South East Europe Regional Market Opportunity

Forum

Connecting Businesses with Outside Markets

RussiaPresented By:Eric Hansen

Deputy DirectorThe U.S. Russia Center for Entrepreneurship

Bucharest, RomaniaNovember 2, 2006

The U.S. Russia Investment Fund

The U.S. Russia Center for Entrepreneurship

Who We Are

Mission: Accelerate Entrepreneurship in Russia via:Trainings/WorkshopsNetwork Learning EventsConferencesResearchGrants

$330 Million USAID Enterprise Fund

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Entrepreneurship Training and Education

Policy Analysis and Development

Catalyst Organization

Commercializing Innovation and Technology Transfer

The U.S. Russia Center for EntrepreneurshipProgram Priorities

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Seminars Entrepreneurship Group

Panel Events Business Plan

Competitions Promote Entrepreneurship

Education in Universities

Entrepreneurship Training and Education

Educate Policymakers on Entrepreneurial and Growth Industries

Promote High Standards of Business Practices and Corporate Governance

Policy Analysis and Development

The U.S. Russia Center for EntrepreneurshipProgram Priorities

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Catalyst Organization

Identify and Recognize Role Models

Publish Case Studies, Success Stories and Books for Entrepreneurs

Promote Innovation and Initiative in all Sectors of the Economy

Business Planning Training to Technology Start-Up Companies

Commercializing Innovation and Technology Transfer

The U.S. Russia Center for EntrepreneurshipProgram Priorities

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Many Potential Partners • 2 million SMEs (<250 employees)

Skilled Labor in Sciences, Software, Aerospace and Optics Access to Natural Resources Increasing Foreign Direct Investment

• 2005 = $9 billion• 2004 = $6.6 billion

Expanding Consumer Market • 2005 = $220 billion

• 2004 = $193 billion Increasing Monthly Income

• 2005 = $440• 2004 = $320

Access to Capital• Increased Presence of Foreign Banks and Investment Funds

Russia: Competitive Advantages

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Consumer market Food processing and packaging Printing Medical equipment and

pharmaceuticals Retail trade and distribution Healthcare services Financial services (asset man.,

insurance, banking, mortgage) Hotel and tourism

Natural resource-oriented Wood processing, pulp & paper Metals Oil & gas Chemicals Fishing

Industry Building Materials Environmental technologies Automotive Industry

Subcontractors High Tech (software

development) Machine-building (nuclear power

stations, optics, trucks and automobiles, other)

Infrastructure Ports and airports Road construction Telecommunications Logistics (cargo terminals,

warehouses, etc.)

Russia: Expanding Sectors

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High Administrative Barriers• Fire & Sanitation Inspections, Certification/Licensing, Utilities

Hook-Up• Corrupt Legal System • Weak Intellectual Property Protection• Cumbersome Tax Regime• Restricted Market Access in Certain Industries• High Cost for Warehouse and Production Premises

Deficit of Information• Marketing Research, Demographics, Statistics

Poor Management Practices Scarcity of Manufacturing Labor

Russia: Risks

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#2 – Stavropol Region (Agriculture)#15 – Novosibirsk Region (IT)#22 – Nizhny Novgorod Region (IT)#23 – Rostov Region (Agriculture)#34 – Volgograd Region (Agriculture)#57 – Leningrad Region (IT)#64 – Krasnodar Region (Agriculture,

Tourism)#65 – Irkutsk Region (Tourism)#68 – Moscow Region (IT)#69 – City of St. Petersburg (IT, Tourism)#78 – City of Moscow (IT, Tourism, Food

Distribution)#79 – Voronezh Region (Agriculture)

Where to Enter the Russian Market?Sample Ranking of Administrative Barriers by

Region*#1 (Low Barriers) - #80 (High Barriers)

* Source: Conditions and Factors Affecting the Development of Small Enterprises in the Regions of the Russian Federation

OPORA Russia9

Good Local Partner• Carefully research potential

partners Long-Term Approach

• Need to be committed to Russia Carefully Research the Market

• Be wary of official statistics Be Prepared for Unexpected

Legal/Regulatory Obstacles

Russia: Key Success Factors

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Russia: Additional Resources

Trade Promotion Resources: Agricultural Business Trade Associations: www.rusagribiz.com IT Companies Trade Association: www.acsit.ru Russian Travel Industry Union: www.rata.ru World Food Exhibition: www.world-food.ru PRODEXPO International Food Exhibition: www.prodexpo-moscow.ru

Business Support Organizations: OPORA (Organization of Small and Medium Business): www.opora.ru Delovaya Rossia (Business Russia): www.deloros.ru Russian Venture Capital Association: www.rvca.ru European Bank for Reconstruction and Development: www.ebrd.com Association of European Business in Russia: www.aebrus.ru American Chamber of Commerce in Russia: www.amcham.ru

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Thank You

Eric HansenDeputy Director

The U.S. Russia Center for Entrepreneurshipehansen@cfe.ru

www.cfe.ru

St. Petersburg

Nizhny Novgorod

MoscowOur Offices:

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