As we get closer to the anniversary of Russia’s accession to the WTO, it is understandable that many people seem dismayed due to the fact that, unlike its economic peers, the Russian economy has not enjoyed sustained growth for the last decade. In this article we will briefly look at what distinguishes Russia from the often referenced BRIC economies, and explore how, when considering some key cultural differences, an outside investor can still capitalize on the many economic opportunities that Russia has to offer.
What makes Russia different?
Many analysts ask themselves why Russia has not mimicked the developmental patterns of the other BRIC poster child Brazil and maintained significant growth rates. Simply put, the answer is that Russia, unlike China, for example, has already been substantially developed, beginning with (and even before) the time perestroika. Indeed, Russia has always been able to draw on a substantially educated labor force, a number of strong domestic industries, and a certain amount of functional infrastructure. Comparatively, China is a relative newcomer to the game, in that it still possesses a substantial unskilled labor force and is still in the process to fully develop its domestic industries and infrastructure to promote investment.
What does this mean for opportunity?
As a result of these factors China still occupies the role of an inexpensive manufacturer; yet, for Russia, due to its development level and production cost average the role of a consumer might be more fitting. Accordingly, Russia has to go its own path to economic success and being a full WTO member will help.
Here’s why and how:
- Russia has a foreign trade surplus of $115 billion
- As Russian trade increases by a World Bank-estimated 11% annually, household income is expected to increase by 7% annually, which would add more growth and more spending to the consumption cycle.
- Though US business with Russia only reached $11 billion in 2011, repeal of the Jackson-Vanik amendment might cause this number to rapidly increase.
- WTO-inspired tariff reductions on consumer goods in Russia should cause a further influx of affordable foreign goods.
How can businesses take advantage of this opportunity?
While this is a golden opportunity for Russian businesses as well as Russian consumers, this is just as great of an opportunity for businesses wishing to do business in Russia. As always though, the key question of commerce remains, “How do I get my product into the hands of the consumer?” Essentially, Russia is opening its economic doors; however, business needs to take the initiative by either beginning to develop or further developing domestic supply and distribution channels as well as marketing products directly to the Russian people in a meaningful and successful fashion. For many businesses, the difficulty of this concept is exponentially increased by the fact that they do not operate in Russia, nor had any extended exposure to the Russian market and its specific laws and dynamics. In order for these businesses to adapt and make the most of their investment, it is vital to seek the assistance of a trusted and knowledgeable translation company that can localize their product line and adapt their marketing campaign effectively.
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