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Monthly Newsletter - October 2012

Growth in Customer Confidence, Low Unemployment and Rise of the Internet Transactions Era

With the stabilisation of the political situation (at least temporary) in Russia, came a significant improvement in customer spending. In fact, on some indicators Russia beats almost all the countries of the European Union.

There are all reasons to be optimistic: the lowest unemployment rate for the last 10 years, the growing aggregate consumer confidence index, predictable politic situation and more. Therefore, the confidence of citizens in the economic well-being, including the ability to make major purchases, to accumulate savings, and so on, has been steadily increasing.

With the socioeconomic changes within Russia, certain industries seem to grow especially fast. For example, internet business and digital services that have been rising everywhere in the world have captured even stronger positions in Russia.

According to the Russian Association of Electronic Communications (RAEC) and the Higher School of Economics, the Russian Internet market in 2012 is projected to grow 30%.

Despite the fast growth, some major industry players such as Amazon still restrain from working in Russia. This gives the opportunities to competition. For example, the Marketplace AliExpress, owned by the Chinese Alibaba Group expanding west sees Russia as a strategic market. Indeed, only in 2010 and 2011, the number of buyers of the resource from Russia increased by 600%. Last year, 6.1 million Russians have made online purchases, which are 16.5% more than the year before. According to the Public Opinion Foundation, in 2011 the e-commerce market in Russia amounted to 10.7 billion dollars, which is about 7% of the largest e-commerce market in the world – Europe. This number is growing significantly with the improvement of the freight and internet infrastructure in Russia.

In order to secure web transactions, some new regulations have been introduced by the Central Bank of the Russian Federation. Credit institutions are obliged to identify the computers and networks of users of Internet banking and shopping. 

Formally, the new requirements are introduced in order to counteract the legalization (laundering) of proceeds from crime and terrorist financing. At the same time, banks collect IP-and MAC-addresses of the internet users participating in transactions, in order to protect innocent clients and detect fraud. Although, according to experts, for the experienced user is not difficult to change the MAC-address of their computer and network if they are to commit unlawful acts, the change in regulations will still make the difference. So that if a shopper uses open Wi-Fi networks that are available in many malls, restaurants, hotels, shops, etc., it will be easier to prove their innocence and protect their rights in court, when needed.  In addition, under the current law, banks are not required to identify customers when making non-cash transactions amounting to 15 thousand rubles (about £300).Who will be entitled to get credit in cases of fraud in such transactions is not explained in the draft proposal of Bank of Russia.

Overall, the new regulations are a significant progress for Russia, where about 80 million bank accounts are serviced remotely: they enhance security of the online transactions and facilitate the rapidly growing internet business.


You cannot understand Russia with the mind alone (Umom Rossiyu ne ponyat')

Russian poet Fyodor Tyutchev (XIX century) wrote a short poem which is now cited by many Russians and normally goes as an extra proof in the argument that Russia lives its own way. The idea of Russian uniqueness is hidden somewhere in the national subconscience and reveals in lots of circumstances - from the "special" type of the Russian democracy to the way Russians tend to fulfil the task. Russians rightly pride themselves on their achievements in science, culture, military arts and many other issues. So, may be, they indeed have their own way?

One of the best translations of this short poem has been offered by Anatoly Liberman:

You will not grasp her with your mind 
Or cover with a common label, 
For Russia is one of a kind – 
Believe in her, if you are able...


"Doing business in Russia" workshop in London

Ignaty Dyakov will be delivering a workshop on Doing business in Russia at the City Business Library on 9th November. Please ring CBL on 020 7332 1812 to book a place. Free admission.

Russia related events in the UK

Annual Russian Film Festival starts on 2nd November. All films are subtitled in English. This year the screenings will come to London, Cambridge, and Edinburgh. The programmes is available here



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