Russian business

Russian business

1 ABSTRACT In the last few years Russians economy was grown. The most important reason for this are the resources of natural gas and crude oil. For this increasing more and more foreign companies invested and settled down in Russia. But of course the company has to be cautious because Russia has different law and often it is different to the law of the own country. In this report, I will write about the political situation and its structure. Furthermore, I will show you the economics of Russia, the trade patterns, the industrial situation and the business law and regulations.

At least, I will give a short conclusion. 2 INTRODUCTION Russia is becoming more and more an attractive business location. Unlike the countries central and southeastern Europe they can? t follow to the economic traditions of the market and there is a growing number of new companies which established there. In 2007, the Russian economy continued its steady growth. GDP grew by an estimated amount of 8. 1% to $ 1. 344 trillion. Russia now ranks as one of the top ten economies in the world. At the moment the population of Russia amounts to 140. Mio and the growth rate is

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-0. 47 %. Russia’s area has a size of 17. 075. 400 km? and is covering almost one-seventh of the worlds land mass. It is a country that spans 11 time zones. The largest city is Moscow with 8. 305. 000 residents. [1] In the following report the political situation in the Russian Federation, the economical situation with its structures and import and export regulations will be discussed. 3 POLITICAL SITUATION IN THE RUSSIAN FEDERATION 3. 1 Governmental policies Russia is the biggest country in the world and they have a lot of problems.

In the constitution, Russia is a social state and they should create conditions for a dignified life and a free development. The government should try to get a better standard of living and to improve the satisfaction of their physical and spiritual needs. This includes the work and the health of people, a minimum wage, the right to maternity and the payment of state pensions for handicapped and old people. [2] One important point of this is the social system because they don? t have a good compulsory health insurance.

They worked since many years on a new health insurance law but the ten participating ministries can? t agree upon to the new law. The health care system provides medical attendance for free, but it is ineffective. Many people have to pay when they need a treatment because normally the doctors only try to help if they are bribes. Russia can change the standard of live but they need a good growing market. Unfortunately, such conditions have not been created yet. [3] 3. 2 Political structure Russians Political System was changed on 12 December 1993 following the Russian constitutional crisis.

Since 1993 Russia is a federation and formally a semi-presidential republic with extensive authorities of the president. The Political System means that the President is the head of state and the Primary Minister is the head of government. In this part of the system the nation can elect the President for a period of 4 years and it is only possible to reelect the president for one time. At the moment the President of Russia is Dmitry Medvedev (who was voted with 70. 28 %) and the Primary Minister is Vladimir Putin. The bicameral legislature consists of the lower house (State Duma) and the upper house (the Federation Council).

The president nominates the highest state officials, including the Prime Minister (Vladimir Putin), who must be approved by the Duma. The president can pass decrees without consent from the Duma and he is also the head of the armed forces and the Security Council. The Russian Federation has a three branch system of government. The executive branch contains the head of government and the legislative branch consists of the State Duma and the Federal Council which is a bicameral federal assembly. On the other hand there is the judiciary branch it interprets laws and can overturn laws they deem unconstitutional.

Since 1993 the Constitutional Court is authorized to arbitrate disputes between the executive and legislative branches between Moscow and the regional and local governments. [4] 3. 3 Recent developments The recent developments are that Vladimir Putin became prime minister after his presidentship time and Dmitry Medvedev is the new president of Russia since 7 May 2008. [5] On the 12 May 2008 the prime minister presented the new structure of his cabinet and distributed the powers among his deputies. The new amendment is that the number of deputy heads of government has rised by five to seven. 6] An important background is also that Medvedev has never worked in very intelligence and security agencies and many people are thinking that he is more oriented on Putin. Many people don? t expect major changes in the policies because the influence that Putin has is too big. [7] 4 ECONOMY 4. 1 Trade Patterns Russia is coming more and more in the international Economy. They are specializing in the production and the exports of resource and products. [8] 2007 Russia has a real growth of 8. 1 %. Foreign investment increased cumulatively in 2007 which was financed by credits from abroad.

The largest share of investment was flowed into the manufacturing industry sector with 30 %, followed by the trade, repair of vehicles and household appliances with 25. 2 %, the promotion of mineral resources with 22. 3 % and the real estate industry with 8 % as well as the transport and communication with 7. 9%. The Russian market is still interesting for foreign investors, even though the legal frameworks have to be improved. The most important targets for Russian export are Germany, Finland, USA and China. The main import trade partners are USA and Germany.

For example, Germany delivers industrial finished products to Russia. Russia has been a reliable supplier of oil and gas to Germany and the EU for many years and they export one third of the German demand for natural gas. The German economy is exports, especially in areas such as automobiles, machinery and equipment. It is expected that Russia will be an important export market in the future. Backwards, there is also a growing interest of Russian companies to invest in Germany. [9] 4. 2 Industrial structure The normal structure of an economy has 3 sectors.

The first one is the primary sector, which generally means the natural resources. The most products from this sector are considered raw materials for other industries. The business in this sector includes agriculture, agribusiness, fishing, forestry and all mining and quarrying industries. The primary industry is a larger sector in developing countries. After that there is the secondary sector (approximately manufacturing) of the economy. This sector generally takes the output of the primary sector and manufactures finished goods. It is often divided into light and heavy industry.

As a last resort, there is the tertiary sector of economy, which is also known as the service sector or the service industry. [10] If we look at the Russians industrial structure we note that there is a big part of metal industry with 22. 2 % followed by the food industry with 15. 4 % and as the main pillar which is coming more and more the oil industry with 17. 1 %. [11] The power industry has high importance for the Russian economy: There is a high source of crude oil and natural gas which exceeds the national demand and so can be exported.

For the Russian government it is a “strategic important branch of economy”, because the national power supply is ensured and due to this, Russia is one of the largest power suppliers worldwide. An example for the tertiary sector is the energy supply sector with 7. 6 %. Russians industrial structure should be advanced because at the moment they have just only the power industry and if the prices of oil and gas decrease their economy will have a fall. For this reason they should improve the other parts of the three sectors. [12] 4. 3 Services

The service sector includes shares of financial, telecoms, transport, tourism and other services. For example the financial service sector is an important and growing export for the United States. But prospects for increased access to the Russian financial services sector will depend on a number of factors, including ongoing trade negotiations, development of a sound financial infrastructure, and cultivation of strong business ties between Russian and U. S. asset managers. All in one the service sector in Russia has a good chance to grow and to get bigger and more important than now. . 4 Recent developments and forecasts In the future the economy will get a new structure. President Dmitri Medvedev wants to change the institutions (government and civil society), the infrastructure, the innovations and the Investments. It will be a modernization of Russian Economy away from the one-sided dependence of profits from the commodity sector. With this strategy they want to get an independent judiciary, fight the corruption, reduce the bureaucracy and cut the tax. Moreover they want to create an independent financial system and invest in infrastructure. 13] 5 BUSINESS LAW AND REGULATIONS 5. 1 Import and export regulations Russia is a leading producer and exporter of minerals, gold and all major fuels but Russia has a lack of legislations and inefficient law enforcement in many areas of economic activity. For this reason it is not easy to make business with Russia and maybe it is one reason why many companies are very cautious. Since January 1, 1998, purchase of food and since July 1, 1998, purchase of other goods which do not have a product description in Russian is prohibited in the Russian Federation.

According to the Russian Customs Rules they are an import charges which have being paid by the foreign companies before the goods will be released. The minimum tariff for imported goods is 5 % and the maximum is 30 % except for some luxury products. The rates vary according to the nature of the goods. According to the Russian Customs Rules for example the number for raw materials is 5 %, for semi-finished goods 10 % and for finished goods 15 %. In total, the maximum tariff decreased to 30 %. [14] Besides import tariffs, there are two other types of duties one of them is the excise tax and the other one is value-added-tax (VAT) which mounts to 18 % (standard rate) at the moment. Excise taxes are a number of luxury goods like alcohol, cigarettes and cars. [15] 6 CONCLUSION Doing business with Russia can be a good decision for companies if they have informed themselves. It is important to know about all information of Russia and the system and economic law. Since Putin was the head of government many companies invested in Russia because of the positive changes. 7 REFERENCES Books: Dr. Terterov Marat (2005): Doing business with Russia – a Guide to Investment Opportunities & Business Practice; 2005. D. Brunn Stanley/Williams Jack Francis/ J.

Zeigler Donald (2003): Cities of the World, 2003. Internet: http://www. switzerland. mid. ru/rusbotschaft/russland_2. htm http://www. flemming-partner. com/uploaded/Gesundheit. pdf http://www. csudh. edu/global_options/375students-Sp96/Russia/PolitSys. html http://news. bbc. co. uk/2/hi/europe/country_profiles/1113655. stm http://de. rian. ru/russia/20080512/107186704. html http://www. russiaprofile. org/page. php? pageid=CDI+Russia+Profile+List&articleid=a1224253771 http://www. bof. fi/NR/rdonlyres/849B2E90-68BE-4DD4-A484-C64A45A1CBE5/0/ trade. pdf http://www. auswaertiges-amt. e/diplo/de/Laenderinformationen/RussischeFoederation/Wirtschaft. html http://www. dbresearch. de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000200542. pdf. http://www. dgap. org/publikationen/view/1dd8ec40c7021308ec411dd814f2f31c5a270297029. html http://www. rhein-neckar. ihk24. de/produktmarken/international/Anlagen/Anl_CEE/RUS/ 0105/EinfuhrbestimmungenAusfuhrbestimmungenRussland. jsp? print=true http://www. fipc. ru/fipc/investment. ru/investor/trade. html ———————– [1] Cp. : http://www. deutschland-tourismus. ch/pdf/MI_KURZ_Russland_2008(1). pdf [2] Cp. : http://www. switzerland. mid. u/rusbotschaft/russland_2. htm [3] Cp. : http://www. flemming-partner. com/uploaded/Gesundheit. pdf [4] Cp. : http://www. csudh. edu/global_options/375students-Sp96/Russia/PolitSys. html; 12. 10. 2008 [5] Cp. : http://news. bbc. co. uk/2/hi/europe/country_profiles/1113655. stm; 12. 10. 2008 [6] Cp. : http://de. rian. ru/russia/20080512/107186704. html; 24. 10. 2008 [7] Cp. : http://www. russiaprofile. org/page. php? pageid=CDI+Russia+Profile+List&articleid=a1224253771 [8] Cp. : http://www. bof. fi/NR/rdonlyres/849B2E90-68BE-4DD4-A484-C64A45A1CBE5/0/trade. pdf [9] Cp. : http://www. auswaertiges-amt. e/diplo/de/Laenderinformationen/RussischeFoederation/Wirtschaft. html [10] Cp. : D. Brunn, S. /Williams, J. (2003), Page 30. [11] Cp. : http://www. dbresearch. de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000200542. pdf. [12] Cp. : Dr Terterov, M. (2005), Page 115 ff. [13] Cp. : http://www. dgap. org/publikationen/view/1dd8ec40c7021308ec411dd814f2f31c5a270297029. html [14] Cp. : http://www. rhein-neckar. ihk24. de/produktmarken/international/ Anlagen/Anl_CEE/RUS/0105/EinfuhrbestimmungenAusfuhrbestimmungenRussland. jsp? print=true [15] Cp. : http://www. fipc. ru/fipc/investment. ru/investor/trade. html