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Economic News in Review
23 November 2007
Economic News in Review

Economic News in Review
for Oct/Nov, 2007

The following resource is meant to quickly introduce the reader to some of Russia's major business news for the month. Please note that we strive to focus on more specific, less-well-covered issues. This news review is developed in conjunction with The School of Russian and Asian Studies.


Economic Relations / Foreign Investment

How to Do Business in Russia
Based on interviews with executives from 36 foreign companies operating in Russia, as well as our own business experience there, here are eight commandments aimed at helping Western companies prosper.

Issues in the U.S.-Russia Economic Relationship
In short, it is a "virtual economy"—not a market economy, but something quite different, with its own rules of behavior and criteria for success and failure.

Foreign direct investment in Russia could reach $50 bln in 2007
... the chief economist of Deutsche Bank in Russia said.

Russia’s Image to Be Concern of State Agency
Russia’s Economic Development and Trade Ministry suggests establishing a state agency, which sole purpose will be worldwide promotion of Russia.

Russia's Economy and Prospects for U.S.-Russian Economic Relations
Keynote speech by William J. Burns, U.S. Ambassador to Russia, at the US-Russia Business Council (USRBC).  

Russia given low competitiveness ranking despite growing economy
The ranking is based on 12 "pillars of competitiveness" - institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation.

Quarter of Russian regions could suffer if country joins WTO
The Higher School of Economics (MIRBIS) had finished a study of possible consequences of Russia's accession to the WTO for various industries, taking into account regional aspects.


Businesses and Markets 

"Protection" in Russia: Different Providers, but Same Racket
Policemen generally get a daily payment of 500 rubles (around $20) from each booth, but, for the sake of fairness, ask only 100-150 rubles ($4-$6) from each babushka.

Russia's Business of Heating Homes
Combined heat and power plants (CHP's), fueled by either oil, coal, or gas, use excess heat from electricity generation to heat water, which is then sent through a network of pipes right to your building.

Russian Businesses Report Losses, Fear Due to Pirate Software
Most businesses still use illegal versions.

Russia Casts A Selective Net in Piracy Crackdown
Political bias alleged in pursuit of groups using illicit software.

Russian Oil Firms Reap Little Benefit From Prices
Despite high crude prices Russian oil production growth may be damped because the country's tax regime deprives producers of the bulk of export revenues while rising costs mean companies struggle to invest in new fields.

YUKOS Bankruptcy Complete
After the company is removed from the state register of legal entities, which should take no more than a month, YUKOS will cease to exist.

Wooing the Next Pepski Generation
PepsiCo is building a potato chip factory in southern Russia and eyeing a deal to take the lead in beverages.

Ad Sales on the Eastern Front|
Yandex dominates search with focus on local needs.

Sochi - Russia's Biggest Building Site
The Sochi (Olympic) Games will set an all-time record in the level of funding. 

Russia Pours Billions in Oil Profits Into Nanotech Race
"Nanotechnology will be the driving force of the Russian economy -- if it can overcome the legacy of the recent past."


Legal, Tax, and Accounting News

Those interested in the more nitty-gritty issues of Russian business should check out The Alinga Market Update, published by USRCCNE member Alinga Consulting Group.



Banking on Small Business: Microfinance in Contemporary Russia
New book on the subject now available.

Rattled elsewhere, banks bet on Russia, a known risk
Leading foreign lenders are finding it can be better to bank on the Russian risk you know than the subprime exposure you don't.

As Russia Confronts Pension Shortfall, Some Advocate More Aggressive Investment of State Funds
Nowhere has wealth accumulated faster than government coffers, which presently hold a record surplus of more than $140 billion and climbing.

Foreigners Keep Russian Market Afloat
Western investors' optimism is unflagging. Last week, they moved an additional $125 million into funds investing in Russia, the second largest amount for the year, according to Emerging Portfolio Fund Research, behind the previous week’s $140 million.

Russia Cracks the List of Top 20 Exchanges
The Moscow Interbank Currency Exchange, the Russian holding company of seven national bourses that offer trading, clearing and settlement, broke into the list of the top 20 global exchanges this month by topping $2 trillion in trading volume in the first nine months of this year.

Saving Russia (with Microfinance)
We never hear the one story that could really give us hope about Russia's future: the successful development of Russian entrepreneurs. Equally perplexing, we never hear about the role of microfinance in contributing to that development.

Russia: A Haven in Current Global Emerging Financial Markets
Full integration financially for Russia has obviously had benefits, particularly because the global financial system has been expanding more rapidly than any time in history.


Issue - Food Prices

Price Freeze on Some Foodstuffs
Grocery chains will be required to limit their markups on socially significant food products.

Soviet Habits Show Up in Price Measures
A sudden surge in food prices ahead of elections has the Russian government digging deep into its bag of tricks, including a few from Soviet days, to prevent discontent from spilling into the voting booth.

Freezing food prices in Russia would be a mistake
"Freezing food prices is impossible. This is a market, and prices cannot be frozen in the market. It would be a mistake."



Not the Worst Place for Women
Of 128 states, Russia climbed eight positions to No. 45 in terms of the gap between men’s and women’s opportunities.

Dollar salaries lose favor in Russia
Overview of wage issues in Russia.

Russians Close Gap With Expats
The young generation of managers in Russia could soon win back jobs that so far have been traditionally occupied by foreigners.

Brain Drain Reversal: Repats Welcome
The generation of young, talented Russians who left the motherland in the wake of the 1998 crisis now have good reason to come home.

Moscow Wants More Specialists, Not More Ethnic Russians
The Kremlin’s effort to attract Russian-speaking “compatriots” living abroad is intended not so much to boost the number of ethnic Russians in the Russian Federation, as many nationalists fervently hope, but rather to attract highly trained specialists the country’s economy can put to use.

Letter From Russia: A boom that depends on migrant workers  
A shrinking work force complicates the situation, as oil-powered economic growth fuels demand for offices, apartments, hotels and shopping malls - along with people to build and maintain them.


Demographics, Health, and Racism

Demographics, health issues, and racism are negatively affecting Russia's labor supply, which could cause a myriad of problems. While Russia is now producing more skilled labor, it is also struggling just to fill vacancies, particularly in large cities like Moscow.

Russian Scientists Fear Warming May Bring Disease
Scientists in Moscow are concerned that increasing temperatures will help spread malaria and other diseases to new areas.

Russians Will Be 12% Fewer by 2025
The population will also continue to age, with every fifth Russian being over 65 by that date and the workforce will shrink by 3 percent (about 11 million people).

60 Killed In Racist Crimes In Russia In 2007
People originating from former Soviet republics like Azerbaijan, Uzbekistan, Armenia and Georgia, along with North Koreans and Africans, were the most likely to fall victim to racist attacks.

80,000 Drug Deaths Every Year in Russia.
About 70,000 Russians die annually from diseases linked to drug addiction, and another 10,000 are killed by overdoses.

Moscow Moves to Restrict Abortions to Boost Birthrate
And officials say that "the next step will be to ban abortions in private clinics."

Inaction Said Hampers Russia AIDS Crisis
Officially, Russia had about 390,000 registered cases of HIV infection as of August 2007. But international experts say the true number of HIV carriers is closer to 1.6 million and is expected to grow by 30 percent by 2010.

Labor Migrants Face Abuse, Xenophobia
Poverty and unemployment have led millions of men and women from Tajikistan, Uzbekistan, and Kyrgyzstan to seek jobs elsewhere in Central Asia or farther abroad.

Putin approves demographic policy goals through 2025
Key aims set out in the document are to lower the national mortality rate, raise the birth rate, improve national health, and regulate immigration. 

Russia's Demographic Decline Complicates Military Draft
And the poor physical and mental condition of many young men in this cohort are making it ever more difficult for the Russian military to meet its draft quotas.

Happy to live in Russia
"I have a very interesting life in Moscow, and I play a significant part in developing the community here. If in the future I understand that Israel is the place for me and my children, I'll immigrate," she says.

Black Russians
Historical links between Africa, America and Russia were unravelled at an academic conference last month in St. Petersburg.

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