As sanctions on Russia continue, many Asian countries are now finding this an opportune time to establish closer trade and investment links with Russia.
It makes sense: 70 percent of Russian territory is physically in Asia, and the country has a reasonably sized middle class consumer base. Europeans have stopped selling to them and the Rouble is extremely competitive right now, having lost 50 percent of its value in the past two years – Russia is capable of offering more bang for the Asian buck.
One of the leading Asian hubs that has begun to explore the Russian market is Singapore. Bilateral trade between the two countries is US$5.4 billion, with Russia being Singapore’s 21st largest trade partner.
That means there is plenty of room for trade growth, particularly as the Russian market is receiving heavy investments in infrastructure and services ahead of the World Cup next year.
Singapore Prime Minister Lee Hsien Loong has urged Singaporean companies to “Invest time in Russia to see results”. Following a trade and development trip to Moscow, Lee told the media, “If you look at Moscow city, their redevelopment, their upgrading which they want to carry out, the transformation of the old industrial infrastructure, which is now becoming really outdated and they want to redevelop the industrial estates into, in some cases modern business parks, in some cases arts and cultural centers and in other places education centers, very ambitious plans. So urban master planning, talking about transportation, building public transport, there are many business opportunities to be had. But you have to understand them and you have to fit in”.
This is pertinent for Singapore, especially as the government, together with local partners, has been very active across Asia in developing and building business parks and related infrastructure – exactly the type of experience and investment support Russia is looking for.
In terms of public transport, for example, buses in Russia’s largest cities have been changing their badges – what used to be European marked Scania and Volvo are now Asian made King Long and Daewoo vehicles.
Singaporean companies appear to have been listening. Singaporean investment has been growing at a rate of 10 percent or more in the past three years into Russia. Lee further commented to the media, “Even with our different international environments, we’ve significantly grown our relationship [with Russia]. When there are opportunities, we should take them and make the most of them. Don’t wait for the world to improve.”
Singapore is also exploring an Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU). The EAEU comprises five countries: Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia.
Collectively, they have a market of 180 million people and total GDP of US$4.4 trillion in purchasing power parity terms. This is being fast tracked: Singapore has stated it wants an agreement in place by 2018, which is the 50th anniversary of diplomatic relations between the two countries.
That is significant because if a Singapore-EAEU deal can be reached, it paves the way for an ASEAN-EAEU FTA to be brokered, an arrangement which would open up significant Russian market opportunities for Asian nations, and vice versa.
Vietnam already has an FTA with the EAEU, showing that matters are very much pointing in the direction of Asia for Russian trade and development.
Dezan Shira & Associates are a full service advisory practice assisting foreign investors with legal, tax and operational issues for their investments throughout Asia. Established in 1992 we are one of the largest professional firms in Asia with over 30 offices and 600 professional staff.
We can assist Russian investors into Asia and have offices in Singapore and throughout the region. Please contact: email@example.com. Our Russian partner firm, Olimpline can assist with foreign investment into Russia. Please contact firstname.lastname@example.org or visit our website at www.dezshira.com
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