FingerTec Newsletter

Expansion In The Midst of Recession

By Batyr Komurzoev, Sales Manager (CIS Countries)

(An avid economist who is pursuing his PhD in Monetary Economics)

Our recent participation in the international exhibition, MIPS 2009, in Moscow was the first step to introduce FingerTec to CIS countries. Historically, Moscow was the center and capital of the now dissolved Soviet Union and even today, the city remains to be a financial and business center of the Russian Federation and CIS countries. In that sense, it was the right place to start introducing FingerTec to the Russian speaking market.

The exhibition was for four days with the number of visitors usually higher during afternoons. We had visitors from various parts of Russian Federation and other Russian speaking countries like Ukraine, Armenia, Kazakhstan, and Uzbekistan. FingerTec products caused much interest among the visitors, especially due to their unique designs, functionality and support of the Russian language. At first, judging from the enquiries made and interest shown by the visitors, who were mostly in the industry of security and system integration, it appeared that the current financial crisis did not affect the country. However, after hearing from a number of visitors mentioning about the worsened economic situation and reduced demand for their products and services, we began to anticipate a lower effective demand of our products largely due to the economic slowdown of the country. Nevertheless, we were able to establish quite a number of serious contacts there, some of which already became our Resellers and we remain positive about our future prospect in this country.

Outside the exhibition there was a similar picture. At first glance, it seemed that the business is going as usual and the economy is doing well with people hurrying to work during rush-hour, crowded shops with prices never falling and roads full of luxurious cars. After reading local news and talking to some of my acquaintances and friends in Moscow, I realized that the economy was not doing as good as it seemed which largely confirmed the news of the economy in the world media. There was a rise in unemployment, a fall in the demand for goods and services and a rising number of foreclosures of businesses with similar situation in other cities of Russia. In order to correct the situation, Government was taking various steps most of which are similar to the steps taken by other countries affected by the world financial crisis.

Red Square, view from Saint Basil's Cathedral

One of the measures adopted by the Government of Russia is the scheme of recapitalizing banks instead of creation of bad bank. Speaking at a Cabinet meeting discussing economic issues, Russian Prime Minister Vladimir Putin said that any banks receiving government assistance would be required to lend out as much as they were receiving and to keep interest rates relatively low (The Moscow Times, 23/04/09). Other components of recapitalizing banks are imposing no tax on profit if the profits are reinvested in the banks own capital and temporary participation of Government in bank’s capital with Government’s bonds. Opponents, however, argue that the scheme of recapitalizing banks is not efficient and requires two much spending from the Government. The alternative they suggest is the concept of bad bank and there is an ongoing debate among economists and Government officials of Russia on whether to adopt such concept or not. Bad bank concept is already in use by the governments of US and a number of other developed countries. It refers to forming a bank or a government entity that would buy out the toxic assets, like non-performing loans from other banks and troubled assets of private sector firms at a discounted price to help clean up their balance sheets. This concept of bad bank is gaining momentum, although its viability has been undermined by questions like how the assets would be valued.

The effectiveness and outcome of this and other strategies taken by the Governments around the world is not confirmed yet, although there are reports that the economic slowdown in some countries has reached the bottom. However, it is comforting to see that Governments around the world are doing their best to tackle the current financial crisis origins of which has more systematic nature. Businesses at least have some hope that the situation will be corrected soon and they can plan accordingly. This hope of the recovery could have been the reason why the visitors at MIPS were eager to know about new products in their market, like FingerTec in Russia, so that they obtain the necessary information, get familiar with the new products and make decisions accordingly even before the recovery with subsequent increase in aggregate demand is felt. Understanding the current situation in the world economy as well as economic situations at individual countries, we at FingerTec give a proper support in terms of product information and instant reply to the enquiries for any individuals and companies that are interest to become our partners. In fact, this strategy has proven right in more than 90 countries that we are present today.