Amid the current focus on trade opportunities in China and India, Western Australian businesses are being urged not to forget about another fast growing economy, Russia.
Amid the current focus on trade opportunities in China and India, Western Australian businesses are being urged not to forget about another fast growing economy, Russia.
According to Austrade regional director for Europe, the Middle East and Africa, John Finnin, the country is equally as important a trade destination as the much-publicised Indian subcontinent and China’s tiger economy.
While there was still a perception hangover from the days of bread queues on the streets of Moscow, Mr Finnin told a recent WA Business News Meet the Ambassadors breakfast the reality was that a much more mixed standard of living was emerging in the country.
“Russia must be on our agenda,” Mr Finnin said. “It needs to be on our radar both politically and commercially.
“China might be boasting economic growth rates of 9 per cent but figures from the World Bank show real GDP growth in Russia of 7.1 per cent last year, the highest of any country in the European Union.”
In the past year, an appreciation in the Russian currency, the ruble, fuelled a rise in imports in 2004-05 of 24.6 per cent, according to Austrade.
The higher valued ruble has risen on the elevated oil price of recent times, with Russia holding 6 per cent of the world’s estimated oil reserves, according to industry estimates.
Of the world’s top 10 oil producers last year, Russia was one of only two net exporters.
The higher oil price has also swelled government coffers, Mr Finnin said, bringing stability to the once-volatile nation.
Notably, Russian president Vladimir Putin had repaired confidence in the financial sector, he said.
“Putin has restored credibility to the banking sector, which obviously improves conditions for foreign investment,” Mr Finnin said.
In 1998, Russia was caught in a serious economic crisis, which came to a head when the Yeltsin government abandoned its defence of the ruble against the US dollar and defaulted on large amounts of government debt. This crippled the country, putting the industrialists’ goal of a market economy on the backburner.
But Western Australia’s oil and gas industry services industry was well-poised to take advantage of the country’s new booming growth, Mr Finnin said, with recent trade missions to Sakhalin Island (a hub for the oil and gas industry in the country) delivering contracts to Australian companies worth $70 million.
Austrade’s fifth mission to the island is planned for next year.
Graeme Tuder, the managing director of Micromine, a WA-based company operating in the country, says the Russian arm of the company has performed strongly over the last few years.
“The country possesses a very large mining industry, which is technology hungry,” said Mr Tuder, whose company produces a range of software products for the exploration and mining industries. “There is a strong desire to move to Western standards but there are inefficiencies due to a lack of investment.”
The signs are very promising for the end-user market in Russia, according to Mr Finnin, with an emerging consumerism that presents many trade opportunities for WA producers aiming for the retail market.
“There are still many people living below the poverty line, but there is a rising entrepreneurial class,” he said.
The capital, Moscow, enjoyed an economic growth rate of 33 per cent last year and would host Australia Week in June 2006, following the successful debut this year of the trade event, considered by Austrade as the most important function for Australian businesses exploring growth opportunities in Russia.
