14th Annual CIS and Eastern Europe Business ForumTucson, Arizona 2 November 2007

Ellen House, Desk Officer

U.S. Department of Commerce

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Entering Eurasian Markets

Overview of the Markets: Opportunities and Challenges

Department of Commerce Services

U.S. Government and other Resources

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Market Size- 275 Million

Belarus – 11m

Ukraine – 51 m

Moldova – 4m

Armenia – 3m

Georgia – 5 m

Azerbaijan – 7m

Turkmenistan – 4m

Uzbekistan – 26 m

Kyrgyzstan – 4 m

Tajikistan – 4 m

Kazakhstan – 17m

Russia – 145 m

Total Eurasia market size – 275 million

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Eurasia’s 12 Markets

Various levels of transition and development … movement towards a market economy.

Some are WTO members (Armenia, Georgia, Moldova, Kyrgyzstan), others are more-or-less actively seeking to accede (Azerbaijan, Kazakhstan, Russia, Tajikistan, Ukraine)---good news for U.S. companies.

Benefits of WTO accession: more transparent and predictable business environment.

Each country has its own market characteristics that require individual attention.

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U.S. Exports to Eurasia (in mlns of US$)

2005 2006 2007 (H1) % ChangeEurasia Total 5911.4 7062.3 4993.7 (07/06)Russia 4000.0 4700.0 3200.0 40.7Ukraine 524.0 756.0 728.0 66.2Kazakhstan 530.0 646.0 424.6 23.8Georgia 213.8 263.5 189.9 81.6Turkmenistan 237.0 112.8 164.0 134.7Azerbaijan 132.5 231.0 72.8 -25.4Armenia 65.5 80.4 53.0 55.1Belarus 34.9 74.5 50.9 68.3Uzbekistan 73.8 53.9 37.3 32.6Tajikistan 28.8 43.0 28.9 10.8Kyrgyzstan 31.1 71.2 25.8 31.8Moldova 40.0 30.0 18.5 41.1

Source: World Trade Atlas

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World Bank’s Doing Business in 2008 www.doingbusiness.org

Overall “Ease of Doing Business” Rankings (out of 178 countries)

Georgia – 18 Russia - 106

Armenia – 39 Belarus – 110

Kazakhstan - 71 Uzbekistan – 138

Moldova – 92 Ukraine - 139

Kyrgyz Republic – 94 Tajikistan - 153

Azerbaijan – 96 Turkmenistan – N/A

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Russian Federation

• World’s 10th largest economy

• World’s 3rd largest foreign currency reserves

• 2006 FDI $28 billion (Jan.-Sept. 2007 estimate $40 bln)

• Strong GDP (6.7% in 2006), and disposable income growth

• U.S. exports grew 20% last year and stronger this year

• Political and Business Risks are still significant: it is still not an easy place to do business or market to enter

• Lack of transparency and predictability

• Saturation in Moscow and St. Pete (look at regions)

• Competition is fierce from Europe and Asia

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Other Major Markets: Ukraine, Kazakhstan, Azerbaijan

Ukraine: pluses - large market, central position in Europe, strong industrial base; minuses: political instability, needs more reforms

Azerbaijan: pluses - oil and gas wealth, GDP growth of 40%; minuses – administrative barriers, lack of transparency

Kazakhstan: pluses - huge hydrocarbon reserves, regional hub for Central & S. Asia; minuses – bureaucracy, state interference

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Challenges for Doing Business in Eurasia

• Corruption• Administrative barriers• Selective interpretation of laws• Inadequate and inconsistent legislation

and enforcement of laws• Poor protection of IPR• Conflicts between the state and business• Unfair competition by local companies

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Basic Precautions: Keys to Success

Do research and choose partners carefully (due diligence) Prepare your expectations and take nothing for granted Build relationships with key personnel on the ground Details (take care of them, or have them taken care of) Find reliable professional assistance (registering, banking,

accounting, taxes, opening the office, personnel, security) Get reliable translator/interpreter – translate your materials Know where to go for help

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Getting Started in Eurasia

Take advantage of the unique knowledge and positioning of the U.S. Embassies and CS/BISNIS in the region

Become involved with the American Chambers of Commerce (Amchams) and other business associations (as in-country sources of support, information, advocacy) AND

Talk to Washington, DC, and other U.S.-based membership organizations (USRBC, FRAEC, AUCC, AGBC, USACC, USKBA, USUBC, etc.)

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International Trade Administrationwww.trade.gov

Market Access and Compliance (ensuring fair trade and market access for U.S. companies)

U.S. Commercial Service (trade promotion)

Import Administration (enforcing trade laws, i.e., anti-dumping and countervailing

duties)

Manufacturing and Services (industry experts)

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Market Access and Compliance

Identifies and overcomes trade barriers, resolves trade policy issues, and ensures that our trading partners fully meet their obligations under our trade agreements.

MAC ensures access to world markets for U.S. companies and workers so they can compete on a “level playing field.”

MAC country desk officers - experts on the commercial, economic, and political climates in their assigned countries. Focus on resolving trade complaints and market access issues, such as: intellectual property rights, quotas, customs, transparency, commercial disputes with foreign govt entities

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FYO8 SABIT Group Training Programswww.mac.doc.gov/sabit

Hospital AdministrationProgram dates: Jan. 19-Feb. 16, 2007

Hotel ManagementProgram dates: Jan. 26-Feb. 23, 2007

Infrastructure: Road ConstructionProgram dates: Feb. 23-Mar. 22, 2007

Water Resource ManagementProgram dates: Mar. 29-Apr. 26, 2007

Energy: Exploration & ProductionProgram dates: Apr. 26-May 24, 2007

Infrastructure: Maritime Ports Program dates: May 3-31, 2007

Fruits and Vegetable Processing and Packaging

Program dates: June 7-July 4, 2007

Timber

Program dates: July 12-Aug. 9, 2007

Dairy Processing & PackagingProgram dates: Apr. 26-May 24, 2007

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MAC Eurasia Desk Officers

Belarus, Ukraine, and Moldova Christine Lucyk (202-482-2018, Christine.lucyk@mail.doc.gov)

RussiaMatthew Edwards (202-482-2354,

matthew.edwards@mail.doc.gov) or Jay Thompson (202-482-2511, jay.thompson@mail.doc.gov)

Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan

Danica Starks (202-482-3952, danica.starks@mail.doc.gov) or Ellen House (202-482-0360, ellen.house@mail.doc.gov)

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BISNIS/CS in Eurasiawww.bisnis.doc.gov -

www.export.gov

• Still going as part of CS: staff of 3 in DC, 10 in Eurasia – Russia: Krasnodar and Nizhny Novgorod, also Tomsk,

Novosibirsk, & Khabarovsk until December 31– Caucasus: Tbilisi, planning to hire in Baku– Central Asia: Astana, Bishkek, Dushanbe, Tashkent

• Diminished info and services available• 2007 Customs Report – Survey of 8 Countries• Upcoming Event on December 11 in Washington, DC:

“Business Opportunities in Russia & Ukraine”

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Commercial Service in Eurasia

Ukraine www.buyusa.gov/ukraine/en/ Kyiv: Richard Steffens, Senior

Commercial Officer Tel: 380-44-490-4018Richard.Steffens@mail.doc.gov

Kazakhstanwww.buyusa.gov/kazakhstan/en/ Almaty: Stuart Schaag, Senior

Commercial Officer Tel: 7-727-250-4920

Stuart.schaag@mail.doc.gov

Russia

www.buyusa.gov/russia/en/

Moscow: Ms. Beryl Blecher, Senior Commercial Officer Tel: 7-495-737-5030 beryl.blecher@mail.doc.gov

St. Petersburg: Keith Silver, Principal Commercial Officer Tel: 7-812-326-2560 keith.silver@mail.doc.gov

Vladivostok: Irina Konstantinova, Commercial Specialist Tel: 7-4232-499-381 irina.konstantinova@mail.doc.gov

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Sources of Trade & Project Finance

• Overseas Private Investment Corp. (www.OPIC.gov) provides (1) political risk insurance/reinsurance and (2) corporate and project financing (projects with at least 25% U.S. ownership)

• U.S. Export-Import Bank (Caucasus & Central Asia portal: http://www.exim.gov/centralasia/index.cfm, Russia portal: www.exim.gov/russia/index.cfm) provides loan guarantees, insurance, and direct loans to help foreign buyers finance purchases of U.S. goods and services.

• U.S. Department of Agriculture, Foreign Agricultural Service (www.fas.usda.gov) provides U.S. agricultural exporters with short- and intermediate-term commercial financing support through Commodity Credit Corporation (CCC) export credit guarantee programs. (Also, reports and analysis, trade missions and other events, trade leads, etc.)

• IFIs - European Bank for Reconstruction and Development (www.ebrd.com), Asian Development Bank (www.adb.org), World Bank (www.worldbank.org) have trade finance programs and offer consulting, goods and services procurement opportunities.

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Ellen House, Desk OfficerOffice of Russia, Ukraine & Eurasia202-482-0360, ellen.house@mail.doc.gov

The U.S. Department of Commerce is here to assist you to search for opportunities, and assist in any market barriers that you may encounter.