Bloomberg: Emerging markets trump the US

BRIC Stocks Top Developed Markets Over Decade: Chart of the Day

By Eric Martin

Dec. 10 (Bloomberg) — Stocks in Brazil, Russia, India and China beat developed-country equities this decade as surging commodities lifted the fastest-growing markets, while investors lost money in advanced nations from the U.S. to Germany.

The CHART OF THE DAY, based on a note from Bespoke Investment Group LLC, shows that so-called BRIC stocks, led by Russia, climbed since the end of 1999 as equities in the biggest developed markets retreated. Emerging-market stocks rose as oil prices almost tripled, copper quadrupled and economic expansions boosted demand. A collapse of technology shares in 2000 and banks last year spurred losses in the U.S., Japan, the U.K., Germany, France and Italy.  Read more…

Military leadership skills for a tough business market

Author during joint NATO-Russian ops in Bosnia in 1998

After leaving the Army, I decided to take my acquired military leadership techniques to launch my own technology company in Ukraine.   In the military, we are taught to complete any mission no matter how tough it is and therefore, I did not expect that starting up a new company from scratch would be easy.  However, I had plenty of opportunity to draw from my own military experiences to manage the local staff by developing a process that trained, mentored and motivated people using proven military leadership techniques learned from my years as an Infantry grunt.   Please keep in mind that I don’t mean to motivate your employees by yelling in their faces and making them do push-ups.  Instead, I am talking about the esprit de corp that many military organizations use to form cohesive teams and that can take the initiative.

“Shoot, move and communicate.” When I was stationed in Germany, I was once with a group of soldiers and officers being assigned to different units to deploy down range to Bosnia where I was to link with my new rifle platoon.  While waiting around, some of the guys began arguing and bragging about which branch of service is the best and how they will be better off using those skills later in the private sector.  Some soldiers from the Signal Corp were looking forward to earning big bucks after they complete their military commitments.  And how they were ever right!   It did not take long to notice the IT companies recruiting these soldiers during the Dot Com boom.   Supply, Medical and other sectors from the military also had promising outlooks to put their skills to use in the civilian world where supply chain, logistics and health care careers awaited them.   But what about the combat arms where your primary skill is to destroy things?  A small group of us happened to be the only combat infantry grunts within this group deploying at the time.   One of the soldiers then asked us, ”What can you guys do besides fighting on the front lines?”  A young sergeant replied with three simple words taken from the combat arms text book: “Shoot, Move and Communicate.” 

So how does this translate then in the private sector you might ask? It is simple and relevant:
Shoot – Launch your product or service and shoot straight with a proper business plan;
Move – Be proactive and never sit idle or your competition will get you!
Communicate - Effectively address your customer’s pains in order they see the benefit in what you are trying to sell.

Too often, communication is overlooked. In today’s business, companies are no longer confined to one location, but instead cover vast geographical locations.  How you may communicate in Chicago, USA will differ on how you communicate with engineers at your company’s oil rig in Baku, Azerbaijan or your supply chain distribution center in Belgrade, Serbia.  Different cultures, languages and other factors may impose challenges in understanding within the global market place.

Likewise, I have read many articles on this topic and this is by no means new stuff.
Many successful CEO’s and successful entrepreneurs have effectively applied these skills. You can find very good material regarding this topic on the Internet where it is applied in different ways where various businesses “attack” new markets and defend their positions on the market place from the “trenches.” Most importantly, you don’t have to go to boot camp to learn many of these useful techniques!

In my world, it means leading the attack for organizations on business performance execution on the “battlefields” in tough emerging markets.  In business as in the military, great leaders succeed by relying on values, protecting constituents, developing a clear vision, identifying competitors’ weaknesses, measuring actions and establishing tried and true leadership tactics.  This can be no truer than taking a new product to export to Russia or when trying to invest in a new start up company in places like Ukraine.  Steve Forbes also addresses some of these topics in his new book: Power, Ambition & Glory where he discusses great leaders and conquorers of the ancient world as compared to CEOs of the modern world.

As with the military, your business venture must have a purpose.  My purpose is to protect and serve.  Protect your brands, consumers, employees and shareholders just as one would when leading Infantry grunts in harm’s way on the battlefield.

Next, your business venture must have a vision.  Not only do you have to define your vision, as a business leader you must communicate that vision within and outside your organization.  Today’s reality means crossing continents and time zones between vastly different cultures and languages.   Here, I found it very useful to establish a clear chain of command and to counsel employees on a monthly basis.  I developed a system based on the U.S. Army counseling system and found it to be very effective when managing operations at our Ukraine facility.

Finally, as business leaders we need to take time to establish targets and evaluate achievement.  Adjustments are made when targets are not hit and solutions are developed to maintain success much like a soldier conducts target practice on a regular basis.  This can be done easily using my techniques mentioned above.  A counseling system that documents your vision, sets targets and evaluates performance makes managing people much easier.  Like the military, companies that overlook this will find themselves crushed on the battle field.

If you have any ideas or comments from your own experiences, I would enjoy receiving your feedback below. If you wish to learn more how your business can benefit from these techniques, I look forward to discussing one on one.

NOTE: WANT TO USE THIS ARTICLE FOR YOUR E-ZINE, BLOG OR WEBSITE?  You can, as long as you include the following statement in its entirety:  Andy Verich is an Emerging Markets Expert covering the Balkans, Eastern Europe, Russia and the CIS.  If you are ready to empower your business with the vital tools and information to uncover the untapped emerging market opportunities, visit him now at: www.andyverich.com.

Russia offers long-term opportunities for U.S. exports

By far, Russia’s economy relies on the production of its natural resources.  In order to tap those resources, Russians buy Western equipment.  Although the global crisis has affected both countries, Russia remains an important market for U.S. exporters.    

Despite the crisis, U.S. exports to Russia totaled US$1.2 billion in Q1 2009.  Among the leading exports to Russia in 2009 were products from the aerospace, automobile, and meat products industries.  Other opportunities exist for machinery products driven by demands in the Russian oil, gas, agriculture and timber sectors.  Get more facts here…

Is the Russian Bear Beating the Global Recession?

In the next few weeks I will be posting observations from various sources including myself on how Russia and other emerging markets weather the global economic fall out of 2009 and if there are signs of recovery for 2010.

Is the Russian Bear beating the recession?  There is no question that this region was hit hard and Russia was no exception.  Its credit rating was downgraded and its construction sector nearly ground to a halt.  However, as demands for commodities increase in places like India and China, the Russian market maybe showing signs of recovery.

Read here:  How Russian Bear beat the recession early

Looking for a job in an Orthodox organization?

I found a great career website source at www.OrthodoxJobs.com:

OrthodoxJobs.com is the source for Orthodox Christians who are seeking employment in an Orthodox Christian or Christian environment. In its current version, it is a posting site of Job opportunities for any Archdiocese, Metropolis, Diocese, Parish, or Organization that falls under the jurisdiction of SCOBA, the Standing Conference of Canonical Orthodox Bishops in the Americas. To post a job on this site, simply send us a job ad/posting with contact information and duration of the posting. Future releases will include resources for employers and employees.

OrthodoxJobs.com is a collaborative effort of the Information Technology Commission of SCOBA, the Department of Internet Ministries, and the Office of Vocation and Ministry at Hellenic College. For questions, email the webmaster

Click here to visit the site.

Kissinger on Russia

This week I had the opportunity to hear Henry Kissinger speak at a conference in honor of the famous Soviet diplomat Andrei Gromyko in Washington, DC. Kissinger along with Anatoliy Gromyko, the son of the late Andrei Gromyko, revisited many important meetings and events that took place during the Cold War. Kissinger explained that people often mistake the Cold War era as a time when foreign affairs were simple and predictable since the world was divided into two camps. However, he stressed that it was not simple but a very complex relationship that managed to avoid direct military confrontation between the two super powers.

Kissinger also stressed how important Russia is even today. It is connected to Europe, Asia and the Middle East. It is the largest country in terms of area and resources in the world and it has nuclear capability. Kissinger criticized U.S. policy towards Russia after the Cold War.

It is no secret that Kissinger was a strong critic of U.S. policy from the 1990′s to the present. Most notably was his opposition to the recognition of Bosnia and Herzegovina as a sovereign state, which he described as a “foolish act.” Regarding the Balkans, he made additional public statements that the Serbs and Croats should be allowed to join their respective countries and that the Rambouillet Agreement which would have forced the Serbs to give all its territory access to NATO ground forces, “was a terrible diplomatic document that should never have been presented in that form.”

Regarding the current US president, Kissinger joked, “Obama was my second choice.” Although he stressed he disagrees with most of Obama’s policies, he did compliment recent actions of the Administration for getting U.S.-Russian relations back on track. He also noted that the current policies Obama has taken towards Russia were the same as what he advocated to both candidates prior to the 2008 presidential elections.

As for Afganistan, it was noted that Andrei Gromyko was initially opposed to sending Soviet troops to Afganistan. Kissinger also made a point that he disagrees with the current policies in Afganistan regarding the US policy to create a centralized government. Although he supports the goal of eliminating the threat of terrorists using Afganistan as a launch pad of attacks against the US, he said outside forces can never unite the various tribal regions.

Several questions were put to Kissinger during the conference regarding Russia’s recent disapproval of much of U.S. policies with Iraq, Iran, etc. Kissinger explained that it is not that they disapprove, but that the Russians are concerned that the United States does not know what it is doing in these areas. Kissinger believes that what the Russians really worry is that the Americans will come in and leave the place worse than when they arrived. When one sees the resulting chaos in Kosovo, Iraq and other places where the US intervenes, the Russians may have a point.

NOTE: WANT TO USE THIS ARTICLE FOR YOUR E-ZINE, BLOG OR WEBSITE?  You can, as long as you include the following statement in its entirety:  Andy Verich is an Emerging Markets Expert covering the Balkans, Eastern Europe, Russia and the CIS.  If you are ready to empower your  business with the vital tools and information to uncover the untapped emerging market opportunities, visit him now at: www.andyverich.com.

Fiat To Benefit From Serbia-Russia Free Trade Deal

Serbia, situated in the “suburbs” of Europe, offers numerous investment opportunities and has one of the lowest corporate tax rates in Europe.   In addition to its natural resources and educated work force, Serbia is becoming the “Gateway to Russia” in terms of trade for Western companies by enjoying virtually free trade access to Russia’s growing consumer market.   Since the economic crisis, Russia began imposing heavy tarrifs on foreign made autos sold in Russia.  However, Fiat is reportedly planning to take advantage of a Free Trade accord between Serbia and Russia that will allow it to export Serbian built Fiat and Chrysler cars to Russia.

Click here for article: Fiat to Benefit from Serbia-Russia Free Trade Deal from the WSJ Business online site.

Russia enters its second round of privitization

Andy Verich in Sochi

Last week while attending the 2009 International Investment Forum in Sochi, Russia, I managed to obtain a glimpse of where the Russian economy is heading for 2010 and beyond.

The aim of my visit to the Russian resort city on the Black Sea, was to participate in the Forum in order to have a clear view of the opportunities that the Krasnodar region and Sochi will offer for a business client. Of interest was the short term / mid term economic developments and opportunities in the Krasnodar region linked to the Sochi Olympics in 2014.

Prime Minister Vladimir Putin, opened the forum’s first session where he participated in a forum discussion along with Jeffrey Immelt, the Chairman & CEO, of General Electric; John Mack, Chairman of Morgan Stanley; and the founder and President of Texas Pacific Group Investment Fund, David Bonderman which represents the largest private equity investment firm in the world.

Putin made several announcements regarding new mechanisms for economic recovery to attract investments in the construction of infrastructure, power stations, roads, railroads and residential housing.  He also announced the lowering of interest rates at the central bank.  Morgan Stanley’s CEO remarked that since the crisis, there are $5 trillion in the US and $7 trillion in Japan now waiting on the sidelines. As this money moves into the investment market, Russia will be a “huge benefactor of that capital.”   Because of the rising BRIC (Brazil, Russia, India & China) economies, the CEO of General Electric announced that already 80% of their operations are outside of the U.S. which partly includes Russia. The CEO’s presence in Russia was an initiative to further increase GE’s presence in Russia to take advantage of Russia’s vast opportunities.

Most of the above mentioned forum participants noted a reduction in corruption and an increase in transparency, specifically in the Krasnodar region. Krasnodar Governor Tkachev was congratulated for his efforts to improve the business climate in Krasnodar.

According to public information, the Russian government conservatively estimated last year that the 200 construction projects for the 2014 Olympics would cost $12 billion. The state promised to inject up to $7.5 billion, with the rest coming from the private sector. With the accounting of ruble losing against the dollar, the total amount has been reduced to $9.2 billion. The government estimates at least $2.5 billion will be invested by the private sector in Sochi alone.

According to the Forum organizers, 112 agreements amounting to €13.8 billion were signed at the forum:
- 64 agreements among them to the amount of €8.4 billion were signed by 11 Russian regions.
- The Governor of Krasnodar signed 35 agreements amounting to €4.4 billion.
- Krasnodar Region presented 1,500 investment projects totaling €27 during the forum

I also got the chance to meet privately with officials from the Construction Department of the region of Krasnodar, where much of the construction is ongoing. They also noted that there are opportunities in this region that are unrelated to the Olympics in infrastructure, logistics, and agriculture. International contractors are welcomed and needed to assist the local construction sector.

According to the Krasnodar officials, decisions can be and are made locally. I also heard from some other Russian government officials that they are encouraging the decision making process to take place locally and to not rely on the government or Moscow.

One of the complaints among Russian business participants was regarding business credit and financing. Russian banks were previously charging interest rates as high as 20% . Putin suggested that the banks should lower their rates eventually down to 6%.   According to one of my contacts at U.S. EXIM Bank, some previous recipients no longer need to rely on U.S. export products due to their success in Russia. However, foreign companies selling U.S. content in Russia can rely on U.S. EXIM products to reduce risk utlizing some of the stronger local Russian banks. As of this week, the Central Bank of Russia announced it will slash its rates to 10% and further rate cuts are predicted to follow.

Driving along the road from the Sochi seaside to the Krasnaya Polyana Olympic village where I was staying, there was much evidence of extensive construction, new roads, tunnels, bridges, power plants/electrical lines, and the beginning construction of a high-speed rail. Also interesting was the evidence of opportunities in the Krasnodar region not related to the Olympics. Besides the need for affordable residential housing, roads and infrastructure, Krasnodar offers tremendous opportunities in wine production, agriculture and timber.

Interestingly, other regions within and outside of Russia were also being promoted at the Investment Forum from Armenia, the Crimean region of Ukraine, Kalmyk Republic, and Caucuses.

I also heard from other Russian businessmen who reported movement in the construction sector was starting up again in the Moscow and St. Petersburg regions due to government intervention during the economic crisis.

In conclusion, Russia offers tremendous opportunities in construction, agriculture and infrastructure development which will offer long-term opportunities for investors. The forum portrayed optimism that Russia and the neighboring region will be a magnet for investment as the global economy recovers. Already Russia is in 5th place for foreign direct investment inflows according to the U.N. Conference on Trade and Development only behind the U.S., France, China, and Britain.

Despite the global economic fallout, Pepsi, Boeing, and John Deere have announced substantial large scale investment plans in Russia for 2010. As energy prices stabilize to normal levels, and demands increase on Russian commodities from China and India, new opportunities will open up in 2010:

• New wave of privatization – Experts predict that since the economic crisis, over 50% of the Russian economy is at least temporarily under state control. As major developers and retailers went bust and construction projects came to a halt, Russia’s top largest banks were forced to step in and take stakes in these indebted companies converting more debt into equity. However, experts believe this is a short-term trend. Recent government announcements indicate a new wave of privatization is taking place as the government offers stakes in these companies to private investors in order to close the gap on the deficit and to avoid heavy reliance of energy prices to maintain normal levels in the state coffers. This trend is also expected to follow with a new wave of mergers and acquisitions as private investors take advantage of lower prices, especially in the real estate sector.

• Krasnodar Region – Sochi will host the 2014 Winter Olympic games marked by heavy investment and construction of the Krasnodar infrastructure systems, Casinos and Black Sea resort developments.

• Energy – Russian oil production output this year has reached record highs since the fall of the Soviet Union. Russia’s Gasprom reports that gas exports to Europe have finally stabilized since the last year’s gas issues. Merrill Lynch Russia predicts oil will rise to $82/bbl before the end of 2010.

• Agriculture and Forestry Sectors – Russia, Ukraine and Kazakhstan contain the world’s largest land areas for agriculture and forests. At the height of last year’s economic crisis, Russia reported the largest grain harvest since 1990. This sector continued to grow in 2009 and vast untapped lands will attract even further agricultural development.

The presence of Morgan Stanley, GE and other US heavy weights support this conclusion.

NOTE: WANT TO USE THIS ARTICLE FOR YOUR E-ZINE, BLOG OR WEBSITE?  You can, as long as you include the following statement in its entirety:  Andy Verich is an Emerging Markets Expert covering the Balkans, Eastern Europe, Russia and the CIS.  If you are ready to empower your  business with the vital tools and information to uncover the untapped emerging market opportunities, visit him now at: www.andyverich.com.

Russia has fastest hotel construction rate in Europe, report says

Russia is the king of hotel development in Europe, according to the June 2009 Smith Travel Research Global Construction Pipeline Report, quoted by Business Travel News online.

As of June, Moscow has the largest number of active rooms in the continent: 5,127 of the total 94,695, which includes projects from the planning stages to those under construction. Russia is also one of the countries seeing the most development, said STR vice president of content management Duane Vinson.

“I don’t think the global recession has impacted Russia as much as its own internal issues have, so we’ve continued to see a lot of development in that country,” Vinson said in a statement.

Other countries seeing a good deal of hotel development include Germany, France, Spain and the United Kingdom, according to Vinson. London’s 4,968 rooms are the second-highest number, followed by Berlin’s 4,720, the report said.

Hotel construction in Europe has its heaviest concentration in the upper upscale and upscale tiers, according to the report. Together, the two tiers account for 42.6% of the hotels under construction at the end of June.  Click here for original article

Why invest in Srpska?

An entity of Bosnia Herzegovina, the Republic of Srpska is recognized within the constitution of Bosnia since 1995.

Foreign investment

According to sources in the Srpska government, recent strategic partnerships were formed between the Iron Ore Mine Ljubija Prijedor and a leading British steel producer LMN; and the Russian company Yuzuralzoloto with the Lead and Zinc Mine Sase Srebrenica. Additional foreign investments include privatisation of Telekom Srpske, which was acquired by the Serbian Telekom Srbija for (€646mln, and the sale of the petroleum and oil industry, based in Bosanski Brod, Modrica and Banja Luka, to Zarubezhneft of Russia, whose investment is expected to total US$970mln in the coming years.  On May 16, 2007 the Czech power utility ČEZ signed a €1.4 bln contract with the Elektroprivreda Republike Srpske, to renovate the Gacko I power plant and build a second, Gacko II.  Today Srpska offers a number of investment opportunities in waste and waste water treatment infrastructure and tourism sectors.

External trade

In recent years exports (not including trade with the Federation of Bosnia and Herzegovina) have grown significantly and the level of import coverage has improved – from 1,130,518mln KM (€565mln) and 38.3% in 2005, to 1,539,229mln KM (€770mln) and 55.8% in 2006. In the first two months of 2007 exports grew 19% year on year, and imports by 39%.  In 2008 exports amounted to €960mln and imports €2.07bln.

Taxation

Since 2001, Republika Srpska initiated significant reforms in the sector of the tax system, which lowered the tax burden to 28.6%, one of the lowest in the region. The 10% rate of capital gains tax and income tax are the lowest in Europe and highly stimulating for foreign investment, and there are no limits on the amount of earnings. Increasing the number of taxpayers and budgeted incomes, and creating a stable fiscal system, were necessary for further reforms in the fields of taxation and duties; this area is a priority goal of the RS authorities. VAT has been introduced in 2006. Income tax is 46% in the RS, compared to nearly 70% in the Federation, and the corporate tax rate is 10%, compared to 30% in the Federation. These tax advantages have led to some companies moving their business to RS from the other entity.

Salaries

In January 2007, the average wage was 804KM (€400 gross) or 531KM (€265 net).  Two years later, in January 2009, the average salary was 1228KM (€615) gross and 819KM (€410) net.   SOURCE: Wikipedia online

NOTE: WANT TO USE THIS ARTICLE FOR YOUR E-ZINE, BLOG OR WEBSITE?  You can, as long as you include the following statement in its entirety:  Andy Verich is an Emerging Markets Expert covering the Balkans, Eastern Europe, Russia and the CIS.  If you are ready to empower your  business with the vital tools and information to uncover the untapped emerging market opportunities, visit him now at: www.andyverich.com.