Doing business in Russia for US companies

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Market Overview   

• With over 140 million consumers, a growing middle class, and almost unlimited infrastructure needs, Russia remains one of the most promising markets for U.S. exporters. 
• Russia is the world’s 11^th largest economy by nominal GDP, 6^th largest by PPP and has the highest per capita GDP ($13,236) of the BRIC countries.  It is an upper middle income country, with a highly educated workforce and sophisticated, discerning consumers.  
• Russia’s economy is still recovering from the economic crisis that started in 2008, with GDP growth at 4.3% for 2011.  Economists forecast real GDP growth of 3.3% – 3.5% in 2012. 
• Russia was the U.S.’s 31^st largest export market and the 14^th largest exporter to the U.S. in 2011.  Russia accounted for 1.16% of total U.S. trade, making it our 20^th largest trading partner overall.  U.S. exports to Russia were $8.3 billion, the highest since 2008, and a 39% increase from 2010.  This is more than double the growth rate for overall U.S. exports worldwide which were up only 16%.  Russian exports to the U.S. were $35 billion, up 21% from 2010.  Russian sources list the country’s leading trade partners as:  Netherlands, China, Germany, Italy, Ukraine and Turkey. 
• U.S. accumulated investment in Russia is approximately $10 billion.  According to Russian data, the U.S. is Russia’s 10^th largest foreign investor.
• Russia was formally invited to join the WTO on December 16, 2011, and accession should be finalized by August 2012.  This will liberalize trade with the rest of the world and create opportunities for U.S. exports and investments.  For industrial and consumer goods, Russia’s average bound tariff rate will decline from almost 10% to under 8%.

Market Challenges

• Russia is a geographically vast market, spanning nine time zones and encompassing over 17 million square miles. 
• Seriously underdeveloped infrastructure poses logistical challenges, especially in accessing markets outside of major cities. 
• An incomplete transition from central planning has led to an insufficiently integrated economy and disparities in wealth distribution, geographically and demographically.
• Conducting business may be impeded by: burdensome regulatory regimes; inadequate IPR protection and enforcement; extensive corruption and inadequate rule of law; inconsistent application of laws and regulations; lack of transparency; and the continued presence of large state-owned or controlled enterprises in strategic sectors of the economy.
• 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 obtain necessary permissions to do business in Russia. 
• English is not widely spoken, although knowledge of the language is expanding, especially in the major cities.

Market Opportunities

In alphabetical order:

• Agricultural Equipment
• Apparel
• Automotive Parts and Service Equipment / Accessories
• Aviation
• Chemicals / Plastics
• Construction
• Consumer Electronics
• Electric Power Generation & Transmission Equipment
• Energy Efficiency / Green build
• Medical Equipment
• Refinery Equipment
• Safety and Security Equipment
• Travel and Tourism to the U.S.

Market Entry Strategy  

• Developing business in Russia is resource intensive, requiring serious commitments of time, personnel and capital.
• Conduct market research, such as with the U.S. Commercial Service’s Gold Key or International Partner Search services, to identify opportunities and potential Russian business partners.
• Conduct due diligence, such as with the U.S. Commercial Service’s International Company 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 and U.S. - Russia Business Council.
• Communicate regularly with Russian business partners to ensure common understanding of expectations.
• Frequent travel to Russia is strongly recommended to establish and maintain relationships with partners and to understand changing market conditions.
• Maintain a long-term timeframe to implement plans and achieve positive results. Source

Read Russian Country Commercial Guide, 2012

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