2016 Country Profile The Russian Federation The Russian Federation Country Profile April 2016 Acknowledgements Team Leader: Samir S. Amir Lead Researcher: Zahra Anum Disclaimer: The findings, interpretations and conclusions expressed do not necessarily reflect the views of the Board of Directors and Members of The Pakistan Business Council or the companies they represent. Any conclusions of analysis based on ITC, IDB, CTS, UNCTSD and WEO data are the responsibility of the author(s) and do not necessarily reflect the opinion of the WTO, IMF or UN. Although every effort has been made to cross-check and verify the authenticity of the data, The Pakistan Business Council, or the author(s), do not guarantee the data included in this work. All data and statistics used may be subject to change. For any queries or feedback regarding this report, please contact [email protected] or Zahra@ pbc.org.pk Cover Picture: St. Basil’s Cathedral 2, At Red Square in Moscow, Russia by brando.n licensed under Creative Commons 2.0; https://www.flickr.com/photos/bpprice/15514656831/ ii The Pakistan Business Council: An Overview The Pakistan Business Council (PBC) is a business policy advocacy forum, representing private-sector businesses that have substantial investments in Pakistan’s economy. It was formed in 2005 by 14 (now 52) of Pakistan’s largest enterprises, including multinationals, to allow businesses to meaningfully interact with government and other stakeholders. The Pakistan Business Council is a pan-industry advocacy group. It is not a trade body nor does it advocate for any specific business sector. Rather, its key advocacy thrust is on easing barriers to allow Pakistani businesses to compete in regional and global arenas. The PBC works closely with the relevant government departments, ministries, regulators and institutions, as well as other stakeholders including professional bodies, to develop consensus on major issues which impact the conduct of business in and from Pakistan. The PBC has submitted key position papers and recommendations to the government on legislation and other government policies affecting businesses. It also serves on various taskforces and committees of the Government of Pakistan as well as those of the State Bank, SECP and other regulators with the objective to provide policy assistance on new initiatives and reforms. The PBC conducts research and holds conferences and seminars to facilitate the flow of relevant information to all stakeholders in order to help create an informed view on the major issues faced by Pakistan. The PBC’s Founding Objectives: • To provide for the formation and exchange of views on any question connected with the conduct of businesses in and from Pakistan. • To conduct, organize, set up, administer and manage campaigns, surveys, focus groups, workshops, seminars and field works for carrying out research and raising awareness in regard to matters affecting businesses in Pakistan. • To acquire, collect, compile, analyze, publish and provide statistics, data analysis and other information relating to businesses of any kind, nature or description and on opportunities for such businesses within and outside Pakistan. • To promote and facilitate the integration of businesses in Pakistan into the world economy and to encourage the development and growth of Pakistani multinationals. • To interact with Governments in the economic development of Pakistan and to facilitate, foster and further the economic, social and human resource development of Pakistan. The PBC is a Section 42 not-for-profit Company Limited by Guarantee. Its working is overseen by a Board of Directors elected every three years by the Membership with the Board being headed by a Non-Executive Chairman. The day-to-day operations of the PBC are run by a professional secretariat headed by a full-time, paid CEO. More information on the PBC, its members, and its workings, can be found on its website: www.pbc.org.pk iii The PBC’s Member Companies The PBC’s Member Companies Executive Summary By landmass Russia is the largest country in the world. It covers more than one-eighth of the Earth’s inhabited land area. It is also the world’s ninth most populous country with a population estimated at just over 146 Million in 2015. Russia has vast mineral resources, as well as energy resources, which are estimated to be the largest in the world, making it one of the biggest producers of oil and natural gas. In addition it is a permanent member of the UN Security Council and one of the five recognized nuclear powers. The Pakistan Business Council, as part of its on-going research initiatives, is conducting a series of studies on key economies which indicate opportunities for trade and investment. This short report provides a brief snapshot of the Russian economy concentrating on various aspects of trade and investment. In 2014 the Russian economy was ranked as the tenth largest by nominal GDP and the sixth largest by purchasing power parity. The table below shows a comparison between the Pakistan and Russian economies. Pakistan Russia 2013 2014 2013 2014 Real GDP $143.76 B $150.57 B $993.47 B $999.83 B Real GDP Growth 4.37% 4.74% 1.34% 0.64% GDP per Capita (Nominal) $1,268.93 $1,325.79 $14,467.79 $12,717.69 Population 183 M 185.1 M 143.7 M 146.3 M Trade Surplus/(Deficit) ($18.6) B ($22.8) B $212.32 B $211.28 B Current Account Balance ($2.5) B ($3.1) B $34.14 B $59.46 B FDI, net inflow $1.3 B $0.8 B $69.2 B $20.9 B Economic activity in Russia decelerated in late 2014 mainly due to a fall in oil prices and the Western sanctions imposed on it as a result of the Ukrainian crisis. In 2014 Russia was the 11th largest exporter of commodities in the world with an export value of $497 Billion. For the past 10 years, the Netherlands has clearly been Russia’s top export partner, with exports going from $15 Billion in 2004 to an all-time high of $76 Billion in 2012. Meanwhile China has been Russia’s top import partner, with imports amounting to $50.8 Billion in 2014 and $34 Billion in 2015, around 19% of Russia’s total world imports. With the start of the Ukraine crisis and the first round of sanctions imposed on Russia by the US, Canada, Australia and the EU amongst others; President Putin announced a turning point in Russia’s foreign policy, calling it the ‘Pivot to Asia’. The Russian government is seeking to increase Russia’s integration with Asia, through the achievement of mutually advantageous economic ties, by bolstering Moscow’s diplomatic influence on critical Asian issues and finally by raising Russia’s profile in Asian regional organizations. Russia’s economy is highly dependent on fossil fuels, with Mineral Fuels and oil products accounting for the majority of exports; while relying on imports for most manufactured goods. Russia’s largest imports consist of Machinery, Electronic Equipment and Vehicles. vi From 2010, Russia has faced a deficit in its trade relationship with Pakistan, with 2015 showing exports to Pakistan of just $96 Million whereas imports totaled $285 Million. Russia’s top exported commodities to Pakistan consist mainly of Paper and Paperboard, Edible vegetables, Iron and steel, Inorganic Chemicals and Machinery; whereas imported commodities from Pakistan consist of Edible Fruits, Articles of Apparel (HS 62 and 61), Edible vegetables and Cereals. Russia is a huge market for some of the products that Pakistan manufacturers. Some of the major opportunities for Pakistani exports lie in Other Petroleum Oils and Preparations; Women’s/girls trousers and shorts, of cotton, not knitted; Men’s/boys trousers and shorts, of cotton, not knitted; Instruments and appliances used in medical or veterinary sciences, nes; and Portland cement nes. On the imports side the major items that can be imported by Pakistan from Russia, include Mineral fuels, Iron and Steel, Residues and waste from the food industries, Fertilizers and Pharmaceutical products. vii Table of Contents Executive Summary ..........................................................................................vi Key Social Indicators .......................................................................................03 Short Country History ......................................................................................................................06 Economy .............................................................................................................................................07 Economic Outlook .......................................................................................................................09 Financial Sector ..................................................................................................................................10 The Pivot to Asia Initiative ..............................................................................................................12 Trade ...................................................................................................................15 Trade Balance .....................................................................................................................................15 Major Trading Partners ...................................................................................................................15 Major Imports ...................................................................................................................................16 Top Imported Commodities at HS06 ..............................................................................................17