In the spotlight: Russia

20 January 2017

Supply Management goes globe trotting to evaluate the procurement potential of countries around the world...

POPULATION 143,500,000

AREA 17,075,200km2

THE HELICOPTER VIEW There are tentative signs that Russia could finally exit its recession. Following the economy’s collapse in 2015, analysts project that the country’s GDP will expand 1.3% in 2017.

ECONOMIC OUTLOOK Russia’s economy began growing at the end of 2016 and should expand again in 2017, providing there are no big external shocks and oil prices are stable.

BIGGEST FOREIGN INVESTORS Big retailers such as Ikea and France’s Leroy Merlin have begun pumping billions of dollars into new stores and factories. Pfizer is building a new drugs factory, while Mars expanding plants to make chewing gum and pet food.

SUPPLY CHAIN ISSUES Challenges include customers being dispersed over a vast country, unreliable supplies and delays at customs and an unstable and inconsistent legal environment. There also seems to be little will to make the structural reforms needed to stimulate growth.

STRENGTHS Very low production costs, massive reserves of oil and gas, a large domestic market and low public debt.

CHALLENGES Corruption, high staff turnover (driven by short-term employment contracts), poor internal infrastructure, lack of innovation, extreme weather conditions and sanctions over Ukraine.

BOTTOM LINE Russia needs more foreign investment to wake up dozy, large, state- owned businesses and to introduce new ways of doing things. Yet its political isolation – and the fate of previous investors such as BP – has deterred many businesses. For all the government talk of moving up the value chain, most of its exports are still extracted, rather than manufactured.

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