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Russia Russia has signed a protocol with the European
Union on its terms for entry into the World Trade Organization. The EU's support
removes a major obstacle to Moscow's ambition of becoming a member of the
trading bloc. Putin says Russia and the EU can find compromise.
Foreign companies, which are planning to do business in Russia, will have to
study
Russian mentality. They have to take into consideration the Russian
character, learn to understand the Russian people and build upon it. Overall,
the best way to do business in Russia is to understand, and accept, that things
happen differently. Therefore you have to adapt and evolve your own mindset
accordingly in order to fully exploit the market. The benefits of understanding
Russian business etiquette cannot be underestimated.
It also important to remember that, not so long ago there was the largest
country in the world, the USSR. It consisted of 15 republics that all worked
together under one system and towards one common goal. The whole economics of
the USSR was build upon dependency of one republic upon another. A manufacturer
of military aircraft in Uzbekistan was getting many components from factories in
Armenia, different spare parts from manufacturers in Belarus, equipment from
Ukraine, etc... This was the way everything was functioning and working. Despite
its break-up, connections between former Soviet Republics are still strong.
It should be remembered that Russia and the other former Soviet Republics are
now in times of deep economic and social transformation which are not, by any
means, finalized.
GDP: purchasing power parity - $1.35 trillion (2002 est.)
GDP - real growth rate: 4.2% (2002 est.)
GDP - per capita: purchasing power parity -
$9,300 (2002 est.)
GDP - composition by sector:
agriculture: 5.8%
industry: 34.6%
services: 59.6% (2002 est.)
Population below poverty line: 25% (2002 est.)
Household income or consumption by percentage share:
lowest 10%: 5.9%
highest 10%: 47% (2001)
Distribution of family income - Gini index: 39.9 (2001)
Inflation rate (consumer prices): 15% (2002 est.)
Labor force: 71.8 million (2002 est.)
Labor force - by occupation:
agriculture 12.3%,
industry 22.7%,
services 65% (2002 est.)
Unemployment rate: 7.9% plus considerable underemployment (2002)
Budget: revenues: $70 billion
expenditures: $62 billion, including capital expenditures of $NA (2002 est.)
A decade after the implosion of the Soviet Union in December 1991, Russia is still struggling to establish a
modern market economy and achieve strong economic growth. In contrast to its trading partners in Central
Europe - which were able to overcome the initial production declines that accompanied the launch of market reforms within three to five years - Russia saw its economy
contracts for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy. Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population.
The economy subsequently has rebounded, growing by an average of more than 6% annually
in 1999-2001 on the back of higher oil prices and the 60% depreciation of the ruble in 1998. The ruble's real appreciation back to its 1998 level is making Russian goods exports less competitive both domestically and abroad. Economic growth fell to
4% during 2002. These GDP numbers, along with a renewed government effort to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its
second decade of transition.
Yet serious problems persist. Russia remains heavily dependent on exports of
commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of exports, leaving the country vulnerable to swings in world prices.
Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain vigorous economic growth.
Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions.
Russia has proven oil reserves of 60 billion barrels, most of which are located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau. In the 1980s, this prolific region, also known as the "Russian Core," made the Soviet Union a major world oil producer, allowing for peak production of 12.5 million bbl/d in 1988 (most of which came from Russia).
Russia holds the world's largest natural gas reserves, with 1,680 trillion cubic feet (Tcf)--more than twice the reserves in the next largest country,
Iran.
With 173 billion short tons in estimated recoverable coal reserves, Russia holds the world's second largest coal reserves, behind only the
United States which holds roughly 274 billion short tons. Russia's power sector includes over 440 thermal and hydropower plants (approximately 77 of which are coal-fired) plus 30 nuclear reactors.
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