17 October 2006 - A new PricewaterhouseCoopers study, ‘Risks & Rewards – Forest, paper and packaging in Russia’, aims to help companies in the industry assess the risk and reward equation of entering or expanding in the region. The study includes detailed analysis of the economic, political and cultural environment for the industry, which lie behind the obvious growth potential - and risk - for many of the global players in wood products, paper and packaging (both fibre and non-fibre).
With over a fifth of the world's forest resources, a booming domestic market, and attractive Far Eastern export prospects, the Russian forest, paper and packaging sectors is a hot investment market, growing robustly at a time when most of the global sector is contracting and rationalising. The country is currently harvesting well below what experts consider to be a sustainable rate, giving the country great potential for the development of modern, sizeable forest, paper and paper-packaging industries.
Robert Barnden, Global Forest, Paper & Packaging leader, PricewaterhouseCoopers says:
“Multinational forest, paper and packaging companies would do well to consider doing business in Russia. Although companies will need to monitor legislative developments such as the new Forest Code closely, the environment should become increasingly favourable.”
Despite its vast natural resource base, Russia’s forest-based products industry is not a global player, except in low-value raw timber, which it exports in large quantities. With regard to higher-value-added products, Russian domestic demand has grown rapidly in the past decade, making it an attractive and growing import market for types of paper and packaging which are not yet produced domestically. However, the Russian government is increasingly interested in championing domestic industry as a substitute for imports, particularly in natural resource-derived products. This could in time have a significant impact on world supply and demand.
Many potential investors may be deterred by the unique and significant geographic, infrastructural and political challenges therein. Also, changes to regulations are sometimes unpredictable and the availability of finance, technology and people skills to maximise opportunities is restricted.
Robert Barnden, Global Forest, Paper & Packaging leader, PricewaterhouseCoopers says:
“The current risks of investing in Russia will not be eliminated overnight, but they can be managed, in our view. The Russian Government is clearly working hard to reform industry legislation and tariffs to stimulate development and expand the domestic industry.”
Investing companies should be thorough in evaluating local partners with respect to transparency, corporate governance, and forest management. Locations should also be carefully vetted, both in terms of infrastructure, be it existing or planned, as well as local authorities’ attitude towards forestry. Companies also need to take into account inflation, exchange rates and rising wage costs when calculating their investment scenarios.
Alexei Ivanov, Russian Federation Forest, Paper & Packaging leader, PricewaterhouseCoopers says:
“Foreign companies investing in Russia are expected to lead the way in terms of environmental protection, the use of resources and community participation and can anticipate the need for continuing capital inflows to upgrade outdated facilities – however, these investments should ensure them a long-term role in a growing market.”
Notes to Editor
- 'Risks & Rewards – Forest, paper & packaging in Russia’ is available to download in PDF format from 17 October at www.pwc.com/fpp.
- PricewaterhouseCoopers Global Forest, Paper & Packaging practice is comprised of a network of industry professionals located in over 30 countries around the world. PricewaterhouseCoopers in Russia is the largest consultancy and audit practice in the country with around 1,000 professionals. It offers deep industry specialisation across a broad range of services.
- PricewaterhouseCoopers (www.pwc.com) is the world’s largest professional services organisation. Drawing on the knowledge and skills of more than 130,000 people in 148 countries, we build relationships by providing services based on quality and integrity.
PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
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