GLOBAL BUSINESS SCENARIO

The financial crisis in all over the world has soaked up the economies of the
globe. The economic position has declined dramatically, the banks have given
away & a significant droop has resulted in the stock prices. Because of the rise of
real state &financial anticipation in US, these crises have started in 2007 & at the
end of 2008 it effect many economies. The large number of people was
unemployed because of this crisis; the government took many steps in order to
overcome this crisis. Many economics in all over the world considered this crisis
as an opportunity for them in order to re-generate there economy.

Financial crisis in Europe:

Many financial institutions have collapsed in Europe. The economy of Iceland
mainly relay on financial sector, due to financial crisis many problems were
create for them. As the financial institution of the country has fallen so the
government has to lend from International Monitory Fund (I M F) in order to save
Iceland economy. The people of Iceland were not satisfied what the government
was doing in order to overcome crisis therefore government of Iceland was
collapsed.

In order to get the trust of the business man & the customers the government of
Europe is planning to rise its expending & lowering the taxes.
Russians economy has feared that there economy may go down from poverty
line as its economy is significantly declining , & the reason that the Russian
economy is still stable is just because of its oil export.

Financial crisis in Asia:

As the world is inter-related with each other therefore financial crisis effecting the
west is also affecting Asia, which makes Asian economy worried. The effects of
crisis were seen in Asia also as stock exchange of many economies fall down,
currency losing its value, unemployment & other problems related to it has
started.

China, India & Japan biggest economies in Asia, Indian economy was flourishing
from period of 2007 to 2008 by 9 % due to its home market, still Indian economy
was also suffered from global crisis.

China's economy was also suffering from crisis & as a result unemployment
started there .china government was taking measures to over come the problem
of unemployment by offering recovery packages & also promoting their home
companies to invest outside the country.

Global financial crisis affected the Japan’s economy most, as Japan has already
suffered from its own crisis in 1990s .people were losing jobs there & hope of
recovery is minimized.

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GDP of the World

GDP and the Trade of the world by region from 2006 to 2008

GDP Exports Imports

2006 2007 2008 2006 2007 2008 2006 2007 2008

World 3.7 3.5 1.7 8.5 6.0 2.0 8.0 6.0 2.0

North America 2.9 2.1 1.1 8.5 5.0 1.5 6.0 2.0 -2.5

United States 2.8 2.0 1.1 10.5 7.0 5.5 5.5 1.0 -4.0

South and Central America a 6.1 6.6 5.3 4.0 3.0 1.5 15.5 17.5 15.5

Europe 3.1 2.8 1.0 7.5 4.0 0.5 7.5 4.0 -1.0

European Union (27) 3.0 2.8 1.0 7.5 3.5 0.0 7.0 3.5 -1.0

Commonwealth of Independent
States (CIS) 7.5 8.4 5.5 6.0 7.5 6.0 20.5 20.0 15.0

Africa 5.7 5.8 5.0 1.5 4.5 3.0 10.0 14.0 13.0

Middle East 5.2 5.5 5.7 3.0 4.0 3.0 5.5 14.0 10.0

Asia 4.6 4.9 2.0 13.5 11.5 4.5 8.5 8.0 4.0

China 11.6 11.9 9.0 22.0 19.5 8.5 16.5 13.5 4.0

Japan 2.0 2.4 -0.7 10.0 9.5 2.5 2.0 1.5 -1.0

India 9.8 9.3 7.9 11.0 13.0 7.0 8.0 16.0 12.5

Newly industrialized economies (4) b 5.6 5.6 1.7 13.0 9.0 3.5 8.0 6.0 3.5
(a) Include the Caribbean.
(b) China, Hong Kong, Republic of Korea, Singapore and Chinese Taipei.

(Source: WTO Secretariat)

http://www.economywatch.com/gdp/world-gdp/

The import and export of Asia dropped dramatically. In 2006 it was 13.5% and it
gradually decline by 11.5% in 2007 and just remain 4.5% in 2008 which shows a

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significant decline in export and the same situation happened with imports, the
trend of imports of Asia is also in declining slop.
And when we see the Europe situation regarding import, export we fined that the
Europe is showing and ever lowest growth in export from previous year, it remain
just 0.5% in 2008 from 7.5% in 2006, and it is a very highly decline in any region.
The export of North America in 2008 increased by 1.5% and from 2.5% the
imports have declined.
The world wide GDP in 2006 was 3.7% and it just remain 1.7% in 2008 while the
same happened with the export. The exports of the world were 8.5% in 2006 and
it reduced gradually and just remains 2.0% in 2008 which is a very high drop.
Similarly the imports of the world were 8.0% in 2006 that just remain 2.0% by
reducing in 2008.

The Forested GDP of 2010 by IMP World Economic Outlook:

Country/ region 2010 Forecast

World 2.5
Advanced economies 0.6
United States 0.8
Euro area -0.3
Germany -0.6
France 0.4
Japan 1.7
United kingdom 0.2
Canada 1.6
Other advanced economies 1.0
Newly industrialized Asian economies 1.4
Emerging and developing economies 4.7
Africa 4.1
Central and eastern Europe 1.0
Russia 1.5
China 8.5
India 6.5
ASEAN 3.7
Middle East 3.7
Brazil 2.5
Mexico 3.0

Source:http://www.economywatch.com/economy-business-and-finance-
news/economic-forecast-2009-2010-imf-raises-gdp-growth-expectations-09-
7.html

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Inflation rates of the world by month & year (1999-2010):

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

2010 2.6 2.1 2.3

2009 0 0.2 -0.4 -0.7 -1.3 -1.4 -2.1 -1.5 -1.3 -0.2 1.8 2.7 -0.4

2008 4.3 4 4 3.9 4.2 5.0 5.6 5.4 4.9 3.7 1.1 0.1 3.8

2007 2.1 2.4 2.8 2.6 2.7 2.7 2.4 2 2.8 3.5 4.3 4.1 2.8

2006 4 3.6 3.4 3.5 4.2 4.3 4.1 3.8 2.1 1.3 2 2.5 3.2

2005 3 3 3.1 3.5 2.8 2.5 3.2 3.6 4.7 4.3 3.5 3.4 3.4

2004 1.9 1.7 1.7 2.3 3.1 3.3 3 2.7 2.5 3.2 3.5 3.3 2.7

2003 2.6 3 3 2.2 2.1 2.1 2.1 2.2 2.3 2 1.8 1.9 2.3

2002 1.1 1.1 1.5 1.6 1.2 1.1 1.5 1.8 1.5 2 2.2 2.4 1.6

2001 3.7 3.5 2.9 3.3 3.6 3.2 2.7 2.7 2.6 2.1 1.9 1.6 2.8

2000 2.7 3.2 3.8 3.1 3.2 3.7 3.7 3.4 3.5 3.4 3.4 3.4 3.4

1999 1.7 1.6 1.7 2.3 2.1 2 2.1 2.3 2.6 2.6 2.6 2.7 2.2

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http://www.usinflationcalculator.com/inflation/current-inflation-rates)

Inflation rates of selected countries:

Inflation rates
Country
2008 2009
United states 3.8% -0.7%
Japan
1.4% -1.3%
Germany
2.7% 0%
China
5.9% -0.8%
France
2.8% 0.1%
United kingdom
3.6% 2.1%
Italy
3.4% 0.6%
Canada
2.4% 0.2%
Saudi Arabia
9.9% 5%
Thailand
5.5% -0.9%
Brazil
3.4% 0.6%
Pakistan
20.3% 14.2%
India
_ 10.7%
Bangladesh
8.9% 5.1%
Russia
14.1% 11.9%
Spain
4.1% -0.8%
Turkey
10.1% 6.5%
Iran
25.6% 16.8%

Sweden 3.5% -0.5%

(http:/www.cia.gov/library/publication/the-world-factbook/fields/2092/htm)

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Unemployment in the world (From 2000 to 2010):

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2000 7.1 7.2 7.1 6.9 7.1 7.0 7.0 7.1 7.0 6.8 7.1 6.9 2000
2001 7.3 7.4 7.3 7.4 7.5 7.9 7.8 8.1 8.7 9.3 9.4 9.6 2001
2002 9.5 9.5 9.4 9.7 9.5 9.5 9.6 9.6 9.6 9.6 9.7 9.8 2002
2003 10.0 10.2 10.0 10.2 10.1 10.3 10.3 10.1 10.4 10.2 10.0 9.8 2003
2004 9.9 9.7 10.0 9.6 9.6 9.5 9.5 9.4 9.4 9.7 9.4 9.2 2004
2005 9.3 9.3 9.1 8.9 8.9 9.0 8.8 8.9 9.0 8.7 8.7 8.6 2005
2006 8.4 8.4 8.2 8.1 8.2 8.4 8.5 8.4 8.0 8.2 8.1 8.0 2006
2007 8.3 8.1 8.0 8.2 8.2 8.2 8.3 8.5 8.4 8.4 8.5 8.8 2007
2008 9.1 8.9 9.0 9.2 9.7 10.0 10.5 10.9 11.2 11.9 12.8 13.7 2008
2009 14.0 15.0 15.6 15.8 16.4 16.5 16.4 16.8 17.0 17.4 17.2 17.3 2009
2010 16.5 16.8 16.9

http://portalseven.com/employment/unemployment_rate_u6.jsp

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 BUSINESS AND ECONOMIC ENVIRONMENT IN PAKISTAN

Pakistan is a developing country and world’s 27th largest economy based on

purchasing power. However Pakistan is facing hard time due to internal political
disturbance and insignificant foreign investment. Form 2001 to 2007 poverty level
reduced by 10%, GDP rise 5% to 8% “between” 2004-07 this was largely due to
the expansion of industrial sector.

Pakistan’s economic environment is greatly exaggerated by war against terror,

regular bomb blasts and global financial crisis which penetrated into domestic
economy through the route of considerable decline in Pakistan’s exports and a
noticeable decline in foreign direct investment. Despite support from the IMF and
other donors, Pakistan external account remains exposed to a host of
uncertainties.

Currently Pakistan is trying to improve taxes collection system, Pakistan is an

Agro base country 75% of its population is based on agriculture sector remaining
are doing other jobs. In Pakistan a big relief is given to agriculture sector
including tax remittance so 75% of the population doesn’t pay tax and remaining
25% majority has monthly income less then eligibility of tax payment that’s why
Government has very tiny amount of collection of tax in order to meet the
problem of large population. Local industry is suffering due to energy crises,
inflation rate and law and order situation there fore they failed to produce at there
full capacity and fail to meet market demand due to which a large gap is available
which is filling by countries like china who are able to take complete advantage of
such sort of gap which result currency devaluation.

Despite all the factors Pakistan is known as a fastest developing country in world
although it’s a poor country but growth rate has been batter than global average
growth rate it shows that country have it’s potential to give back more then
expectation of investors.

Overall the scenario is not that much appreciable but Pakistan still better for
investment as it is on number 26th on world GDP ranking,27th on purchasing
power and standing on 133 in Richest Countries by GDP per capita. Population
is over 17million total literacy rate is 57% .60% of population is based on
youngsters and have vast natural resource along with geographical importance.

Growth and investment:

Because of global economic situation we lost investor in growth and in

investment because of financial markets which export’s external demand has
been collapsed and continuous decline in availability of external capital to invest
or finance for growth process of the country.

-7-
Agriculture:

Agriculture sector is still the largest sector of the economy .In spite of growth in
industrialization .It is the measure source of the livelihood of almost 44.7% of the
country’s total employed labor force and having GDP of 21.8 %.

Manufacturing:

The second largest sector of the economy is manufacturing bears significant

importance 18.4 % contribution to GDP. Overall manufacturing sector showed a
negative growth rate which is 3.3% during the current year against the target of
6.1% and 4.8 % of last year. However, production in large scale manufacturing
during 2008-09 showed a decline of 7.7% against the revised growth target of
negative 5.0%.

-8-
GDP Growth Rate:

From 2002-03 till 2006-07 GDP growth rate is promising infect in 2004-2005 it’s
8.4% but from last two years GDP growth rate is decreasing it slipped form 6.8%
to 2% this trend hurting Pakistan’s economy and caused balance of trade to be
negative

Capital market:

In 30 Jun 2008 the index rate of KSE was 12,289.03 and on 15 May 2009 it
was 7,177.64.

Inflation:

Pakistan is one of the

countries which is still
having inflation in double-
digit. The Consumer Prices
Index (CPI) was pushed in
Pakistan to a record level of
25.3% in August 2008 due
to the surge in commodity
and food prices showed
during the start of fiscal year
2008-09, Now a days its
roundabout 18%

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Import, Export and Trade balance:

The main export items of Pakistan are rice, furniture, cotton fiber, , cement, tiles,
marble, textiles, clothing, leather goods, carpets and rugs and food etc. mainly
petroleum, petroleum products, machinery, plastics, transportation equipment,
edible oils, paper and paperboard, iron and steel and tea. Its main trading
partners are: European Union, China, The United Arab Emirates and The United
States.

Import and Export

(July-
2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- Feb)
Years
02 03 04 05 06 07 08 09 2009-
10
Export
9.13 11.16 12.31 14.39 16.47 17.01 19.22 17.79 1.53
(Billion$)

Import
10.34 12.22 15.59 20.6 28.58 30.54 39.96 34.82 2.5
(Billion$)
Trade
- - - -
balance 1.2 1.06 3.28 6.21 12.11
13.53 20.74 17.03 0.964
(Billion$)

Export during the current fiscal year (July-Feb2009-2010) amounted to $ 1.53

billion against 17.79billion $ in 2008-2009 and 19.22 in 2007-2008 the major
decline occurred from the textile sector, Pakistan’s export based in textile but due
to energy crises and government policies this sector is shifting. Import during
current fiscal year (July-Feb2009-2010) amounted to 2.5$billion which was
34.82biilion$ in2008-09 and 39.96biilion$ in 2007-2008 although import is
declining but still balance of trade ratio is in negative figure from last 4 years.
World economic crises and increase in oil prices as well as increase in dollar
price are the reason of negative trade balance

External and Domestic Debt:

The government has been planning to stabilize the economy and to regain
macroeconomic stability. The measures taken by government have put the
economy on the way to recovery. The effect of stabilization started accruing as
$3.4 billion have been added to the reserves.

- 10 -
Foreign investment:

Foreign investment
(July-
2001- 2002- 2003- 2004- 2005- 2006- Feb)
Years 2007-08 2008-09
02 03 04 05 06 07 2009-
10

Investment 475 820 922 16677 3,872 8,417 5,193.00 2,665.00 866.7
million $

Foreign investment is increasing since 2001-02 to 2007-08 which indicates the

availability of opportunities in Pakistan .Pakistan is a free market and welcomed
any sort of foreign investment but due to law and order and political situation and
war against terror form last year it’s falling from 5193miilion $ in (2007-2008) to
2,665 million$ in (2008-09) and the figure reach 866.7 million$.

- 11 -
Exchange rate:

Exchange rate
(July-
2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- Feb)
Years
02 03 04 05 06 07 08 09 2009-
10
61 57.7 57.92 59.66 60.16 60.5 71 - 84.99
In RS.

Exchange rate is increased during last three years it’s now 84.99 and may
increase in future which shows that Pakistan’s economy failed to maintain its
currency power in international market.

Source: federal bureau of statistic

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 PAKISTAN-RUSSIA FEDERATION RELATION

Since the independence of Pakistan August 1947 the relationship between

Russia and Pakistan Is not good, this is because of the strong relationship
between Russia and India and the other reason is that Pakistan supported during
Afghan Russia War.
Prime Minister of Russia Mikhail Fradkov visited Pakistan in 2007, and this has
re-established the relationship between both countries and when we see the
history we find that Mikhail Fradkov was the 1st Prime Minister of Russia who
visited in Pakistan in 38 years, for the sake of improving the economic relation
between two countries.
The president Asif Ali Zardari & Prime Minister Yousef Raza Gilani also trying to
improve the relation with Russia & they are successful to the some extent. An
agreement about the investment in Pakistan has been initiated by the Russia but
still this agreement is waiting for the approval by Pakistan board of investment.

Opportunities in Russia:

The agriculture sector of Russia is not efficient & unable to fulfill the food
requirement of country, to fulfill its food requirement Russia is importing
agriculture products from United States, European Union, Brazil and other parts
of the world.

The Russia has become the 2nd largest agriculture importer in all over the world
and this growth has been increased by $7 billion - $33 billion during 2000 to
2008.

- 13 -
The major imports of Russia are meat, fruits, vegetables and highly processed
products. The key reason of the boost up in the imports of the Russia is their
macroeconomic nature, highly specific GDP growth due to which the income
level of the Russian increase along with the Purchasing power, this increased
the value of Ruble and makes imports cheap than the homely produced goods.
Among the imports of agriculture products the Russia imports the meat mostly
that includes beef and poultry.
In next coming year the factors that impact on the Russian agriculture imports
are increased GDP, exchange power of Ruble, their agriculture policies prices of
agriculture products in the world.

Russia is the second largest country which imports agriculture products after
China.

- 14 -
The agriculture sector of Pakistan in very strong today in National economy it
share 23% where as 44% of the labors force is engaged in agriculture sector in
Pakistan.
According to the report of Food and Agriculture Organization in 2005 Pakistan is
the largest suppler and producer of agricultural items.
The Pakistan’s irrigation system is the world’s largest irrigation system and it’s
under cultivated is about 25% of the total land.
The major crops of Pakistan agriculture sector are:
Wheat
Cotton
Sugar can
Rice
Apricot
Milk
Onion
Date palm
Mangoes
Oranges
Livestock is one of the most important parts of agriculture sector. The items of
livestock are,
Cattle
Buffalo
Sheep
Goat
Camel
Livestock by products are:
Beef
Milk
Mutton
Poultry
These items also contribute in the agriculture sector in Pakistan.
As the Russia is a major importer of agriculture goods and she imports the
agricultural items from the World to fulfill its requirements except Pakistan, and
the agriculture sector of Pakistan is also good therefore Pakistan has an
opportunity to export agriculture products to Russia which will help Pakistan to
improve the Pakistan’s economy.

- 15 -
 Selected Country’s Analysis

RUSSIA ECONOMIC PROFILE

The Russia which is also known as Russia Federation is allocated in northern

Eurasia, having 83 federal subjects. Norway, Finland, Estonia, Latvia, Poland,
Georgia, Azerbaijan, China, Mongolia and North Korea are the countries to
whom the Russia border links. Russia links to the Japan (via Sea of Okhotsk)
and USA (via Bering Strait) too.

Capital Moscow
Russia Official in all over the
Official
country; 27 others co-official in
Language(s)
various regions
Russia 79.8%, Tatars 3.8%,
Ukrainians 2%, Chuvash 1.1%,
Ethnic Groups
Chechen 0.9%, Armenians 0.8%
others 10.4% speaks
Demonym Russia

Government Federal semi- presidential republic

Area
 Total 17,075,400 km2 (1st)
6,592,800 sq mi
 Water (%) [1]
13 ( including swamps)
Population
 2010 EST.
141,927,297(2) (9th)
GDP (PPP)
 Total $2.126 trillion
 Per capita $15,039
GDP (nominal)
 Total $1.255 trillion
 Per capita $8,874
Ruble (RUB)
Currency

- 16 -
Calling code +7

- 17 -
The 1990s economic crisis of post-Soviet countries was the twice of the great
depression of 1930s which came in Western Europe and US countries. When we
see the GDP of Russia before its crisis of 1998, it was 50% of its1990s GDP.
Although at the end of the century the increment in oil prices, FDI, dynamic
political stability and their home town consumption have boost up the economic
position of Russia.

At the end of 2007 the Russia was having 9th straight growth with an average of
7% yearly since 1998. The Russia is the 6th largest in all over the world having
the GDP of 8.1% comparatively last year. Basically this growth has been
increased due to non traded services and products for the usage of their
domestic markets as well as the mineral extraction and exports.
In the 2008 the average per month salary in Russia was $640, increased from
$80 in 2000. When we see the poverty line of Russia we find that in 2007 about
14% of the people survive under the national poverty line which shows Russia as
a strong economy and it is dramatically down from 40% of post-Soviet crisis in
1998. The Unemployment rate in 2007 in Russia was just 6% which was down in
1999 from approximately 12.4%.
More than 80% of Russia export is contributed by Oil, Natural gas and timber.
Anyhow the export of natural resources has been decreased in economic
importance since 2003 because of the domestic market strengthened
significantly. Although the oil, gas and energy prices are so high yet they
contribute only 5.7% of Russia’s total GDP and it is expected by the government
that it will decrease to 3.7 % by 2011. The Russia counts among rich counties in
other resource and in its economic boost like education, science and industry
and it has very large amount of high graduates then any other country in Europe.
Further more the taxes were reduced in 2001 that made people relax from the
burden of taxes and this reduction in tax has increased the revenues of the state.
The applicable personal income tax in Russia is 13%. Russia has the second
most attractive taxation system for every individual in all over the globe after the
UAE.
Russia is the third largest reserve in all over the world as its oil exports revenues
have permitted Russia to raise its foreign reserves from $12 billions in 1999 to
597.3 billion in first August 2008.
Large of Russia, particularly the rural and native communities in Siberia are not
as much efficient and active but lag behind. Yet there is significantly increased in
the growth of middle class from 8 million persons to 55 million persons in 2000 –
2006.The fixed capital investment has also showed the real gains of more than
10% each year in last 5 years , and the personal incomes have also reached to
attain the real gains of more than 12% each year.
However, after having the glance on the strong economic performance of the
county since 1999, there are many challenges faced by Russian economy which
includes the diversification, motivating the growth of SMES, establishing human
capital and motivating the governance of corporate. One of the biggest problems
is about the advanced and modern infrastructure in the Country, having
neglected the several years now the government has announced that about $1

- 18 -
trillion would be invested for the sake of development of Russia’s infrastructure
by 2020.
When we talk about the agricultural sector of Russia, we find that it is the world’s
largest producer of wheat, oats, sunflower seed, buckwheat and rye.
The area under cultivation regarding the agricultural was approximately
1,237,294 km sq in 2005 that’s the 4th larges in all over the world. Because of
the economy crisis of 1990 the agricultural production is reduced and a very
large reserves of arable land is unused.
However, the Russia’s has increased its agriculture growth in 1999 to 2009 and
has turned the country to the 3rd largest exporter from the grain importer after
EU and United State.
The meat production has also increased from 6,813,000 tons to 9,331,000 tons
in 1999-2008 and it’s expected to grow more.
Russia is a great suppler of oil and gas in much of the Europe. It is the initiator
who introduced the first nuclear power plant in the world, and they are actually
who developed and introduced the civilian nuclear reactor. In the Asian part of
the Russia it has large numbers of hydropower stations, although a very large
part of hydroelectric potential is still unexploited in Siberia and the Russian Far
East.
Moscow which is the capital of the Russia sometimes called as the “port of the
five seas” because of its connection with Black, White, Azov, Caspian and Baltic
seas. The Russia has a large number of airports about 1216.
In the 2006 the Russia was having 933,000 kilometers of roads from which
755,000 are sealed

Trade of Russia:

The trade of Russia from the year 2006 to 2009 shows continuous boost up in
exports of the country. In the mid of July 2008 the export of the country is
significantly high comparatively to the import and after that at the start of 2009
the export started to decline due to the economic crisis along with the imports.
Over all the trade balance of the Russia is beneficial for its economy growth.
References: (Sources: IMF International Financial Statistics, Global Trade
Information Services GTA database, national statistics.)
(http://en.wikipedia.org/wiki/Russia#Economy)

- 19 -
 COUNTRY’S HUMAN DEVELOPMENT PROFILE

Human resource development can be better observed by human development

index .HDI is used to measure the three dimensions of human development, first
it measures long and healthy life by measuring life expectancy, secondly being
educated measured by gross enrolment in education and adult literacy .Thirdly
having a decent living standard measured by income and purchasing power
parity. Any how it is not a comprehensive measure of human development; many
of the important indicators are not included in it. It provides a broad view of
human progress and a complex bound between well-being and income.

• Between the year of 1990 and 2007 Russian Federation's HDI fell by
-0.03% annually from 0.821 to 0.817 today. The score of HDI in all regions have
increased over the years (Figure 1) although with slower growth or even
reversals.

Figure 1: HDI Trend:

- 20 -
  The HDI of 2007 shows the very large gaps in well-being and life chances.
The HDI for Russian Federation is 0.817, and country has rank of 71 st out
of 182 countries with data provided in Table 1.

Table 1: Russian Federation’s human development index 2007

Combined
Life Adult literacy
gross
expectancy at rate GDP per capita
HDI value enrolment
birth (% ages 15 and (PPP US$)
ratio
(years) above)
(%)
1. Norway 1. Japan 1. Georgia 1. Australia 1. Liechtenstein
(0.971) (82.7) (100.0) (114.2) (85,382)
69. Saint Lucia 116. Mongolia 9. Tajikistan 49. Bulgaria 53. Poland
(0.821) (66.2) (99.6) (82.4) (15,987)
50.
70. Albania 117. Pakistan 10. Kazakhstan 54. Gabon
Seychelles
(0.818) (66.2) (99.6) (15,167)
(82.2)
71. Russian 118. Russian 11. Russian 51. Russian 55. Russian
Federation Federation Federation Federation Federation
(0.817) (66.2) (99.5) (81.9) (14,690)
72. The former
Yugoslav 12. 56. Saint Kitts
119. Solomon 52. Malta
Republic of Turkmenistan and Nevis
Islands (65.8) (81.3)
Macedonia (99.5) (14,481)
(0.817)
120. 57. Libyan Arab
73. Dominica 13. Azerbaijan 53. Gabon
Bangladesh Jamahiriya
(0.814) (99.5) (80.7)
(65.7) (14,364)
181. Congo
176.
182. Niger 177. Djibouti (Democratic
Afghanistan 151. Mali (26.2)
(0.340) (25.5) Republic of the)
(43.6)
(298)

 By looking at some of the most fundamental aspects of people’s lives and

opportunities the HDI provides a much more complete picture of a
country's development than other indicators, such as GDP per capita.
Figure 2 illustrates that countries on the same level of HDI can have very
different levels of income or that countries with similar levels of income
can have very different HDIs.

- 21 -
Figure 2: The human development index gives a more complete picture than
income

- 22 -
Human poverty: focusing on the most deprived in multiple dimensions of
poverty

The Human Poverty Index focuses on the ratio of people below certain threshold
levels in each of the dimensions of the HDI - decent standard of living, living a
long and healthy life and having access to education, having access to
education.
Russian Federation’s HPI value is 7.4% and it ranks 32nd among 135 countries.

Table 2: Selected indicators of human poverty for Russian Federation

People not
Children
Human Probability of Adult illiteracy using an
underweight for
Poverty not surviving rate (%ages 15 improved
age (% aged
Index (HPI-1) to age 40 (%) and above) water source
under 5)
(%)
1. Hong Kong,
1. Czech
China (SAR) 1. Georgia (0.0) 1. Barbados (0) 1. Croatia (1)
Republic (1.5)
(1.4)
30. Panama 85. Suriname 9. Tajikistan 9. Montenegro
34. Thailand (2)
(6.7) (10.0) (0.4) (3)
31. 10. Occupied
86. Mongolia 10. Kazakhstan
Kyrgyzstan 35. Turkey (3) Palestinian
(10.3) (0.4)
(7.3) Territories (3)
32. Russian 87. Russian
11. Russian 36. Russian 11. Russian
Federation Federation
Federation (0.5) Federation (3) Federation (3)
(7.4) (10.6)
12.
33. Lebanon 88. Uzbekistan 37. Dominica
Turkmenistan 12. Georgia (3)
(7.6) (10.7) (3)
(0.5)
89. El
34. Colombia 13. Azerbaijan 38. Bahamas
Salvador 13. Romania (3)
(7.6) (0.5) (3)
(10.7)
135. 150.
153. Lesotho 138. Bangladesh
Afghanistan 151. Mali (73.8) Afghanistan
(47.4) (48)
(59.8) (78)

Building the capabilities of women:

Russian Federation's GDI value is 0.816. If we compare it from its HDI so we will
find that GDI value is 99.9% of its HDI .Only 8 countries have a better ratio than
Russian Federation's out of 155 countries in consideration of both GDI values
and HDI values
Table 3 illustrates Russian Federation’s ratio of GDI to HDI compares with other
countries.

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Table 3: The GDI compared to the HDI – a measure of gender disparity

Combined primary,
Life expectancy Adult literacy rate
GDI as % of secondary and tertiary
at birth(years) (% ages 15 and
HDI gross enrolment
2004 older) 2004
ratio2004
Female as %
Female as % male Female as % male
male
1. Russian
1. Mongolia 1. Lesotho
Federation 1. Cuba (121.0%)
(100.0%) (122.5%)
(121.7%)
7. Vanuatu 2. Kazakhstan 29. Tajikistan
17. Bahrain (111.0%)
(99.9%) (120.5%) (99.7%)
8. Bulgaria 3. Belarus 30. Kazakhstan
18. Palau (110.7%)
(99.9%) (119.1%) (99.7%)
9. Russian
31. Russian 19. Russian Federation
Federation 4. CIS (118.0%)
Federation (99.7%) (110.4%)
(99.9%)
10. China 5. Lithuania 32. Honduras
20. Jamaica (110.3%)
(99.8%) (117.9%) (99.6%)
11. Latvia 6. Ukraine 33. Armenia
21. Sweden (110.2%)
(99.8%) (117.7%) (99.6%)
155.
190. Swaziland 145. Afghanistan
Afghanistan 175. Afghanistan (55.6%)
(98.0%) (29.2%)
(88.0%)

Russian Federation has rank of 60th among 109 countries in the GEM, and has
value of 0.556.

Migration:

The emigration rate of Russian federation is 7.7%.Europe is the major continent

of destination of migrants of Russian federation with 58.9% of emigrants.

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 Table 4: Emigrants
Emigration rate Major continent of
Origin of migrants (%)
(%) destination for migrants
1. Antigua and Barbuda 45.3 Asia 46.6
13. Bosnia and Herzegovina 25.1 Europe 82.7
67. Uzbekistan 8.5 Europe 57.9
68. Slovakia 8.2 Europe 83.1
73. Russian Federation 7.7 Europe 58.9
91. Turkmenistan 5.3 Europe 86.2
93. Slovenia 5.2 Europe 68.6
120. Czech Republic 3.5 Europe 66.9
181. Mongolia 0.3 Europe 40.7
Global aggregates
Central and Eastern Europe
9.5 Europe 69.9
and the CIS
High human development 6.0 Europe 43.8
World 3.0 Europe 33.4

Russian Federation has 12,079.6 thousand migrants which shows 8.4% of the
total population.

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Table 5: Immigrants
Immigrants as a
Destination of Immigrant stock Destination of
share of population
migrants (thousands) migrants
(%) 2005
1. United States 39,266.5 1. Qatar 80.5
20. Kazakhstan 19.6
40. Belarus 11.3
53. Montenegro 8.7
2. Russian 55. Russian
12,079.6 8.4
Federation Federation
9. Ukraine 5,390.6 56. Slovenia 8.4
14. Kazakhstan 2,973.6 64. Serbia 6.8
165. Malta 11.7 155. Romania 0.6
182. Vanuatu 1.0 182. China 0.0
Global aggregates
Central and Eastern Central and Eastern
30,993.2 5.1
Europe and the CIS Europe and the CIS
High human High human
38,078.0 3.8
development development
World 195,245.4 World 3.0

Remittances:

US$4,100 million in remittances were sent to Russian Federation in 2007.

US$29 is average remittance per person, compared with the average for the CIS
and Central and Eastern Europe of US$114.

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Table 6: Remittances
Total remittance inflows(US$ millions) Remittances per capita(US$)
1. India 35,262 1. Luxembourg 3,355
7. Poland 10,496 7. Bosnia and Herzegovina 640
11. Romania 8,533 101. Hungary 41
21. Ukraine 4,503 103. Belarus 37
24. Russian Federation 4,100 108. Russian Federation 29
37. Bosnia and Herzegovina 2,520 124. Turkey 16
42. Bulgaria 2,086 129. Kazakhstan 14
131. Malta 40
157. Burundi 0 157. Burundi 0
Global aggregates
Central and Eastern Europe and Central and Eastern Europe and
49,618 114
the CIS the CIS
High human development 92,453 High human development 101
World 370,765 World 58
Source: www.undp.org

- 27 -
 Russia’s FDI’s structure

The following figure illustrates the top 15 most attractive economies for FDI in
2007 based on the % of responses to an UNCTAD survey.  China, the U.S., and
Russia are in the 3 of the top 4 spots.

Source: http://www.russiablog.org/2008/10/real_estate_russia_china_opportunities.php

Foreign Direct Investment:

It is a long term investment by a country in another country .this investment could

be in management, technology and Joint-venture etc. Inward FDI and Outward
FDI are the two types of FDI which results in positive or negative inflows.

FDI can be made in any sector of the economy of the country and it could be in
public company, private company .individual, a group of individuals, and a group
of enterprises or in government bodies etc.

Methods for FDI:

FDI can acquire 10% or more voting power in an enterprise of the economy
through any of the methods likewise

1) By acquiring shares

2) By making investment in joint ventures with other investors or enterprises

3) Merger or acquisition of another enterprise

4) By incorporating a wholly owned business

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Incentives for FDI:

1) Low tax rates

2) Economical zones

3) Soft loans

4) Job training

5) Research and development support

6) Free land

7) Tax concessions

8) Support at local level by the government etc

FDI in Russia:

Russia is experiencing a capital fight, in last few years around 23.5 billion has left
the country and only 3 billion has flowed in the country. Russia is the riskiest
country for investment as seen by the investors and that is so because of there
complex tax codes, endless regulations, favour is given to local companies.
Russia has the largest oil and gas reserves but they are unable to use these
reserves as a source of revenue for there economy and that is because of
technology backwardness, conflicts between they states and leaking pipelines
.Investment in oil and gas was encouraged by Russia and they allowed 100%
ownership in oil and gas companies but the foreign investors were reluctant to
invest in Russia as they want stronger and more legal soft corners in taxation
policy and agreements made by the government .Hurdles for FDI in Russia are
there cold wars with the west. They have implemented the improved policies for
FDI in a poor manner and lack of coordination can be clearly seen in government
policies.

Some facts (rank) for doing business in Russia are as under

Ease of Doing Business 120

Starting a Business 106

Dealing with Construction Permits 182

Employing Workers 109

- 29 -
 Registering Property 45

Getting Credit 87

Protecting Investors 93

Paying Taxes 103

Trading Across Borders 162

Enforcing Contracts 19

Closing a Business 92

Starting Business in Russia:

There are 9 steps which must be fulfilled for starting business in Russia these
steps are

1) Notarize foundation documents

2) Deposit capital in the bank and get proof thereof

3) Pay registration fee

4) Register with the unified register at the federal tax service on the local
level to obtain the single number of state registration and the number of tax
registration.

5) Notarize registration certification, tax payer identification number

certificate and bank identification number.

6) Open the company bank account

7) Inform federal tax Service of the company bank account number and
obtain a special letter of confirmation.

8) Register the company with Moscow Center of Quotation of Work Places.

9) Register seal with the local Registration Chamber.

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The GDP of Russia in 2009 was -7.3 but now in 2010 it has been raised to 3.9
that means foreign investment has been made in Russia by the other countries.
This investment has been made in oil and gas refineries by other countries
.Russia has a large number of skilled labor force and it has been seen as a hub
of skilled people but this work force is not utilized by Russia itself.FDI for Russia
is far to low with respect to its size. The ease of doing business in Russia is low
as compared to cost of doing business in Russia. The contribution in the GDP of
Russia through agriculture, industry and services are 5.2%, 37.4% and 60.0%
respectively. Regardless of all the facts Russia’s economy is growing and thus
providing equal chances for opportunities and challenges for the investors.
Russia is rich in natural resources impressive, human capital and a140 million of
consumers for consumption. The increase in GDP for Russia highlights the fact
that Russia is now on a move to use its all factor of production in a effective
manner but still they are unable to use it efficiently because of various issues.
Today Russia is now giving some space for foreign investors so that they can
gain further growth but for earning profit on foreign investment, a large
investment must me made in industrial plants and equipments, latest technology
must be used so that commodities can be produced at a low cost and skilled
labor force of Russia must be used efficient

SWOT analysis of Russia

- 31 -
Strength & weakness:
Russia is very much rich in natural resources therefore it is known as energy
superpower, strength of Russian economy depends on its natural resources.
Russia has the world largest natural gas reserves, second largest in coal
reserves & 8th largest oil reserves .Russia is the world leading producer &
exporter of natural gas & the second largest oil producer & exporter. The most
popular natural resources Russia provides are iron ore, nickel, coal, gold,
diamonds, furs, petroleum, zinc, aluminum, tin, lead, platinum, titanium, copper,
tungsten phosphates, and mercury. Russia is popular for its tree's & exports 1/5
of the world's timber and wood. All these natural resources contribute 80% of
Russia exports. Russia exchange rate is very high because of their good
economy which is due to export.

Beside natural resources Russia also have an ability to generate well-educated,

trained, and active workforce focused on science, engineering and technology
which will help Russia to gain its strength in information & communication
infrastructure. On the other hand software outsourcing industry of Russia is in
trouble due to a weak reputation, Software piracy & poor infrastructure & all
these hurdles prevent Russia to take advantage of its human capital strength.

Russia has weak investment climate due to poor financial system & rule of law
.weak linkages with labor market & productive sector is also one of the weakness
of Russia’s economy.

Opportunities:

The capital reserve in Russia is high due to which FDI can be attracted by
improving investment climate.

Russia is very much rich in natural resources therefore to increase value added
in natural resources Russia can improve its global knowledge.

As Russia has skilled & educated workforce therefore Russian government

should start re-skilling programs fulfill the need of labor market.

Russia has also opportunities in information & communication infrastructure by

improving its software applications & by introducing new software as Russia has
skilled labor .

By increasing tax on natural resources Russia can strengthen its economy .

- 32 -
Threats:

Corruption is one of biggest threat for Russian economy as its in from top level to
bottom level.

Continues boost up in the capital may harmful for the government, as private
sector may overcome government sector.

Russia is lacking behind in advance education, there fore losing its scientific
expertise which is also harmful for the economy.

The increasing exports of core base mind are threat for Russian’s economy.

Even though Russia has expertise in software industries, but Russian’s

engineers are not expert in IT industry as whole.

- 33 -
 SOCIAL ENVIRONMENT SCANNING

After the collapse of USSR, Russia is still struggling to establish a modern

market economy and achieve a market growth. Security is a big issue for Russia
i.e. internal threats, cold wars with neighbor countries, internet crime and
hijacking etc .Russia is multinational country with more than 90 nationalities and
has a complex federal structure. Relation of Russia with Pakistan was not too
good because they wanted strong relations with our enemy state INDIA. The
invasion of Russia was because of Pakistan as they are aware of this fact.
Former military leader AYUB KHAN sought to improve the relations with Russian,
trade and cultural exchanges were increased during 1966 to 1971, but due to
Russia’s (USSR) critics on Pakistan’s position in 1971 war with India weekend
the relations and many of the people at that time thought that Russia is not a
country which could be Pakistan’s friend.

After the collapse of USSR Pakistan’s relation with Russia improved but the
support of Pakistan for Taliban’s in Afghanistan remained a ongoing tension
between both they countries. Later on the government of Pakistan changed its
policy for Taliban’s of Afghanistan and became an important member of war
against terrorism fought by USA .The decision of Pakistan to join the international
struggle for peace helped to improve the Russia Pakistan relations to a great
extent.

Russia vowed its support to Pakistan while fighting against the Taliban militant.
Today the major focus of Russia Pakistan relation ship is to improve relations,
particularly emphasizing on ways and means to enhance the economic
cooperation between the two countries.

- 34 -
 Chances for direct investment for Pakistani businessman

Russia is one of the largest oil exporters and the world's leading gas exporter
that’s why Russia has become one of the most attractive world’s emerging
markets.

Russia has attraction for investment due to low-price assets, impressive

consumer market huge and cheap human resources market and profitable
conditions of working in this country.

Pakistani businessman or any other business man can decrease the

expenditures by hiring cheaper human resources of the country, (if they are
targeting the Russian market) get rid of transportation fees, solve the problems
with supply of the raw materials and get a range of other benefits,after opening a
business here or investing in Russia.

The most attractive areas of industry in Russia to invest are:

 Real estate
 fuel and energy minerals extraction,
 pulp and paper industry

Real estate:

As Russia is the largest country in the world one might assume that it has the
broadest range of real estate investment opportunities available for a purchaser,
but the country is very distinctly divided between poverty and opulence,
opportunity and risk.
Western Russia is closest to Europe; it is the most populated area of Russia, the
area of the country where the majority of wealth is generated and the geographic
location offering investors the greatest choice of property with potential for
investment growth and rental yield.

Both Moscow and St. Petersburg have Western style real estate economies
where the demand for rental accommodation is high because employment
opportunities in the cities are more substantial than elsewhere.  Furthermore the
local residents and workers in these cities are gaining in personal wealth from
higher salaries etc., and their purchasing power is increasing accordingly
meaning that there is a growing local base for resale demand which is of equal
interest to a property investor who wishes to one day cash in his assets.

Moscow and St. Petersburg have that essential extra ingredient that makes them
highly attractive from a long term investment point of view as well, and that is

- 35 -
‘international appeal’.  Tourists, those seeking an exciting and unusual second
home location and international professionals and executives all demand
accommodation and property in these two cities and will continue to do so as
Russia develops as a business hub and attractive tourist destination and Moscow
and St. Petersburg remain the two most important business cities in Russia.

fuel and energy minerals extraction:

Investors are showing great activity in the market of minerals extraction of

Russia. As Prime Minister of Russia Vladimir Putin has noted that private
investors (both Russian and foreign) are investing 8-9 times more than the State
into this area. According to Putin the minerals extraction is the goose that lays
the golden eggs for Russia, and mentioned that uniting the efforts of both the
State and the private companies will help to develop the area make the business
here smoother, and bring down the expenses

Pulp and paper industry:

If we compare Plup and paper industry of Russia from other industries it is found
that, Investments in the Russia's industrial sector of plup and paper are mostly
long term upto 15 years, which is a great fact  and therefore the share of foreign
investments here is lower than, if we see  minerals extraction areas in Russia,
the basic reason of attacting businessmen in the plup and paper production area
is the Russia's good experiance and high manufacturing facilities and as well as
main importer of plup and paper products to the world market. The owner of 20%
of the forest resources in the world is Russia but still Russia is not capable to
produce with good quality itself therefore it imports number of products from the
world market. 

- 36 -
 Recommendation to BOI & EPB

After glancing the whole report we fine that there are opportunities in agriculture
sector of Russia for the export purpose, so we recommend to Export Promotion
Bureau to promote the trade relation between Russia and Pakistan in order to
boost up their economy. And as in Russia there is the opportunities for the
business man in Real state, Fuel and energy , mineral extraction and pulp and
paper industry so the BOI should encourage the businessman to invest there.

- 37 -
 CONCLUSION

Since the independence of Pakistan August 1947, the relationship between

Russia and Pakistan have not been very good, this is because of the strong
relationship between Russia and India and the other reason is that Pakistan
supported Afghanistan during Afghan Russia War.

Prime Minister of Russia Mikhail Fradkov visited Pakistan in 2007, and this has
re-established the relationship between both countries and when we see the
history we find that Mikhail Fradkov was the 1st Prime Minister of Russia who
visited in Pakistan in 38 years, for the sake of improving the economic relation
between two countries.

The presidents Asif Ali Zardari & Prime Minister Yousef Raza Gilani are also
trying to improve the relation with Russia & they are successful to the some
extent. An agreement about the investment in Pakistan has been initiated by the
Russia but still this agreement is waiting for the approval by Pakistan board of
investment.

As we have seen opportunities in the agriculture sector of Russia with reference

of Pakistan and the opportunities in Real state, Fuel and Energy and Pulp and
paper industry are also there for Pakistani business man as these sectors are
showing growth therefore Pakistani government should take some steps in order
to come up with the best relation with Russia.

- 38 -