IE Singapore started its office in Moscow with a local commercial secretary in 1997. Later, an honorary business advisor, Mr. Rajinder Sethi, was appointed to help IE Singapore understand the complexities of business practices in Russia, as well as to harness the opportunities that might arise.

OVERVIEW OF RUSSIA'S ECONOMY SINCE THE 1990s

Legacy of a State-Run Economy

As a result of its Soviet central planning legacy and rich resource endowments, Russia's industrial sector is heavily skewed towards heavy industries. In 2002 machine-building and metal-working remained the largest processing industry, accounting for just over 20 per cent of industrial production. Light industry — which includes textiles — accounted for only 1.5 per cent of industrial output.

That Russia's economy is very much dominated by the mining industry is demonstrated by the fact that, in an October 2004 ranking of top 400 Russian companies, 266 companies were connected with mining of natural resources. These companies accounted for 74 per cent of the Top-400 aggregate revenue. In contrast, there were only fifty-six companies of the “new economy” — banks, insurers and IT companies, cellular operators, retail networks and newly created industrial enterprises.

Market Reforms

The transition from a highly-industrialized command economy to a market- based economy has been taking place since 1991, boosting private consumption and benefiting all sectors of the economy that cater to consumers. Retailers, communications service providers, car dealers, car maintenance services, insurers, dealers of branded consumer durables, producers of personal care and fitness services are segments where significant growth is expected for several years.

Russia's Hopes of WTO Accession

Since China's accession to the WTO in 2001, Russia is the largest economy that is not yet a part of this global trade forum. Russia began its drawn-out WTO accession process some eleven years ago. However, services continues to be a sticking point, with Russia unwilling to further open up its banking and insurance sectors — a key U.S. demand.