Russia presents a great opportunity for wholesale, retail and franchise investment, despite its lackluster economic growth last year and ongoing dispute with the West over Crimea, academics said yesterday.
The spate of trade sanctions against Russia will have limited impact given the country’s long stretch of terrestrial borders and rich natural resources, including oil, gas, coal and precious metals, Taiwan Institute of Economic Research (TIER, 台經院) deputy director of international affairs Wu Fu-cheng (吳福成) said.
The country of 142 million people has pledged to open its market to foreign telecommunications operators, as well as insurance, banking and distribution companies, both to meet WTO obligations and to boost its economy, Wu said.
While Taiwanese companies may not be competitive in telecom, banking and insurance operations, they can consider venturing into Russia’s wholesale, retail and franchise businesses, where foreign investors may own a 100 percent stake, Wu said.
Bilateral trade is small at US$4.74 billion because of language, cultural and geographical barriers, he said.
The trend may take a different turn since Russia became a WTO member in August 2012 and it will accelerate its pace of deregulation and cut tariffs to attract foreign investment, he said.
Based on TIER research, Taiwan-made cars, auto parts, hardware and machine tools, among other products, will be highly competitive in the Russian market, where companies from China, South Korea and Japan have lavished investment and advertising money to boost their presence, he said.
Taiwanese carmaker Yulon Group (裕隆集團) has already made a foray into Russia with its own brand, Luxgen, smartphone maker HTC Corp (宏達電) has plans to strengthen sales there and Chailese Holding Co (中租) has shown a keen interest in tapping business opportunities.
Taiwanese banks and insurance companies have NT$143.7 billion (US$4.74 billion) in aggregate exposure in Russia and none in Ukraine, the Financial Supervisory Commission said.
Robert OuYoung (歐陽禹), chairman of ANKO Food Machine Co (安口食品機械), which designs and manufactures machines that make Chinese dimsum and Indian food, suggests Taiwanese investors focus on second-tier Russian cities — with a population of 1 million — to pursue higher profits.
OuYoung, whose company has business dealings in Russia, advised caution when investing in Russia. He recommended that Taiwanese investors avoid joint ventures and demand payment prior to exports.
While Russia ranks third in terms of foreign reserves, the gap between rich and poor is large and the country is lacking in political stability and law enforcement, OuYoung said.