MegatrendsinRussia2012-2020

7/29/2019 MegatrendsinRussia2012-2020

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Russia Mega Trends:

Macro to Micro Implications for 2020

May 2012


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Introduction to Mega Trends


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Impact of Mega Trends on Key

Organizational Functions

Mega Trends are global, sustainedand macro economic forces of

development that impact business,

economy, society, cultures andpersonal lives thereby defining our

future world and its increasing pace ofchange

What is a Mega Trend?

Definition of a Mega Trend


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Mega Trends in Russia


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Economy: Russia Beyond Moscow The Next GameChangers


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Moscow Emerging Mega City

Fast Forward Moscow City Facts: Did YouKnow?..

25-30% of Russias 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


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Russia Beyond Moscow The Next Game Changers

Moscow

Yekaterinburg

Novosibirsk Krasnoyarsk Khabarovsk

Vladivostok

Krasnodar

SaintPetersburg

South: Sochi,Krasnodar, Rostov

Development of tourismand agricultural business

Far East: Vladivostok,Nakhodka, KhabarovskModern infrastructure andlogistics facilities

Siberia: Krasnoyarsk,Novosibirsk, TomskOil and gas, healthcare,energy, innovation

Ural: Yekaterinburg,PermLogistics, finance, machinebuilding

1/3 of the population will live in theEastern part of Russia in 2025

5 to 7 cities will emerge as alternative growth centres by 2020,bridging the welfare gap between Moscow and the regions


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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 linkingEurope, 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 socialinfrastructure

Yekaterinburg The City of Ural

Economic and financial centre

Important transportation hub multi-modal logistics,the fastest growing airport

Solid industrial base attracting investments


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Social Trends: Prosperity, Education and SocialMobility


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Wellness and wellbeing

Healthy nutrition

Healthier lifestyle sport and fitness

Education

RUB 140.5 billion investment

From quantity to quality

Corporate and federal universities, nationalresearch centres

Middle Class

Boom in consumer expenditure, stimulatingthe overall economy growth

The largest consumer markets in Europe

Higher demand for intangible products services, leisure and entertainment, etc.

2020201520102005

Annual Disposable Income* (Russia), USD per capita

Source: Frost and Sullivan, Euromonitor International, Rosstat

Social mobility

She-economy

Small and medium businesses

Reverse brain-drain

* Current prices, year-on-year exchange rates

The Middle Bulge


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Small and Medium Business Engine for InnovativeGrowth

Restraints

Only 5% have international contacts

Only 2% - innovative SME

US 40% of GDP, Europe 60% of GDP

Barriers tax system, lack of availablefinancing, corruption, red tape

Positive trends 1.7 m SMEs, 4 m individual entrepreneurs

17 m employed, 22% of working-agepopulation

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 theMinistry of Economy Monitoring of SME

sector(June 2011), Opora.


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Healthcare as a National Security Doctrine


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Source:WHO

,UN,

Rosstat,Frostand

Sullivan

Nations healthcare becomes THE most urgent problem in Russia

Facing Demographic Crisis

Life expectancy among the lowest in the developed world

Unhealthy lifestyle and inefficient healthcare system

Number of population decreased by 7 million in 1991-2009. 2025 forecast: optimistic/pessimistic scenarios ~139/131 million

Fast Forward Facts:Demographics


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Source:IMSHealth,Fr

ostandSullivan

Pharma2020

Manufacturing of pharmaceuticals in Russia

Foreign Russian

2010 2020

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

Pharma

Pharmerging Economy

CAGR 2011-2016:

11-14%


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Source: Frost and Sullivan

Equipping the Healthcare System

Today

Installed base 4 MRI and 9 CT scanners per 1 million populationEstimate 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

Medical

Equipment

CT computer tomography

MRI magnetic resonanceimaging

CAGR: 7-8%


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Infrastructure Development


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The most ambitious infrastructure development programme in the world

New and improved business opportunities

Population mobility

Economic development of the Eastern part of Russia


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Source: Rosstat, IATA, Frost and Sullivan

Today:

63% of the Russias 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 existingairports

Vladivostok air hub in the Far East

Investment 2012-2019:RUB 107 ($ 3.55)

billion

Up in the Air


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Source: Ministry of Transportation, Frost and Sullivan

Automotive IndustryOver 4 mln new car sales inRussia by 2020

Logistics IndustryTo reach over $100 bn by 2020

Fools and Roads

Today:

29% of federal roads are overloaded, in Moscow 60%

46,000 settlements (2.7 m citizens) do not have access to hard-surfacedroads

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

Investment 2012-2019

RUB 1.71 trillion($ 57 billion)


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SiemensDesiro trains to bemanufactured in Russia

TalgoSpanish manufacturer to supplyvariable gauge trains for Moscow-

Berlin and Moscow-Kiev routes

AlstomSupplier of Allegro train onSt.Petersburg-Helsinki direction, iseyeing further expansion in Russia

Back on Track

Today:

Low railway network density

Low cargo delivery reliability 88-90%

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)

Investment 2012-2019

RUB 407 ($ 13.5)billion

Railway modernizationin Russia attracts

foreign players

Source: Ministry of Transportation, Frost and Sullivan


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e-Russia


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Modern Russia

Implications for Government,Business and Society:

Accountable and transparentgovernment

Transparency for stakeholders inG2G and G2B transactions, biddingprocess

Improved city planning process

Cut red tape and save time: on-lineG2C services (taxes, utility bills)

Reduce operational costs forbusinesses

Efficient delivery of a long range of

public services 24/7 educationand healthcare

New business models


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E-Government

UN e-Government index 2012

www.government.ru solid andrepresentative, rich technical features

www.gosuslugi.ru portal One StopShop for e-services, ~500,000monthly visitors

27th spot in the world

The leader in Eastern Europe, onlybehind Japan and US among thelargest populated countries

RUR 80 ($2.7) billion investment forgovernment informatization

60% of the population to use e-government services in 2020, up from~11% presently

+32 positions inglobal ranking in

2 years (!)

Note: * - with a population over 100 million peopleSource: United Nations


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e-Society

e-Learning

Legal status of e-learning approved by the newLaw on Education (2012)

20-25% growth of e-learning services in thecoming years

~ 40% annual growth

Overcoming general distrust, expansion in theregions and all age-groups

Solving logistics and payment issues

New business models (private shopping clubs,group purchasing, penny auctions)

e-Commerce

e-Healthcare

RUR 24 ($ 0.8) billion investment

Electronic health records system roll-out in pilotregions

Telemedicine and m-healthcare remotepatient diagnosis, monitoring and treatment


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Made in Russia


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Made in Russia 2.0

Innovative production in Russia, % of GDP

Innovative products in Russian exports, %

Before After

REBRANDING


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Localization offoreign

manufacturers

Strongdependence

onhydrocarbonexports

Export ofinnovative

goods andservices

R&D funding

Technologytransfer

Before After

Localization of manufacturing in Russia will trigger its innovative growth

From Raw Materials Supplier to Innovative Exporter


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Back to Russia

Healthcare

CT scanners PhilipsHealthcare and Elektron,GE Healthcare andRostekhnologii

Big Pharma

ICT

Mobile base stations forLTE networks NSN,Rosnano and Mikran

IPTV set-top boxes

Cisco Systems(manufactured by Jabil)

Energy

Energy efficient powergeneration turbines General Electric andRostekhnologii

High performance gasturbines Siemens AGand Silovye Mashiny

Automotive

Localization ofautomotive plants

Railway cars Alstomand Siemens AG

Automotive components Valeo, Robert Bosch


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Technology Leapfrogging


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Automotive &Logistics:

Navigation assistance

Traffic management

Usage-based insurance

In-vehicle infotainment

Asset tracking

Real-time stockmanagement

Air-traffic controlAutomated guidance ofmachines

ERA GLONASS is to become fully operational by 2014-2016 and create multiple innovativeapplications

Space Jam

Other:

Tracking (personnel,children, criminals)

Remote patient monitoring

Improvement in weatherprediction

Mobile satellite services

Increase in broadbandspeed


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RFID / NFC

Potential economic benefits to outweighimplementation costs

Multiple applications retail, logistics,toll collection, fare payment

4G Mobile Technology

High rates of data transmission

Enabling integration into any wirelessplatform

Russia at the forefront of LTEdeployments globally

202020152010

Broadband Internet Access, % of Households

Security

Transportation and critical infrastructureprotection

CCTV surveillance integrated into thewireless platform

Market growth of IP-based solutions

Wireless World

Wireless intelligence IT infrastructure to be around 80% wireless


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Biopharmaceuticals and Beyond

Biotechnology-2020

RUB 1,163 ($38.6)billion

Today0.1% of the global biotechnology market80% import dependenceFocus on pharmaceutical biotechnology

Tomorrow5% market share in the global biotech marketTwo-fold reduction of importsRed, White and Green biotech

Fast-growing, attractive forinvestment

Large-scale projects Generium, Bioprocess, Chemrar,Biocad

Opportunities importsubstitution of generics,innovative drugs

Red Biotech - Pharma White Biotech Industry

Virtually non-existent

Third wave of biotech

Opportunities biofuels(agricultural and forestrywaste), chemical industry(biopolymers), food and feed(ingredients, supplements)

Green Biotech - Agriculture

Legal uncertainty barrier

for growth Opportunities increase

yields of agricultural crops,reduce their vulnerabilityto diseases, improvenutritional quality of food(amino acids)


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2018201520122009

Source: Frost and Sullivan, NT-MDT, Rosnano

Global Scanning Probe Microscopes Market,$ million

CAGR

15%

NANOMATERIALS

Large scale production of silicate

nanocomposites (Bryansk, February2012) Rosnano

Large number of innovative SMEs,e.g. Novosibirsk Nanomaterials metalnanopowders.

NANOMATERIALS

Large scale production of silicate

nanocomposites (Bryansk, February2012) Rosnano

Large number of innovative SMEs,e.g. Novosibirsk Nanomaterials metalnanopowders.

NANOINSTRUMENTATION

Worldwide spending onnanotechnology will lead to sustainedgrowth in demand

NT-MDT (Zelenograd)

manufacturer of world-class scanningprobe microscopes (SPM) since 1989

Advanced Technologies Centre manufacturing of SPMs (Moscow,December 2011) Rosnano.

NANOINSTRUMENTATION

Worldwide spending onnanotechnology will lead to sustainedgrowth in demand

NT-MDT (Zelenograd)

manufacturer of world-class scanningprobe microscopes (SPM) since 1989

Advanced Technologies Centre manufacturing of SPMs (Moscow,December 2011) Rosnano.

Nano-Russia


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Smart is the New Green


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Smart is the New Green

Smart Cities SmartTechnology

SmartInfrastructure

Smart Energy

SmartMobility

SmartBuildings

Smart Grids Smart Clouds

SmartMaterials SmartBandages Smart Phones Smart Meters


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Source:Frost&

Sullivan

Russia is to leapfrog from incandescent light bulbs to intelligent LED lighting systems

The Lighting Revolution

LED-pioneers inRussia

LED Lighting Market Revenue, World

CAGR

20%

Smart Lighting

Today LED 3-5% of the market due to high cost

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 andcontrol street lighting, motion controls, dimming sensors, on/off scheduling.


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Source:Fe

deralGridCompany,Frost&Sullivan

Price Projection, $Installed Base, million units

Saving the Energy

Intelligent grid implementation could result in RUB 50 million annual savings

Smart Grid projects in Tomsk,Sochi, Perm, Belgorod

European Smart Meters Market

Today 13-15%energy loss during electricity transmission

70% of installed equipment import

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)

Smart Metersand Grids


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E-government E-healthcare

Smart buildings Smart grid

Traffic management Public transport

Entertainment Culture and sport

Smartgovernance

Smartenvironment

Smart living

Smartmobility

Smart City interconnected urban environment where citizens lead a fully digitalized lifestyles

From Concept to Reality

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

SMART CITY

Belgorod

Maiden smart city project inRussia

Smart lighting system 59,000 smart meters Smart grid.


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Mega Events


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Mega Events

Sochi 2014 WinterOlympics

$ 10 billioninvestment

Development oftourism in theCaucasus

F1 Grand Prix

$ 200 millioninvestment

Recurring annualrevenue

FIFA World Cup 2018

~ $ 22 billioninvestment

Infrastructure,tourism, globalmarketing campaign

APEC Summit 2012

$ 9 billioninvestment

Modernization ofVladivostok hubin the Far East

A string of large-scale events that will open up Russia to the world


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Macro to Micro Analysis


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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

F M t Mi T ki M T d f I f ti t


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From Macro to Micro: Taking Mega Trends from Information toStrategy Implementation

Sub TrendA sub-layer of trends thathas a wide ranging impact

Mega TrendSelected trends that

impact your businessand markets

Analysis ofOpportunities

and UnmetNeeds

Impact on

Future Product/Technology

Impact to YourIndustry

Visualising the roadmap ofthese critical forces throughscenario-building and macro

economic forecasts

Macro Micro

Documents

MegatrendsinRussia2012-2020