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Corporate Perspective on Russia Corporate Perspective on Russia Future High Tech R&D and Future High Tech R&D and Manufacturing Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing Company Russia – The World Bank Workshop on Public Policies in Support of Industrial Competitiveness and Economic Diversification Moscow February 4, 2005

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Page 1: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Corporate Perspective on Russia Corporate Perspective on Russia Future High Tech R&D and Future High Tech R&D and

ManufacturingManufacturing

Ambassador Thomas Pickering Senior Vice-President, International RelationsThe Boeing Company

Russia – The World Bank Workshopon Public Policies in Support ofIndustrial Competitiveness and

Economic Diversification

MoscowFebruary 4, 2005

Page 2: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Boeing in Russia/CISEngineering

New Aviation Routes

Zenit

International Space Station

Sea Launch

IT

Purchases of Titanium and

Parts

Boeing airplane sales

ATM andAviation

Safety

Research and Development

Regional Jet San Francisco

Los AngelesChicago

New York

KhatangaDikson

Singapore

Tokyo

Frankfurt

London

Delhi

Moscow Khabarovsk

Hong-Kong

Page 3: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

1991 2000 2004

$1.3B

$$ Values of Boeing programs in Russia

• ISS• Sea Launch• Design Center• Titanium• IT• Technology

Center

• 787• Design Center• Titanium• IT• Technology

Center• Sea Launch

• ISS• Sea Launch• Design Center• Titanium• Technology

Center

$2.3B

Page 4: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

787 - Russia

787 (7E7)

Large Cargo Freighter

+• 1000 engineers • Hundreds of Programmers • New Alloys• R&D of New Technologies• New IT Technologies

Russian Ministry of Industry and Energy - Boeing MOU on Russian Industry Participation in the 7E7 Program Signing Ceremony Moscow, Nov 17, 2004

Page 5: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

New Opportunities for Russia

• Space exploration- Wide international partnership for

new space exploration initiatives- Best Russian solutions for cargo

delivery to support missions to Moon and Mars

• Defense and SecurityIf and when RG and USG are ready to proceed

- Missile Defense cooperation (U.S./Russia)

- NATO/Russia working group

Page 6: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

~$0.5B / year

~$5B / year Intellectual Services

InformationTechnology

Research &Development

Engineering

Innovations, High-Tech Integrated Intellectual Services – New Competitive Sector of

Russian Economy

Today:• Boeing• Intel• Motorola

Future:Most World Leading Companies

Page 7: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Integrating Russia into World Economy as a High-Tech Country for Engineering/Technology/IT services, less dependant on export of

natural resources

InformationTechnology

EngineeringResearch andDevelopment

InformationTechnology

EngineeringResearch andDevelopment

Page 8: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Sea Launch(Boeing, World Bank, Energia, Uzhmash/Uzhnoye, Kvaerner)

Titanium/Special Metallurgy(Boeing, Airbus, GE, Pratt&Whitney, Rolls-Royce)

RRJ

Trigger Russian Competitiveness

Page 9: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Sea Launch is an international private Joint Venture created by Boeing (U.S.), World Bank, Energia (Russia), Yuzhnoye/Yuzhmash (Ukraine) and Kvaerner (Norway) to revolutionize heavy commercial satellites launches

Sea Launch – The Present

1993-1995Initial Sea Launch studies

with future partners

1995Sea Launch venture is

formed. Hughes signs first order. Ship construction

commences.

1996 - 1998Construction of Launch

Platform and Command Ship in Norway/Scotland/St.-

Petersburg

March 1999First Demo launch

Page 10: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Sea Launch – The Future – New Level of PPP

1999-200414 launches performed

2005-2006Heavy backlog of new

launches. $200M annual cash flow to Russian and

Ukrainian enterprises

New markets of dual purpose and government payloads

Tough declining market of commercial launches

1999 2000 2001 2002 2003 2004

Page 11: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

1993-1997Boeing-VSMPO started

cooperation.VSMPO becomes approved

Boeing supplier.

1998First Boeing-VMSPO long-

term Ti contract

Boeing-VSMPO Cooperation On Titanium Metallurgy For Current And Future Aerospace Products

Titanium - Beginning

Page 12: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

1998-2004Intensive development

and certification of VSMPO.

Joint Boeing-VSMPO new Ti alloys & technology

programs

2005New long-term Boeing-

VSMPO contract.VSMPO becomes major Boeing commercial Ti

supplier starting

2007

Boeing-VSMPO Cooperation On Titanium Metallurgy For Current And Future Aerospace Products

Titanium - Present

Boeing 787

Page 13: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

1993

1993-1997

1998-2004

2005-

Outstanding Projects Based on Soviet Investment in

the Plant and Ability of th

e Current Leader to Meet

Demanding Western Market Requirements,

Supplemented by Great Metallurgical Innovation

Lost MarketShare

Requires Russian Government Protection of the best companies, stability, cooperation to open new markets and develop new technologies

Boeing-VSMPO Cooperation On Titanium Metallurgy For Current And Future Aerospace Products

Increased market share

Titanium – The Future – New Level of PPP

Page 14: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Russian Regional Jet

• Certification according to Russian and International standards• Designed and built in Russia for sales around the world• RRJ Program developer - Sukhoi Civil Aircraft (SCA)

Boeing contribution to RRJ program is providing technical consultation and intellectual property

April 2001 Boeing – Russian Aerospace Agency Agreement June 2001 RRJ Feasibility Study development by SCA and BoeingJanuary 2003 Boeing – SCA Agreement on long-term partnership on RRJ programNov 2004 Full scale program launch

First delivery is scheduled for December 2007

Target: build the best in the world regional jet (~75 and 95 passengers) for Russia and International sales

Page 15: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

1. Russia enjoys an obvious advantage based on the unique intellectual talent:- Information technologies- Engineering services- Research and Development

This should be promoted to customers and investors by Industry and Government. The support of the World Bank to this most promising development of the Russian economy is most desirable.

2. The Role of Government and the private public partnership- Tax concessions- Creation of techno parks IT infrastructure- Support to development of marketing and sales capability of

Russian intellectual services business

Conclusions

Page 16: Corporate Perspective on Russia Future High Tech R&D and Manufacturing Ambassador Thomas Pickering Senior Vice-President, International Relations The Boeing

Conclusions3. International trade is a two-way street.

- Russian Regional Jet (RRJ) – competitive project – leads the way in

revising this industry

- Russian airlines need competitive aircraft now to exploit Russia’s unique geopolitical position and lead the aviation transport market in the region