Doing Business in Russia

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MEI talks about business opportunities in the Russian Federation with Sergey Aslibekyan, managing partner of accounting organisation Grant Thornton ZAO.

Please outline your role and responsibilities at Grant Thornton ZAOI am the managing partner and one of the founders of the firm since its foundation in 1994. My current responsibilities include overall management of the company and strategic development. I am also responsible for providing business advisory services to our clients. What services does Grant Thornton offer in Russia? As you would expect from a leading global accounting organisation, Grant Thornton offers a wide range of services in Russia, including assurance, accounting outsourcing, tax and legal advisory services, corporate finance, i. e. transaction advisory, valuation, project finance and M&A. We also provide business risk services. We are constantly working on enlarging the scope of our services and industry specialisation. For example, we started new service lines in the area of management consulting and information technologies last year [2011]. What does Russia have to offer UK–based or other overseas investors? Russia is a vast market, one of the largest in Europe and in the world, which provides great opportunities for foreign investors starting from traditional areas such as natural resources, and up to development of new high–technology production. Russia has 24 special economic zones of four types: industrial, innovation, travel and ports, where investors have tax, customs and administrative incentives. We expect stronger growth prospects in the next few years in connection with the 2014 Olympic Games, 2016 IIHF World Hockey Championship and also 2018 FIFA World Cup, which our country won the right to host. This growth should be strongest in the infrastructure sectors: construction, railroads, airports, hotels, and etc. The Russian governments recent initiatives aimed to further develop hi–tech and innovation sectors make them attractive for foreign investment. What sectors are doing well at the moment in the country? The most attractive sectors in Russia are natural resources, energy, mining, food and beverage (world class companies have launched their factories in Russia), pharmaceutical and health, retail, IT, and high technology sectors. Russia considers the development of the hi–tech and innovation sector as its top priority to end the country's dependence on raw material exports and has pledged dozens of billions of US dollars on its financing. What is the current business climate? Has the current global recession hit Russia hard? Russias latest economy performance has been solid, though thanks mainly to favorable oil prices. The economy returned to the pre–crises level towards the end of the last year supported by strong consumption, as growth held steady at the same rate as in 2010. After 18 years of negotiations, Russia successfully negotiated the terms of its accession to the WT O. The rouble has demonstrated certain stability compared to the US dollar and Euro over this period. A wide–scale 2011–2015 programme for the privatisation of state property was adopted in order to reduce the public sector of the economy. There is also improvement in doing business in Russia. Four business regulation reforms were implemented last year: it became easier to enforce contracts by introducing a new electronic court case filling system; to transfer property by eliminating the requirements to obtain cadastral passports on land plots; to import by reducing the number of documents needed for import transactions; to afford electricity, by cutting the cost of getting a new electrical connection in half. At the same time, some aspects of Russias business environment remain unfriendly with high levels of red tape and corruption heading the list. The government has made fighting corruption its key priority. How should a UK–based or overseas company best approach targeting opportunities in Russia? (Finding local partners versus setting up their own office etc)Our business and legal environment gives both opportunities for foreign investors: to enter our market directly setting up their own business, or find local partners. It depends on the business, and decision taken by the company targeting business in Russia. Before launching a business in Russia it would be better to visit the country to explore the opportunities, the investment environment and information on the legal, accounting and taxation framework. Finding important business contacts is very important too. Are there are any nuances in Russian business practice that our readers would do well to be aware of? Working in Russia differs from the Western way of doing business. The understanding of local rules and building good business relations with both local business community and authorities are important. Finally, what do you think hosting major sporting events will do for the country? Russias success in the competition for hosting 2014 Winter Olympic Games, 2018 World Cup, and now the 2016 IIHF World Hockey Championship is a testament to how far the country has advanced of late. Hosting such global events will bring Russia substantial economic benefits. Preparation for the above events will boost the production, employment and economic growth tempo in general. Highways, bridges, railroads, airports, seaports and sports facilities will have to be built or revamped to world–class standards. The next decade could become the turning point for Russian economic reforms targeting a lesser dependence on oil and gas sales and offering excellent opportunities for foreign investors to step into this growth market. " Contact Details:Sergey Aslibekyan, managing partner, Grant Thornton ZA32A KhoroshevskoyeShosseMoscow 123007, RussiaT +7 495 258 99 90F +7 495 580 91 96grant. thornton@ru. gt. comwww. gtrus. com

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