Transcript Slide 1

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 UKbased companies
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Focus on 17 High Growth Markets
Taiwan
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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.
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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
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RUSSIA AT A GLANCE
•Population
•Largest territory in the world
•GDP growth (8th +ve year)
•GDP
•GDP/cap
•inflation
•Trade balance
•Foreign currency reserves
•Investments in all sectors
•Growth Real Personal incomes
•Average salary per month
•Average labour rate/hr
•Corporate profit tax
24%
•Shadow Economy
25%
2004
2005
2006 est.
145.2m
145.0m
143.8m
+7.2%
+6.4%
+7.4%
$590bn
$766bn
$881bn
$4117
$5347
$ 6149
+11.7%
+10.9%
+9.2%
+$88bn
+$120bn +$143bn
$121bn
$205bn
$270bn
+10.7%
+13.7%
+18%
+9.7%
+9.8%
+10%
$300
$330
$370
$1.1
$1.3
$1.5
Basic Tax rate
13%
est.
Russian economic recovery
200
180
GDP
relative
to 2000
Putin plan
(just over 7% growth)
160
140
actual
120
100
80
1993
21/07/2015
1995
1997
1999
2001
2003
2005
2007
2009
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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
21/07/2015
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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
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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
21/07/2015
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Boston Matrix for Russia Ltd
100
Rising stars
GAS
RETAIL
BUILDING
OIL MATERIALS
Market
Growth
%/y
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Problem Children
IT (Hardware
and Software)
AEROSPACE
TELECOMS
BIOTECH
HEALTH CARE
FOOD
PHARMA
CARS
ENVIRO
MACHINERY
Cash cows
DogsWHITE
CONSUMER
CHEMICALS
GOODS
ELECTRONICS
DEFENCE
FURNITURE
CLOTHING
WOOD PAPER METALS
TEXTILES
1
0
10%
Import Penetration
100%
Adapted from “Foreign Direct Investment in Russia”, Paul Fischer, MacMillan 2000.
US Department of Commerce Data
21/07/2015
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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
11 Juan Matthews
UK trade with Russia
6
£ billion
5
4
UK imports
3
2
UK exports
1
0
1997
1998 1999
2000
2001 2002
2003
UKTI High Growth Markets
2004 2005
2006
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Russia’s Imports (2005)
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Russian trade with UK
UK main exports to Russia are:
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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Contacts
Dr Juan Matthews
UKTI High Growth Markets Business Specialist for Russia
T: 01235 206569
E: [email protected]
Yana Pavlovskaya
British Embassy Moscow
T:+7 495 956 7252
E: [email protected]
Taissia Zelenkova
British Consulate General, St Petersburg
T: +7 812 3203221
E: [email protected]
Galina Movchan
British Consulate General, Ekaterinburg
T: +7 343 3794931
E: [email protected]
www.uktradeinvest.gov.uk
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