Dynamic Export

Russia will become one of the world’s superpowers within a few decades. Opportunities exist for Australian exporters in Russia along with plenty of reasons you should welcome this market revolution.

Of all the four BRIC (Brazil, Russia, India and China) economies, also known as the ‘Big Rapidly Industrialising Countries’ of the world, Russia is without doubt the most misunderstood and under-estimated when it comes to business, investment and trade.

However, unlike the other three, Russia has in recent times experienced life as a global superpower and, with the developing world, notably China and India, becoming increasingly dependent on Russian supplies of energy, particularly oil and gas, it won’t be long before Russia resumes its place as one of the world’s largest economies.

According to Goldman Sachs, the original architects of the BRIC acronym, by 2050 Russia will be the fifth largest economy in the world after China, the USA, India and Brazil, and the single largest economy in Europe.

While badly hit by the global financial crisis in late 2008, Russia’s economy has now picked up across the board, with rising commodity prices, notably a recovery in the oil price, falling inflation, lower interest rates and a slow improvement in credit markets. Furthermore, with a rise of 63 percent Russia’s stock market is the top performing market in the world so far this year, an early indicator of improving economic conditions in the months ahead.

New exporters

Innovative, entrepreneurial and dynamic Australian companies should take advantage of Russia’s dependence on imports and foreign investment. Research the local market, explore a wide range of opportunities arising from Russia’s rapid resurgence, and develop a market entry strategy to take advantage of a wide range of opportunities in many areas.

From a fairly low base, the Russia-Australia trade relationship is growing strongly and offers opportunities across all of Australia’s traditional strengths; food, agribusiness, education, mining and resources.

The sector of Russia’s economy that always attracts the most interest and opportunity is the food, beverage and agriculture sector, which was the worst hit by the collapse of the Soviet Union and offers the greatest upside potential in the short to medium term. Food and beverage represents 45 percent of Russia’s total retail trade and is growing at over 19 percent per year compared to approximately 12 percent for non-food sectors.

As Russians become more affluent, they demand higher quality, trusted brands and greater variety, which represents great opportunities for Australian players, particularly in meat, dairy, fruit and vegetables, and wine.

I was in St Petersburg late last year leading a delegation of Australian investment advisers and researchers. Our group visited a large dairy and vegetable farm on the outskirts of the city and there was general surprise among the delegation, particularly those with agricultural experience, at the outdated machinery and technology. This was specifically identified as an area of opportunity for foreign investment and expertise, and Australia has more to offer than most in this field.

Many Australian companies, in all sectors of our economy, survive and prosper in a tough, competitive and, by global standards, relatively small market due to the higher savings, efficiencies and margins that can be generated by leveraging world class technology, machinery, equipment and experience. It is in these areas that Australian companies have a significant competitive advantage overseas. The key is to start exporting our expertise, as well as our products, to the new developing economies of the world.

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