PMR Research is a specialised custom market research unit of PMR Ltd., a British-American company based in Poland. We offer a wide range of research services in Central and Eastern Europe for companies interested in business over the countries in the region.

Research services provided by PMR Research in Russia include:

• brand and company image studies
• research on customer preferences, their satisfaction and their purchasing habits
• product concept tests
• usage & attitude studies
• internet surveys
• quantitative surveys - telephone, CATI, face-to-face
• qualitative research - focus groups, IDIs
• industry analyses (comprehensive analyses of given market sectors performed using PMR's proprietary methodology PMR MarketInsight)
• preparation of databases
• fieldwork services

Why to invest?

Ninth largest country of the world by population Eleventh country of the world by GDP Variety of investment opportunities In the majority of sectors, existing players are not able to fulfil demand Gateway to other CIS countries and part of Asia Still low average salaries Low utility and operational costs

Economical

The ninth largest country of the world by population and eleventh by GDP, Russia offers enormous investment opportunities in various sectors targeted both at the domestic market, CIS and as a production, service or R&D location for companies from outside of the country. However, this is not the market a Western businessman will find familiar from the first glance and the 19th century saying ‘one cannot understand Russia, Russia is something in which one should believe’ is still true. Despite the fact that Soviet times are long gone the country’s economy is still controlled to a vast extent either directly by the state or through companies that are dependent on the state assigning various privileges to them. Simultaneously, sensitive sectors like defence or minerals extraction are either closed to non-Russian investors or they are allowed only a minority stake in the joint venture while a controlling part is held by the Russian partner. The cases of TNK/BP or Yukos have not helped in incentivising foreign investors. Nevertheless, Russia offers a one of a kind investment opportunity and one must accept certain rules of operation in the market as additional costs of market entry. The problems one will face are a still-existing large amount of red tape, underdeveloped infrastructure, strict regulations, local competitors and the still important shadow economy. It is generally recommended to enter through a joint venture or takeover of a local company that knows the local conditions and would bring effective trouble shooting know-how. The high oil prices in 2005 – 2008 period have brought cash into the pockets of Russians and with the long time delayed consumption they are more than willing to spend it even now as the commodity prices has fallen down. The sectors that are especially attractive include mining, construction, aerospace, research and development, ICT, food and beverage, agriculture, logistics, wood industry, metal processing and many others. Average salaries are still low but in certain areas and branches a vast pool of skilled workforce is available. Last but not least Russia is not a homogenous country – it has a variety of nationalities as well as developed and poor areas with different needs. High end, luxury goods will sell more than well in Moscow, whose affluent population exceeds that of the Czech Republic, but would find just a few customers in more remote parts of Russia.
Russia’s GDP was forecasted to grow by 5.6% in 2008 what was half a percentage point below the previous year when the GDP growth rate reached 6.1%. In 2009 the pace of growth is forecasted to achieve negative value of -3.9% but in 2010 the trend will reverse as 0.6% should be recorded.
In the period between the year 2000 and 2008 Russia has recorded the current account balance has reached nearly 10% of the country GDP (however, it has been falling gradually from 18% in 2000 to 6.1% in 2008 as the value of GDP in current prices recorded in USD has increased over sixfold). In 2008 the Russian exports grew by 0.2% and imports 17.7% (respectively by 6.4% and 27.3% in 2007), however, forecasts for 2009 assume both values to decline by 7.2% and 18.1% only to recover in 2010.

Inflation in the Russian Federation has reached a level of 9% average value in 2007 (however, end of year value was 11.9%) and for 2008 amounted 14.1%. In 2009 inflation will be much lower as the level of 11.3% is forecasted and the 2010 should witness further reduction to 8.5%.

In terms of corruption its perception in 2008 has been recorded by Transparency International at the level of 2.1 (CPI – Corruption Perception Index) which gave Russia a 147th rank per 180 countries surveyed. In the previous year the survey recorded the level of CPI at 2.3 and country was ranked 143th at 179 countries. Corruption is widely recognized as Russia’s biggest economical problem as it became endemic despite some signs of governmental will to curb it.

The industrial production in 2007 has increased by 6.3% compared with the same period of the previous year. This parameter was forecasted to reach only 1.9% in 2008 as prices of commodities slumped.

The unemployment rate in Russia has reached 6.1% in 2007 while in 2008 it was observed at the level of 6.2%. Forecasts for the 2009 and 2010 has assumed values of 9% and 7.5% respectively. However, we believe that the available statistics does not reflect the real situation and the number of unemployed is actually higher.

Social environment

The population of Russia as of 2008 has amounted to 141.7mn inhabitants making it the 9th country of the world by population. The average age in 2008 has been recorded at 38.3; however, it differs for men and women reaching 35.1 for men and 41.4 for women. In the Russian society the number of women outnumbers men by 16%. In terms of nationalities the major groups are: Russian 79.8%, Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%, and Chuvash 1.1%, other or unspecified 12.1% (2002). What is typical for the Russian Federation is that a majority of people declare themselves as atheist or are non-practicing believers (unspecified 8.8%, unaffiliated 59%) what is both a result of the 70 years of Soviet rule. Those of Russia inhabitants who declare being practicing worshippers make approx. 27 to 35% of population and declare being Russian Orthodox (15-20% of total population), Muslim (10-15% of total population), other Christian (2% of total population). In terms of salaries paid in the Russian Federation their average value was recorded at EUR 469 in 2008.

Infrastructure and technological environment

Russia has a well developed and in some sections outstanding research and development base. This refers especially to the industries developed still in the Soviet Union times like heavy industry, defence, aviation, aerospace, nuclear energy, and chemical and commodities exploration. However, it must be emphasized that part of those branches are closed to foreign companies due to state security reasons. However, those restrictions sometime might be eased if a Russian partner company will be a part in the project.

The total installed generating capacity in Russia has been estimated at 215mn kW. Out of this 68% was located in the fossil fuel power plants, 21% was generated by the hydro power units and 11% by the 31 nuclear power plants making this branch the biggest electricity branch in Europe and fourth globally. The country is rich in fossil fuels controlling approx. 40% of the global gas resources, 12% of oil deposits and 16% of proved coal resources. However, what is striking Russian economy is the least energy effective among all 10 most energy consuming countries globally (comparing energy used per unit of the GDP). It has been estimated that possible gains from emphasizing on more effective usage of energy in Russia would reach EUR 90bn to 115bn per annum. This would result in fixing an increasing demand problem by 2020 at a third of the cost of building capacity required to fulfil demand. While the energy intensively might be explained by the size of the country, harsh climate or importance of the heavy industry the greatest potential for savings is in residential consumption. This issue gets even more important as in terms of gas the Russian domestic consumption is raising higher than production and the demand in the Western Europe being a traditional export market is to increase by more than 50% until 2030. Simultaneously oil output is expected to start decline shortly. Achieving balance between energy supply and demand will be a key problem of the Russian economy in the coming years. Except of the fossil fuels Russia is also abundant in other mineral deposits like aluminium, arsenic, asbestos, bauxite, boron, cadmium, cobalt, copper, diamond, gold, iron ore, lithium, magnesium, mica, nickel, nitrogen, palladium, phosphate, pig iron, potash, rhenium, silicon, sulphur, titanium sponge, tin, tungsten and vanadium.

Russia has still a very low internet penetration in 2008 was recorded at below the 24% level (data vary depending on the source and methodology). However, it must be emphasized that it grows quickly and having in mind the size of the population as well as still low living standards it means and attractive market for potential investors. Mobile phone penetration was estimated at 123% in third quarter of 2008.

The transportation network of the Russian Federation consists of the 87,157 km of broad gauge railways and 1.16mn km of roads out of which 41,000 km are major roads of federal importance. There also exists a wide network of both domestic and international airports as due to the country size flying is sometime the only efficient way of travelling.

Political environment

Russia is a federal presidential republic with president being a head of state. The prime minister is nominated by the president however an approval of the parliament consisting of the two chambers (Duma and Federation Council). Despite the fact that the legislative power is represented by the Federal Assembly both president and government may rule by issuing ordnances. Since November 2008 the term of the parliament has been extended to 5 years and term of president to 6 years. Analyzing the Russian power system it must be emphasized that with Mr Putin becoming prime minister the position of the president has been weakened.

Russia is a member of all major international organizations and has a constant seat in the United Nations Security Council.

General data

Area: 17.075m sq km
Population: 141.7mn (2008)
Capital city: Moscow (Moskva)
Language: Russian
Ethnic groups: Russian 79.8%, Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%, Chuvash 1.1%, other or unspecified 12.1% (2002).
Land boundaries: North Korea 17.5km, China 3,645 km, Mongolia 3,441 km, Kazakhstan 6,846 km, Azerbaijan 284 km, Georgia 723 km, Ukraine 1,576 km, Belarus 959 km, Latvia 292 km, Estonia 290 km, Finland 1,313 km, Norway 196 km

Major economic indicators

	2006	2007	2008	2009f	2010f
GDP (EUR bn)	788.0	942.2	1,139.8	910.9	1,034.0
Population (mn)	142.2	142.0	141.7	141.2	140.8
GDP per capita (EUR)	5,542	6,635	8,044	6,450	7,343
GDP (constant prices y-o-y %)	6.7	8.1	5.6	-3.9	0.6
Exports, real, y-o-y (%)	7.3	6.4	0.2	-7.2	2.9
Imports, real, y-o-y (%)	21..9	27.3	17.7	-18.1	5.3
CPI (average, y-o-y %)	9.7	9.0	14.1	11.3	8.5
Central bank reference rate	5.71	6.08	13.00	11.00	8.00
Monthly wage, nominal (EUR)	314	386	469	393	445
Unemployment rate (%)	6.7	6.1	6.2	9.0	7.5
Net FDI (EUR bn)	22.9	38.3	44.0	27.0	33.9
FDI % GDP	2.9	4.1	3.9	3.0	3.3
FX reserves (EUR bn)	230.2	325.4	302.9	317.1	404.4
Exchange rate to USD AVG	27.15	25.54	24.78	35.20	34.98
Exchange rate to EUR AVG	34.11	35.01	36.46	45.65	45.99

Last update: Q2 2009 

Useful data

Currency: RUB
Time zone: GMT +2 to GMT +12
Area code: +7


If you would like to find out more on the Russian market opportunities please do not hesitate to contact us directly:
phone: (48 12) 618 90 80
faks (48 12) 618 90 08
e-mail: [email protected]

Russia Examples of projects