Q&A: Russia Opens its Doors

The business opportunities and current economic climate in Russia are outlined for MEI readers in a Q&A with Sergey Aslibekyan, managing partner, Grant Thornton Russia.

Please outline your role and responsibilities at Grant Thornton Russia

“I am the managing partner of Grant Thornton in Russia and I have been working in the firm since its foundation in 1994. My current responsibilities relate to strategic and operational management of the company. 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, business risk services, valuation, transaction advisory, project finance and M&A. We have recently started providing management consulting and IT services.”

What does Russia have to offer UK-based or other overseas investors?

“Russia has a vast market, one of the largest in Europe and in the world, which offers an attractive set of opportunities for foreign investors. Russia has 24 special economic zones of four types: industrial, innovation, travel and ports, where investors have tax, customs and administrative incentives. The Russian government has stated its long-term goal to generally improve the business environment in our country and aims its efforts at bringing it into line with global practice. In February 2014 our country will host the 2014 Winter Olympic Games. The preparations for the Games have become a great boost to developing infrastructure in the south region of Russia. We hope that Russia’s accession to the World Trade Organisation, the 2012 Asia-Pac Economic Cooperation (APEC) Summit, the 2014 Winter Olympic Games and 2018 FIFA World Cup are making our country more attractive to foreign investors.”

What sectors are doing well at the moment in the country?

“Traditionally the most attractive sectors in Russia remain oil and gas, energy, mining, FMCG, pharmaceutical and health and infrastructure. The Russian government is planning ways to diversify the economy to end the country's dependence on raw material exports by improving infrastructure and by capitalising on high technology developments. I would also like to mention our automotive sector – some experts expect Russia to become the largest automotive market in the world in 2014. Eleven major auto producers have already or are in the process of setting up assembly plants in Russia”

What is the current business climate? Has the current global recession hit Russia hard?

“The global slowdown has certainly impacted Russia: its business is somewhat slowing down but still remains more buoyant than in some other markets. According to the Grant Thornton Global Dynamism Index (GDI), a research project which ranks 60 of the world's largest economies across 22 indicators of economic dynamism grouped into five categories, Russia is ranked 16th in the category ‘Economic & Growth’. Consumer confidence, budget deficit, bank credit trends, government spending options are still positive, which places Russia in a more advantageous position in comparison with a number of large world economies that have problems in their financial sectors. Russia has extremely low levels of public debt (11% of GDP), the third highest foreign exchange reserves in the world, at $528bn, and solid trade surplus of $212bn. In 2012 Russia joined the World Trade Organisation as its 154th member, and created a common economic space with Belarus and Kazakhstan in the same year.

The Russian government declared the attraction of direct foreign investments as one of its top priorities. It has focused on a series of measures aimed at improving legal environment, continues a broad anticorruption campaign that shows positive effects from year to year.

Over the last two years the Russian government has implemented some reforms that make it easier to do business in Russia. It has become simpler to start business in Russia; it takes much less time to obtain a construction permit and to register a new building; the administrative burden of taxes is eased by simplifying compliance procedures for VAT and by promoting the use of tax accounting software and electronic services; the government has made trading across borders easier by implementing an electronic system for submitting export and import documents and by reducing the number of physical inspections, made filing a commercial case easier by introducing an electronic case filing system, and etc.

According to the latest results of the World Bank Doing Business Survey 2014 that measures business environment, for the first time Russia has been ranked among the top 100 countries with more attractive conditions for doing business, leaving behind China and Brazil. Russia has increased its position by 20 points compared to 2013, and has taken the 92d place among 189 countries.”

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 the objectives pursued by the company targeting business in Russia.

Russia has a vast territory and a lot of sub-markets that are not well explored and need investments for their further development. If you start business in some regions of Russia it should be clear that many key aspects of the business environment depend on the regional and local legislation and on implementation of countrywide reforms at a regional level.

Before launching business in Russia it is advisable to follow common rules: it would be better to visit the country to explore the opportunities, investment environment and information on the legal, accounting and taxation framework. Finding important business contacts is very important too.”

Are there any nuances in Russian business practice that our readers would do well to be aware of?

“I would not say that doing business in Russia today greatly differs from doing business in western countries. However, there are some nuances. The understanding of local rules and regulations as well as good relationship with local authorities are all very important here – you should not forget to pay attention to local governments. Business in Russia relies on trust and finds personal relationships very important. Co-operate with other companies to broaden your business relationships, especially if you conduct your activities in remote regions.”

Finally, what do you think hosting major sporting events such as the Winter Olympics and FIFA World Cup will do for the country?

“Hosting such global events will bring Russia substantial economic benefits. Preparation for the above events is already boosting the production, employment and economic growth tempo in general. Highways, bridges, railroads, hotels, airports, seaports and sports facilities are already being built or revamped to world-class standards. With preparations for the Winter Olympics in Sochi fully underway the south region of the country has already become more progressive from a social, logistics and an economic point of view and therefore more attractive for Russian and international investors.”

Contact Details:

Sergey Aslibekyan, managing partner,
Grant Thornton Russia
32A KhoroshevskoyeShosse
Moscow 123007, Russia
T +7 495 258 99 90
F +7 495 580 91 96
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