The Belgian Russian Business Club organised a fascinating talk in September given by Danny Thorniley, President of DT-Global Business Consulting at ING Bankâs headquarters in Moscow.
In his speech, Danny gave a realistic review of the Russian situation, saying that 66% of his clients have indicated that they will continue to invest in Russia. Large companies, he said, complain about the state of the Russian economy, but this is in comparison to what the situation was a few years ago, when Russia was in the first three worldwide in terms of profitability. Now Russia is in the top 30% of companies around the world, bad news for CEOs who are âhooked on the cocaine of hyper Russian profits.â Compared to their performance in other countries, however, multinationals are still enjoying good profits in Russia.
Danny traced the present economic crisis back to January 2013, way before the Crimea crisis started. He saluted the Russian Central Bank for its good stewardship of the economy, and mentioned that the bank made it clear as far back as 2012 that if there was to be another global economic crisis, the rouble would not be propped up excessively. The bank proved true to its word. Oil is never going to go back up again to the heights it previously commended, Danny said, and predicted a range of $48-$60 per barrel. Medium term growth, as predicted by the World Bank would, however, be roughly 2.4%. Sanctions are unlikely to be intensified by the EU, Danny mentioned, although US sanctions are unlikely to be lifted, because whoever wins the next US elections, Congress will be Republican. The rouble will continue to experience volatility, just like the currencies of all developing markets.
ROI, Danny predicted will not be great but it wonât be bad either over the next 5 years. There will be more opportunities to source locally, which seems to be very much the name of the game at the present time. Because of its cheap and highly qualified labour force, Russia could actually become an export base. Foreign companies, however, will need to realise that if their goods have been in demand in Russia because Russians were always prepared to pay a premium for well made goods, now it will need to be explained in details exactly why the goods are better than home produced equivalents. In other words, selling in Russia will become more difficult; more like selling in other countries. Danny pointed to the Russian regions as possible grounds for expansion, and also to CIS countries, but pointed out that as good as things may be in Kazakhstan and a few other countries, Russia still accounts for roughly 85% of total business from the Russia/CIS region.
Other highlights of the evening included a farewell speech by Luc Truyens, who is leaving his post as General Director of ING bank in Moscow, to take up a similar position in Austria. Luc will be missed by all in Moscow, and not only because of his superb management skills at ING.