Events

Recent Business Dynamics in Eurasia: A Jump Forward?

January 21, 2002 // 11:00pm

Summary of a Kennan Institute meeting at the Woodrow Wilson Center with Trevor Gunn, Director, Business Information Service for the Newly Independent States (BISNIS), U.S. Department of Commerce, and Adjunct Professor, Center for Eurasian, Russian, and East European Studies, School of Foreign Service, Georgetown University

In a recent presentation at the Woodrow Wilson Center, Trevor Gunn, Director, Business Information Service for the Newly Independent States (BISNIS), U.S. Department of Commerce, stated that the commercial outlook in Russia continues to improve at a surprising rate. According to Mr. Gunn, many of the companies that work with the Commerce Department are reporting that a significant portion of their international growth is occurring in the Russian market. Gunn also noted that with countries such as Ukraine showing record economic growth, business executives are beginning to see new opportunities to invest in the entire region.

Mr. Gunn stated that the recent economic success could be attributed, in part, to the current policies of the Russian leadership. According to Gunn, President Putin's economic advisors have shown a willingness to research and develop various economic sectors (outside of oil and gas) in which Russia may have a comparative advantage. This new, innovative attitude not only enhances Russia's ability to compete in the international market, but also increases the likelihood that recent economic gains will be sustainable in the future. Mr. Gunn noted that President Putin has been able to avoid a confrontation with Russia's powerful oligarchs, thereby increasing the stability of the country's largest conglomerates.

Mr. Gunn also pointed out that a second factor in sustaining Russia's economic progress is the consistent upgrade of the country's credit ratings. Higher ratings mean that various international financial institutions are more willing to underwrite transactions. Mr. Gunn stated that recently, the Export-Import Bank has been a key actor in underwriting sub-sovereign transactions. Foreign companies are now able to conduct transactions with a number of Russian municipalities and regions, thereby increasing the amount of foreign investment throughout the country. Mr. Gunn also noted that the oil and gas, telecom and medical equipment sectors have received the most foreign investment, but trade potential also exists in other areas such as consumer goods.

Another key indicator used for predicting an economy's success is the amount of cash being used in financial transactions. Mr. Gunn concluded by citing a 1998 report by the European Bank for Reconstruction and Development, which stated that 91 percent of all financial transactions in Russia involved some form of counter trade (barter trade). However, analysts now estimate that number has dropped to 60 percent, thereby funneling more cash into the monetary system. This in turn has had a stabilizing effect on the aggregate economy and has assisted leaders in developing a more balanced macroeconomic policy.

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