets.
What will specialists offer? Market Entry or Business Development advice; for instance • Company diagnostic – verification of company position, expectations and strategy to engage with high growth markets including agreement on appropriate markets targeted • Guidance on HGM business strategy • Advice on market entry strategies • Advice on setting up an office • Navigation of local business practices, culture and bureaucracy • Client management – follow-up, aftercare and continuing support from UKTI’s global network
RUSSIA AT A GLANCE2004 2005 2006 est. Population 145.2m 145.0m143.8m Largest territory in the world GDP growth (8th +ve year)+7.2% +6.4%+7.4% GDP $590bn $766bn $881bn GDP/cap $4117$5347$ 6149 inflation +11.7% +10.9%+9.2% Trade balance +$88bn +$120bn+$143bn Foreign currency reserves $121bn $205bn$270bn Investments in all sectors +10.7% +13.7%+18% Growth Real Personal incomes +9.7% +9.8%+10% Average salary per month $300 $330$370 Average labour rate/hr$1.1$1.3 $1.5 Corporate profit tax 24% Basic Tax rate 13% Shadow Economy 25% est.
Russian economic recovery Putin plan (just over 7% growth) GDP relative to 2000 actual
Since 1998 • Reduction of value of Rouble led to reduction in imports and a move back Russian products • Increase in price of oil and metals (driven by renewed growth in Asia Pacific) stimulated other economic areas • Industry is starting to retool and industrial growth is faster than GDP growth at ~10%/y • Corruption is decreasing helped by simplification and reduction of taxes • Debts are now paid off and a stabilisation fund (£1.5T) being established to cushion oil and gas price changes
Russia’s Cities • Moscow (10.4M) capital and major centre for many industries • St Petersburg (4.7M) centre for marine and ICT industries • Novosibirsk (1.4M) centre for aerospace and R&D based industries • Ekaterinburg (1.3M) centre for metallurgical and engineering for the oil and gas industry • Nizhny Novgorod (1.3M) centre for automotive and ICT industries • 8 other cities with a population over 1 million • Total of 33 cities with a population over 500,000
Issues for Modern Russia • Entry to WTO still not achieved – increasing transparency (Russia now rates better than China and India on business risk) • Widening national economic base beyond primary industry - issue of regeneration of older industries or concentrating on knowledge based economy • Expanding development to neglected areas of the country – notably the South and the related problem of ethnic minorities
Boston Matrix for Russia Ltd 100 Rising stars Problem Children IT (Hardware and Software) GAS TELECOMS RETAIL AEROSPACE BUILDING MATERIALS BIOTECH HEALTH CARE Market Growth %/y OIL FOOD PHARMA CARS ENVIRO 10 MACHINERY WHITE GOODS Cash cows Dogs CONSUMER ELECTRONICS CHEMICALS DEFENCE FURNITURE CLOTHING WOOD PAPER METALS TEXTILES 1 0 10% 100% Import Penetration Adapted from “Foreign Direct Investment in Russia”, Paul Fischer, MacMillan 2000. US Department of Commerce Data
Russian market challenge • Russia has had 8 years of GDP growth over 6% • Certain sectors in Russia have very high growth (IT, telecoms, health care, etc) • Russia is starting to replace imports in many areas and an innovative approach is needed to continue to engage with the market • Russian large companies are becoming powerful in world markets and could dominate certain sectors – RusAl, Norilsk Nickel, Gazprom, Rosneft, Sistema, Sverstal • New opportunities are emerging due to deregulation and privatisations UKTI High Growth Markets
UK trade with Russia UK imports UK exports UKTI High Growth Markets
Russian trade with UK UK main exports to Russia are: • Computers and other office equipment • Road vehicles and automotive components • Telecoms equipment and software • Manufactured goods – pottery, textiles, glassware etc • Equipment for oil, gas and mining industries • Food and drink – mainly confectionary and alcohol • Electrical machines and machine tools • Instruments , optical equipment, watches • Turbojet engines and power equipment • Specialised chemicals and pharmaceuticals UK main imports from Russia are: • Petroleum products • Chemicals • Semi-finished metal goods • Metals • Wood and paper • Coal and coal products
Business Opportunity – Creative Industries Russians are shopaholics! • Brands, luxury goods, fashions, cosmetics and perfumes • Watches and electronics goods • New shopping malls and retail parks • Furniture, household accessories, DIY and building materials • Food and drink, supermarkets and restaurants • Cars, boats and conservatories
Business Opportunity – Financial Services Russia moves from the pickle jar to banking and mortgages • Opportunities to service exporters and companies engaged in large projects (only Citi and Raiffeison are the only foreign banks properly established in Russia) • Retail banking market is opening as people are looking for alternatives to the state savings bank – Sberbank. • Mortgages and consumer credit is now being demanded • Accountancy business I growing at 50% a year • Foreign insurance companies are now entering the market • Russian companies choose the LSE main and AIM markets for their IPOs.
Business Opportunity – Education English and business education are expanding • Russia has nearly 100% literacy and around 45% university education but there is dissatisfaction with standards in some areas • Richer Russians are sending their children and university students to the USA and the UK • Business education capacity ~£100M of which >50% is in Moscow. Market is expected to grow to £750M by 2016 • Learning English is a priority for all sectors and is used in communication with European and Asian countries. British English is the gold standard • Foreign MBA courses are being established separately and in association with Russia colleges • Distance learning is a growing market
Business Opportunity - Engineering Engineering renaissance • Russian industry is retooling as 70% or equipment is now obsolete • Growth in economy has meant that formerly empty factories are now active often with new dynamic small companies • Defence factories are now moving into civil markets for oil and gas equipment and infrastructure projects • Aerospace- civil aircraft are now mostly imported but defence market strong and some new civil projects. Russian companies looking to work with foreign machining companies to win orders from Boeing and Airbus. • Oil and Gas – equipment and services market around $3.5B growing at 20% with 30% imports
Business Opportunity - Power Insufficient capacity – old plant in need of replacement • Existing plant operating at full capacity and reliance on district heating makes plant failures life threatening in Winter • Old system being deregulated and privatised • Before 1998 demand had reduced but growing economy is now being limited by lack of capacity growth • Major investment initiatives are now being implemented • 70% of power equipment is imported
Business Opportunity – Construction • After a pause following the 1998 crisis construction is now growing at >20%/y over whole country • Retail 326,000 m2 in 2006 and 799,000 m2 in 2007 • Shortage of hotel rooms (~5,000 in Moscow) 10 new hotel in 2006, 65 in 2007 • Shortage of office space – large new office complexes being built • Severe shortage of apartments in most large cities • Large market for renovating living accommodation • Market for individual country homes (kotedzh) and “dachas” • Infrastructure – airports, ports, railways and roads. Construction equipment market $12B growing at 12% with 50% imports
Business Opportunity - Automotive Too many cars! • In 2006 Russians spent £16B on cars: • £9B on imported new cars • £2.2B on foreign cars made in Russia • £1.8B on imported second hand cars • £3B on Russian cars • Sales of imported new cars are growing a 75%/y and for forign cars made in Russia at 100%/y • A 2million cars a year Russia is Europe’s second largest automotive market after Germany • Automotive parts market is around £3.3B growing at 20% a year of which about 40% are imported • Russian has a successful export market in heavy good vehicles and other large construction vehicles • Russia’s large cities have major traffic problems
Business Opportunity – ICT One of the fastest growing markets is telecoms and IT • Russia’s infrastructure for cable and wireless communications is good and Wi-Max will be available in 29 cities this year • Telecom sector $30B growing at 32% • Penetration of mobile telephony >100% based on 3 large Russian providers • IT market now at $10B and growing at 20%. Many computers now being produced in Russia with foreign components • Internet usage growing at 60%, currently around 20M users, broadband growing at 50% with 6M users • Digital TV about to be introduced, but IPTV and cable already established • Look out! - Russian software and ICT service companies are growing fast
Business Opportunity – Healthcare Healthcare is a Cinderella sector that is now catching up • Major health problems from heart disease, diabetes, alcohol, smoking and obesity • Pharmaceutical market around $9B growing at 20% with 70% imports but Russian manufactured generics growing • Medical equipment market around £2.5B growing at 20% with 60% imports. UK companies are entering the market • Opportunities to work with Russian companies to supply or jointly produce drugs, vaccines, diagnostics and equipment for CIS market • Opportunities are also there for innovative service provision
Other Business Opportunities Accessing the CIS market • Use of Russian companies to tailor or finish products fro CIS markets meeting local regulations • Supply of components or alternative spare parts through distributors or service centres • Two way technology trade – Russia needs new technologies to meet resource and environmental problems but is also a source of technologies that need to be adapted to the marketplace • Outsourcing, franchising and the Internet marketplace
Contacts Dr Juan Matthews UKTI High Growth Markets Business Specialist for Russia T: 01235 206569 E: firstname.lastname@example.org Yana Pavlovskaya British Embassy Moscow T:+7 495 956 7252 E: email@example.com Taissia Zelenkova British Consulate General, St Petersburg T: +7 812 3203221 E: firstname.lastname@example.org Galina Movchan British Consulate General, Ekaterinburg T: +7 343 3794931 E: email@example.com www.uktradeinvest.gov.uk