The session “New Markets for Russian Business: Africa, Asia, Latin America, Middle East” was organized by b2b-export.com as part of the Russian Export and Investment Forum (REIF). Experts invited to participate in the roundtable discussed what prospects Russian companies have in these regions and how producers can conquer new markets.
Areas of Growth for Exporters
Today Russian manufacturers face two major challenges: boosting of profits and promotion of non-commodity exports in foreign markets. According to Airat Nazmeev, CEO of Tatarstan Export Corporation, professionals involved in export activities often lack adequate knowledge of export operations because of a gap in their professional education. “When conducting surveys and analyzing the structure of companies, we discovered that employees lack basic knowledge. To close this gap, it was decided to establish our “Export Academy.” We invite instructors and specialists with hands-on experience to conduct master classes in the Academy on regular basis.” Mr.Nazmeev has also mentioned that participation in exhibitions and fairs, forging of international links and a more profound use of e-commerce tools can be identified as the areas of growth. Export Corporation of Tatarstan, for example, has signed a contract and is working with b2b-export.com promoting goods produced in Tatarstan in the international markets.
Africa and Latin America
Though the Russian Federation has always been Africa’s reliable, amicable partner, there have been a cooldown in the bilateral relations and, specifically, in the development of business relations in the last 20 years. The interest demonstrated by companies and top officials of the involved states indicates that there is a good chance for the parties to reinstate their relations.
“In terms of the rate of growth of young population, Africa is leading the world. GDP of African countries is growing by leaps and bounds,” said Natalia Tsayzer, President of the African Business Initiative, Founder and Editor-in-Chief of the African Asset magazine. “Africa, being Russia’s global strategic partner, should demonstrate its willingness to cooperate.”
Russian companies looking to establish bilateral business cooperation in Africa must keep in mind that the continent comprises 54 countries, and that each country has its own rules and regulations. Lack of legal awareness might put participants of a deal at risk of loss of profits. It is recommended that Russian companies intensify the use of international legal resources and give a serious thought to the cooperation with the cluster of international companies operating on the continent.
Though Russian businessmen have a very specific perception of how business in Africa should be done, they have to keep in mind that almost 50% of Africans who at some point studied in the Soviet Union now occupy senior positions in large companies and will be happy to welcome Russian business.
“One should go to Africa as a partner, not as a conqueror,” said Serge Fokas Odunlami, General Director of Africa Service LLC. “Africa has ascended to a new level of mentality. The economies of many countries of the continent are in need of investments, which indicates that Africa is moving forward in its development.”
Serge Fokas Odunlami cites the following statistics:
– Currently, about 50% of Africa’s population is younger than 18;
– A billion of Africans will have reached the working age by 2040;
– As of today, there are 52 cities on the continent where the number of inhabitants reaches one million;
– 60% of the world’s arable land is in Africa;
– The continent’s annual growth rate was fluctuating around 5% during the last decade.
Participants of the session have also noted that Egypt, for example, is perceived as a desirable business partner because it has multilateral and bilateral free trade agreements granting its partners an access to larger markets.
Speaking about Latin America, Minister-Counsellor of the Embassy of Cuba Mrs. Francisca Barbara Sarabia explained that although an economic embargo against Cuba is still maintained, the country’s situation is improving. Its economy is developing. The country is intensifying cooperation with entrepreneurs. The Cuban Government is hoping to attract up to $2.5 billion in foreign investments annually. The companies experienced in the creation of value chains, development of industry and infrastructure as well as agribusinesses will be given high priority.
The Middle East and Syria
Middle Eastern markets are perceived as large markets with abundant human resources. Many of their sectors, ranging from agriculture to power production and oil refining, are underfunded. Despite the Middle Eastern market is rich in hydrocarbons, the raw material processing is barely developed, therefore, the region exports raw materials. As Dmitry Kuryshev, Senior Vice President of ABC (Arab Banking Corporation) has noted, this market would appeal to Russian exporters selling non-energy products, including agricultural produce, products of the machine building industry and products used in the industrial and not-for-profit construction works. Dmitry Kuryshev also believes that there exists a real opportunity to raise funds needed for the promotion of Russian business in the region. A new rapidly developing line of business, the Islamic Financing, is one of the levers that Russian companies could successfully use.
According to the expert, Iran, which is currently signing agreements with a number of global leaders in the power production, is seen as another market with good potential. Iranian market, including its financial sector, is currently reopening. It is expected that in the near future Iranian banks will launch cooperation with representatives of other countries besides the US.
Mitigation of Logistics Risks
Before an exporter hammers out a goods supply deal, it has to go through a lengthy negotiation process. Once the supply contract is signed, though, the supplier is faced up with another complex challenge called logistics. Practical experience accumulated by logistics companies allows to mitigate the risks associated with the delivery of cargo to certain countries.
Vladimir Zolotukha, Deputy General Director of WENTECH GROUP (LLC Foreign Economic Trade Forwarding Company), has shared his opinion on how to reduce risks when dealing with sanctioned countries:
- Act pursuant to the principle of freedom set out in the International Navigation Rules: only international rules apply in the high seas.
- Do not hire fleet sailing under EU-country flags to avoid unnecessary stops along the route. Do not unload in the countries of the EU.
- To reduce the risk of untimely delivery of cargo, it is best to model the situation beforehand by discussing the type of cargo and the country of destination among the parties participating in the delivery.
Exporters should also take time to learn what transshipment tariffs are available. For example, it is several time cheaper to use less popular Azov Sea ports to compare to the Port of Novorossiysk.
Representatives of Russian companies and their African partners are planning to hold their next meeting in the framework of the Russian-African Forum hosted by Ghana on March 13-14, 2017. To get more information about the Forum, please visit: events.b2b-export.com.