When the Soviet flag was lowered for the last time in the U.S.S.R. in 1991, a door opened for Saskatchewan business people - they were finally free to transact with previously inaccessible areas of the world.

"Russia is an emerging nation, as are all of the former Soviet Bloc countries," says Ray Cressman, president of the Lanigan-based New Concept Industries, a Saskatchewan company that exports agricultural equipment to Russia.

"They're grasping hold of new technologies and new equipment. And we here in Canada have the newest and the best and the most advanced of anybody in the world, really. So we have what they need."

Saskatchewan, in particular, has benefited from the growing relationship between Canada and Eastern Europe. According to Western Economic Diversification Canada, the province's exports to Ukraine in 2003, comprised mostly of wheat and agricultural equipment, were valued at $12.5 million. Exports to Russia that same year, mostly peas and harvester parts, totalled $3.4 million.

Photo courtesy of New Concept Industries
New Concept president Ray Cressman, second from left, demonstrates a roller mill during an agricultural equipment tour to a Russian farm near St. Petersburg.

Although together the countries represent less than one per cent of Saskatchewan's total exports, Ukraine, Kazakhstan and Russia were the fastest- growing export markets for the province between 1999 and 2003.

New Concept, a roller mill manufacturer and custom fabricator, has put a lot of effort into developing a relationship with Russia.

"Russia was never on my radar screen of a market that we really wanted to go after," says Cressman. But after travelling there six times, he says: "The potential is great."

Seeing Russian agriculture practices is "like stepping back in history, in time, because they're dealing with methods that are very old and antiquated," he says, and Russians are excited about using Canadian equipment to help them modernize.

Cressman says the similarities between Russia and Saskatchewan make for a natural business relationship. "Their environment is very similar to ours. They have cold winters, so cattle need feed just they way they need feed here. They feed barley just as we feed barley."

He also says that despite cultural differences, Russians are "very much people like we are. In fact, a lot of us, that's where we come from ... so we have a lot of things in common."

Commonality, however, doesn't mean there aren't hurdles when doing international business with an emerging economy.

"Communication was probably the most difficult part," says Cressman. "When you're dealing in equipment, for example, there are technical phrases and terms that you use."

For example, he says: "We say a sprocket and everybody knows what we mean. For them, they would call it a star or a spur, or something like that. So it's learning to understand what that person's actually saying so you can eliminate miscommunications."

Guy Innes, director of international projects at Saskatchewan Trade and Export Partnership (STEP), a non-profit organization that helps Saskatchewan companies in global ventures, says: "There are always language barriers and cultural barriers with any kind of work like this."

Guy Innes

But a larger complication is the lack of "economic wherewithall" in former Soviet countries such as Ukraine. He says because the market system is so new to these countries, farmers don't understand what it is to make a capital investment, or how to get credit, and a lot of them simply don't have the money needed to buy farm equipment.

"Financing is a problem," says Cressman. "In established countries with established legal frameworks and banking systems" there are options for financing and loan guarantees that don't exist in emerging markets.

He says Russian farmers have to be prepared to pay upfront when they order a product, and since their bank rates are so high, most transactions end up being cash purchases. Paperwork and red tape were also stumbling blocks for New Concept.

"The Soviet ways of doing things and free-enterprise are two different things," says Cressman. "Methods of doing business are different."

He says learning the processes required, understanding how contracts, customs and invoices had to be documented, was all "very time consuming."

Bernie Stephaniuk

But there is help out there to smooth the bumps in Canadian-Eastern European business dealings.

In the last two years, Export Development Canada (EDC) has created significant lines of credit with banks in Russia and Ukraine to facilitate funding for buyers. EDC also provides expertise and financial services to Canadian exporters.

STEP introduced the facility for agricultural reform and modernization (FARM) program in 1993, which provides grants to Canadian companies that support rural and agricultural development in Ukraine.

Each project has to support one or more of the "three pillars" of the FARM program: Development of institutional capacity, agriculture extension, and/or civil society.

The FARM program has successfully completed nine projects, has 10 in operation right now, and three more have just received approval.

"The project sizes are small," Innes says, each costing $75,000 at the most, but he describes them as "very strategic, very regional kinds of projects."

The scope and subjects of the projects vary. Some, Innes says, "help with women, for instance, in agriculture and living in rural communities. Some help developing of agriculture co-ops, which are a very, very new concept to Ukraine. Others are working on environmental issues: How do you store and stock pesticides and herbicides in a safe way that's not going to affect the groundwater?" Bernie Stephaniuk of Yorkton was involved with the shipment of the first container-load of farm equipment from Saskatchewan to Ukraine in 1995, and launched aginukraine.com, an online information source and advertising site for agriculture and agri-business in Ukraine.

"It's a two-way street," he says of business dealings with Ukraine. "We can't just sell things there. We've got to be able to buy their services and goods as well."

He recommends that a company trying to establish a business presence in Ukraine should look at joint-venturing or at least joint-manufacturing. "Ukraine has a fairly sophisticated industrial base, so that potential is there," he says.

And the potential, he says, is huge.

"People said: 'Oh, Ukraine. They can't buy anything from us. They haven't got any money,' " says Stephaniuk.

But that is dead wrong, he says, because at least five per cent of Ukraine's population has a good standard of living comparable to Canada's. Of Ukraine's 49 million people, that's roughly 2.45 million, and "that's the population of Alberta. So yes, there is poverty and there is lack of economic means, but the market potential for development is large."

Stephaniuk's research shows Ukraine has even greater agricultural potential than Saskatchewan. Ukraine's territory is roughly 90 per cent the size of Saskatchewan, yet it has 33 million arable hectares compared to Saskatchewan's 20 million cultivated hectares. Not only is that about 1.5 times more land, but that land, he says, is more productive. Ukrainians may have cold winters, but they have a slightly warmer climate overall, a longer growing season and they can grow a bigger variety of crops.

"So, in terms of the economic potential," says Stephaniuk, "I would say it's that of Alberta, Saskatchewan and Manitoba combined."

Innes says estimating a dollar figure for Eastern Europe's potential is difficult. Development depends on how quickly things evolve for the area, both economically and politically. If Ukraine were to join the European Union, for example, he says Canada would essentially be shut out.

But Innes is still optimistic for the region. "Regardless of whether I can give you exact figures on the size of the market, I think there is a market there ... It was the breadbasket for the former Soviet Union and also for parts of Europe. So it's going to come into its own."

(Nicole Strandlund can be reached at nicole@businessedge.ca)