Russia Mega Trends:
Macro to Micro Implications for 2020
May 2012
1
Introduction to Mega Trends
2
Definition of a Mega Trend
What is a Mega Trend?
Impact of Mega Trends on Key
Organizational Functions
Mega Trends are global, sustained
and macro economic forces of
development that impact business,
economy, society, cultures and
personal lives thereby defining our
future world and its increasing pace of
change
3
Mega Trends in Russia
4
Economy: Russia Beyond Moscow – The Next Game
Changers
5
Moscow – Emerging Mega City
Fast Forward Moscow City Facts: Did You
Know?..
25-30% of Russia’s GDP will be produced in
Moscow (2025)
20% of Russian population will live in Moscow
agglomeration
The city will grow 2.5 times (Big Moscow)
150km of new tracks and 70 stations will be
opened in Moscow Metro
What Are The Implications?
Global economic force on its own
Hub and spoke business model
Diverse and dynamic socio-economic mix
Tech-savvy citizens connected 24/7
Mega-corridors: Moscow – St. Petersburg,
Moscow – Nizhniy Novgorod
6
Russia Beyond Moscow – The Next Game Changers
5 to 7 cities will emerge as alternative growth centres by 2020,
bridging the welfare gap between Moscow and the regions
Saint
Petersburg
1/3 of the population will live in the
Eastern part of Russia in 2025
Moscow
Krasnodar
Yekaterinburg
Novosibirsk
South: Sochi,
Krasnodar, Rostov
Krasnoyarsk
Khabarovsk
Development of tourism
and agricultural business
Vladivostok
Ural: Yekaterinburg,
Perm
Siberia: Krasnoyarsk,
Novosibirsk, Tomsk
Far East: Vladivostok,
Nakhodka, Khabarovsk
Logistics, finance, machine
building
Oil and gas, healthcare,
energy, innovation
Modern infrastructure and
logistics facilities
7
The New Locomotives of Growth
Vladivostok – “San-Francisco” in the Far East
“Open sky” status – transit between China and US
Modernization of Vladivostok Marine Trade Port
Educational, scientific, travel and business centre linking
Europe, Asia and America
“Tomsk 3.0 – Cognitive City of the Future
Post-industrial, innovative economic development
Strong scientific and educational complex
Comfortable living environment and social
infrastructure
Yekaterinburg – “The City” of Ural
Economic and financial centre
Important transportation hub – multi-modal logistics,
the fastest growing airport
Solid industrial base attracting investments
8
Social Trends: Prosperity, Education and Social
Mobility
9
The Middle Bulge
Middle Class
•Boom in consumer expenditure, stimulating
the overall economy growth
Annual Disposable Income* (Russia), USD per capita
•The largest consumer markets in Europe
•Higher demand for intangible products –
services, leisure and entertainment, etc.
Wellness and wellbeing
•Healthy nutrition
•Healthier lifestyle – sport and fitness
Social mobility
•She-economy
•Small and medium businesses
•Reverse brain-drain
Education
•RUB 140.5 billion investment
2005
2010
2015
2020
* Current prices, year-on-year exchange rates
•From quantity to quality
•Corporate and federal universities, national
research centres
Source: Frost and Sullivan, Euromonitor International, Rosstat
10
Small and Medium Business – Engine for Innovative
Growth
Positive trends
Restraints
1.7 m SMEs, 4 m individual entrepreneurs
Only 5% have international contacts
17 m employed, 22% of working-age
population
Only 2% - innovative SME
US – 40% of GDP, Europe – 60% of GDP
Barriers – tax system, lack of available
financing, corruption, red tape
21% of GDP
2000-2005 growth – 7%, 2005-2009 – 40%
What kind of support measures for SMES would be most effective?
% of responses
Source: Chamber of Commerce of Russia and the
Ministry of Economy – “Monitoring of SME
sector”(June 2011), Opora.
11
Healthcare as a National Security Doctrine
12
Facing Demographic Crisis
Life expectancy among the lowest in the developed world
Fast Forward Facts:
Demographics
Unhealthy lifestyle and inefficient healthcare system
Number of population decreased by 7 million in 1991-2009.
Source: WHO, UN, Rosstat, Frost and Sullivan
2025 forecast: optimistic/pessimistic scenarios ~139/131 million
Nation’s healthcare becomes THE most urgent problem in Russia
13
Pharmerging Economy
Pharma
Today
Low per capita consumption of drugs
High dependency on imports
Tomorrow
One of the fastest and most attractive pharmaceutical markets
Locally-produced drugs, including innovative and biopharmaceuticals
Manufacturing of pharmaceuticals in Russia
2020
Pharma
2020
CAGR 20112016:
11-14%
Foreign
Russian
Source: IMS Health, Frost and Sullivan
2010
14
Equipping the Healthcare System
Medical
Equipment
Today
Installed base – 4 MRI and 9 CT scanners per 1 million population
Estimate in order to meet the diagnostic needs – 14 and 25
Lack of qualified personnel (e.g. radiologists)
Dependency on imports
Tomorrow
Steady market growth
Localization of production and technology transfer
CAGR: 7-8%
MRI – magnetic resonance
imaging
CT – computer tomography
Source: Frost and Sullivan
15
Infrastructure Development
16
The most ambitious infrastructure development programme in the world
New and improved business opportunities
Population mobility
Economic development of the Eastern part of Russia
17
Up in the Air
Investment 2012-2019:
RUB 107 ($ 3.55)
billion
Today:
63% of the Russia’s territory has no alternative to air transport.
80% of airport infrastructure is outdated and requires modernization
70% of runways were built over 20 years ago.
Tomorrow:
Tourism in the North Caucasus– 4 new and modernization of 6 existing
airports
Vladivostok – air hub in the Far East
Source: Rosstat, IATA, Frost and Sullivan
18
Fools and Roads
Investment 2012-2019
RUB 1.71 trillion
($ 57 billion)
Today:
29% of federal roads are overloaded, in Moscow – 60%
46,000 settlements (2.7 m citizens) do not have access to hard-surfaced
roads
23.5 deaths per 100,000 people caused by road accidents (Europe – 9.5)
Tomorrow:
Construction/modernization of ~20,000 km of roads, including toll highways
Trans-Siberian route development and emergence of multi-modal hubs
The Silk Road of Modern Age: Europe to China highway via Kazakhstan
Automotive Industry
Over 4 mln new car sales in
Russia by 2020
Logistics Industry
To reach over $100 bn by 2020
Source: Ministry of Transportation, Frost and Sullivan
19
Back on Track
Today:
Low railway network density
Low cargo delivery reliability – 88-90%
Investment 2012-2019
RUB 407 ($ 13.5)
billion
Tomorrow:
20,000 km of new railway links by 2030, +24% in railway network density
The dawn of high-speed railway era – 1,500 km with speeds up to 350 km/h
(St-Petersburg – Moscow – Yekaterinburg)
Modernization of rolling-stock (passenger and cargo)
Siemens
Desiro trains to be
manufactured in Russia
Railway modernization
in Russia attracts
foreign players
Talgo
Spanish manufacturer to supply
variable gauge trains for MoscowBerlin and Moscow-Kiev routes
Alstom
Supplier of Allegro train on
St.Petersburg-Helsinki direction, is
eyeing further expansion in Russia
Source: Ministry of Transportation, Frost and Sullivan
20
e-Russia
21
Modern Russia
Implications for Government,
Business and Society:
Accountable and transparent
government
Transparency for stakeholders in
G2G and G2B transactions, bidding
process
Improved city planning process
Cut red tape and save time: on-line
G2C services (taxes, utility bills)
Reduce operational costs for
businesses
Efficient delivery of a long range of
public services 24/7 – education
and healthcare
New business models
22
E-Government
UN e-Government index 2012
www.government.ru – solid and
representative, rich technical features
www.gosuslugi.ru portal – One Stop
Shop for e-services, ~500,000
monthly visitors
27th spot in the world
The leader in Eastern Europe, only
behind Japan and US among the
largest populated countries
RUR 80 ($2.7) billion investment for
government informatization
60% of the population to use egovernment services in 2020, up from
~11% presently
+32 positions in
global ranking in
2 years (!)
Note: * - with a population over 100 million people
Source: United Nations
23
e-Society
e-Learning
Legal status of e-learning approved by the new
Law on Education (2012)
20-25% growth of e-learning services in the
coming years
e-Healthcare
RUR 24 ($ 0.8) billion investment
Electronic health records system roll-out in pilot
regions
Telemedicine and m-healthcare – remote
patient diagnosis, monitoring and treatment
e-Commerce
~ 40% annual growth
Overcoming general distrust, expansion in the
regions and all age-groups
Solving logistics and payment issues
New business models (private shopping clubs,
group purchasing, penny auctions)
24
Made in Russia
25
Made in Russia 2.0
Innovative production in Russia, % of GDP
Before After
“REBRANDING”
Innovative products in Russian exports, %
26
From Raw Materials Supplier to Innovative Exporter
Strong
dependence
on
hydrocarbon
exports
Before
Localization of
foreign
manufacturers
After
Export of
innovative
goods and
services
R&D funding
Technology
transfer
Localization of manufacturing in Russia will trigger its innovative growth
27
Back to Russia
Energy
Healthcare
Energy efficient power
generation turbines –
General Electric and
Rostekhnologii
CT scanners – Philips
Healthcare and Elektron,
GE Healthcare and
Rostekhnologii
High performance gas
turbines – Siemens AG
and Silovye Mashiny
Big Pharma
ICT
Mobile base stations for
LTE networks – NSN,
Rosnano and Mikran
IPTV set-top boxes –
Cisco Systems
(manufactured by Jabil)
Automotive
Localization of
automotive plants
Railway cars – Alstom
and Siemens AG
Automotive components
– Valeo, Robert Bosch
28
Technology Leapfrogging
29
Space Jam
Automotive &
Logistics:
Other:
•Navigation assistance
•Tracking (personnel,
children, criminals)
•Traffic management
•Remote patient monitoring
•Usage-based insurance
•Improvement in weather
prediction
•In-vehicle infotainment
•Asset tracking
•Real-time stock
management
•Mobile satellite services
•Increase in broadband
speed
•Air-traffic control
•Automated guidance of
machines
ERA GLONASS is to become fully operational by 2014-2016 and create multiple innovative
applications
30
Wireless World
4G Mobile Technology
•High rates of data transmission
•Enabling integration into any wireless
platform
Broadband Internet Access, % of Households
•Russia at the forefront of LTE
deployments globally
RFID / NFC
•Potential economic benefits to outweigh
implementation costs
•Multiple applications – retail, logistics,
toll collection, fare payment
Security
•Transportation and critical infrastructure
protection
2010
2015
2020
•CCTV surveillance integrated into the
wireless platform
•Market growth of IP-based solutions
Wireless intelligence – IT infrastructure to be around 80% wireless
31
Biopharmaceuticals and Beyond
Biotechnology-2020
RUB 1,163 ($38.6)
billion
Red Biotech - Pharma
Fast-growing, attractive for
investment
Large-scale projects –
Generium, Bioprocess, Chemrar,
Biocad
Opportunities – import
substitution of generics,
innovative drugs
Today
0.1% of the global biotechnology market
80% import dependence
Focus on pharmaceutical biotechnology
Tomorrow
5% market share in the global biotech market
Two-fold reduction of imports
Red, White and Green biotech
White Biotech – Industry
Virtually non-existent
“Third wave of biotech”
Opportunities – biofuels
(agricultural and forestry
waste), chemical industry
(biopolymers), food and feed
(ingredients, supplements)
Green Biotech - Agriculture
Legal uncertainty – barrier
for growth
Opportunities – increase
yields of agricultural crops,
reduce their vulnerability
to diseases, improve
nutritional quality of food
(amino acids)
32
Nano-Russia
NANOMATERIALS
Global Scanning Probe Microscopes Market,
$ million
Large scale production of silicate
nanocomposites (Bryansk, February
2012) – Rosnano
Large number of innovative SMEs,
e.g. Novosibirsk Nanomaterials – metal
nanopowders.
G
CA
5%
1
R
NANOINSTRUMENTATION
Worldwide spending on
nanotechnology will lead to sustained
growth in demand
NT-MDT (Zelenograd) –
manufacturer of world-class scanning
probe microscopes (SPM) since 1989
Advanced Technologies Centre –
manufacturing of SPMs (Moscow,
December 2011) – Rosnano.
2009
2012
2015
2018
Source: Frost and Sullivan, NT-MDT, Rosnano
33
Smart is the New Green
34
“Smart” is the New Green
Smart
Technology
Smart
Infrastructure
Smart Energy
Smart
Mobility
Smart
Buildings
Smart Grids
Smart Clouds
Smart
Materials
Smart
Bandages
Smart Phones
Smart Meters
Smart Cities
35
The Lighting Revolution
Today
LED – 3-5% of the market due to high cost
Smart Lighting
Tomorrow
LED prices are to decrease 30% by 2015
Russia is to phase-out inefficient light bulbs: 2011 – 100W, 2013 – 75W
LED vs. Incandescent bulbs – potential energy saving of 80%
Intelligent lighting systems – wireless networks to remotely monitor and
control street lighting, motion controls, dimming sensors, on/off scheduling.
LED Lighting – Market Revenue, World
%
LED-pioneers in
Russia
Source: Frost & Sullivan
GR
A
C
20
Russia is to leapfrog from incandescent light bulbs to intelligent LED lighting systems
36
Saving the Energy
Tomorrow
40% energy efficiency increase by 2020 (Federal Law #261)
Incentives for localization of production – to reduce share of imports to 40%
Beyond electricity – pilot installations of water smart meters (Mosvodokanal)
European Smart Meters Market
Installed Base, million units
Price Projection, $
Smart Grid projects in Tomsk,
Sochi, Perm, Belgorod
Source: Federal Grid Company, Frost & Sullivan
Smart Meters
and Grids
Today
13-15%energy loss during electricity transmission
70% of installed equipment – import
Intelligent grid implementation could result in RUB 50 million annual savings
37
From Concept to Reality
SMART CITY
Today
Citizens demanding a modern living environment
Energy efficiency and environmental concerns
Rapid growth and penetration of ICT
Tomorrow
Smart city projects in Belgorod and Skolkovo – a model for
modernisation of smaller Russian cities
• E-government
• E-healthcare
• Traffic management
• Public transport
Smart
governance
Smart
mobility
Smart living
Smart
environment
• Entertainment
• Culture and sport
Belgorod
Maiden smart city project in
Russia
Smart lighting system
59,000 smart meters
Smart grid.
• Smart buildings
• Smart grid
Smart City – interconnected urban environment where citizens lead a fully digitalized lifestyles
38
Mega Events
39
Mega Events
APEC Summit 2012
Sochi 2014 Winter
Olympics
$ 9 billion
investment
Modernization of
Vladivostok – hub
in the Far East
$ 10 billion
investment
Development of
tourism in the
Caucasus
F1 Grand Prix
$ 200 million
investment
Recurring annual
revenue
FIFA World Cup 2018
~ $ 22 billion
investment
Infrastructure,
tourism, global
marketing campaign
A string of large-scale events that will open up Russia to the world
40
Macro to Micro Analysis
41
Key Strategic Conclusions
1.
Mega Trends are connected and intertwined which suggests “synergetic” opportunities
between them
2.
It is important to understand the eco-system of the Mega Trend and the elements of the
value chain which have most profitability
3.
All these trends have global ramifications thereby offering scalable opportunities
4.
These forces are changing rapidly and bringing new competencies into play at half the
life-cycle speed of the past decade
5.
Organisations’ need “Mega Trend” champions and teams within their organisation
structure to best exploit the opportunities
6.
It is important to build a healthy eco-system around your opportunity related to a mega
trend as it can be a source of competitive advantage and raise barriers to entry
42
From Macro to Micro: Taking Mega Trends from Information to
Strategy Implementation
Macro
Micro
Analysis of
Opportunities
and Unmet
Needs
Mega Trend
Selected trends that
impact your business
and markets
Impact on
Future Product/
Technology
Sub Trend
A sub-layer of trends that
has a wide ranging impact
Impact to Your
Industry
Visualising the roadmap of
these critical forces through
scenario-building and macro
economic forecasts
43