Bureaucracy is not too frightful if you know national and regional specific

Oleg Timofeev, the managing partner at the law firm “T&K LEGAL”, the Chairman of the Public Committee of Foreign Investment at N. Novgorod Chamber of Commerce

One investor might seem an obstacle and another  the peculiarities of doing business in a particular country or region. Ignoring this fact may result the missed opportunities, and its recognition may result the success.

Let’s say, an indicator of labor cost: it would seem, that Russia now is not profitable for investors, from this point of view, because of the increased wages. But the flip side of this coin is the high  consumption level and a large share of skilled workers.

Or, for example, the relationship with the government. To some, our bureaucratic system may seem overwhelming, and some will wonder: but there are other companies working in this market for a long time, how do they do it?

Usually in Russia a foreign investor receives a quite serious organizational support in the beginning from the regional authorities, and Nizhny Novgorod region is not exception. The investor gets this support until  the production launching. After that, a new company comes under the control of the Tax Inspection, The Russian Financial Service, The  Russian Ministry of  Defense and Emergency Response, The Russian Service of Environmental Supervision, The Federal Migration Service, etc. And some foreign investors are psychologically not ready for this. In addition, they do not always realize the importance of receiving all the permissions at the early stage,  for instance, the right to use land. Plus, constantly changing Russian legislation, which requires regular monitoring …

For the Russian entrepreneurs such practice is the norm, they are used to it. For example, most managers use the automated databases to check the changes in legislation. For a foreigner  this is, as the phrase goes, “the Chinese puzzle”. But this problem can be solved quite easily if the investor  asks the assistance from the consultants, who can take care of all these problems.

Curiously enough, foreign investors may learn from Russian businessmen, especially when it comes to project implementation in Russia. Example: The project budget  approved by foreign investors is constant and does not include a certain allowance for incidental expenses. In contrast, Russian businessmen,  understands that the budget is formed on the paper, usually undergoes through changes in the face of our reality.

Or a factor of different approach to the adoption and coordination of administrative decisions.  Western companies are used to  complicated approval procedure,  and there is a mindset  if they  negotiate and fix it in their documents for a long time, then it is the way it should be. Therefore, they spend  much more time to make a decision, than Russian investors, who often can make it through the day, as in the Russian character fear to lose time, and with it  some unique opportunities. But it is not common in  Russia, to change  the rules quickly during the process by mutual agreement. This is important to understand if you work in Russia.

The fact that such an approach, as an adaptation to local circumstances of doing business is viable, is proved by  the successful implementation of a number of foreign projects in the Nizhny Novgorod region. If we take 2011, then we will see how the global financial crisis back to life several large investment projects, among them are the projects of  SCHOTT and “RusVinyl” companies. Despite the crisis, the well-known brands such as  Onduline, Freudenberg Politex, Pasebahce, Liebherr, Volkswagen, Lear, Magna, Collini, Valeo were developed their production for
the last three years. Not to mention a number of smaller projects.

That doesn’t happen by accident. After all, one of our  main features is that  Nizhny Novgorod is one  of the leading regions in terms of attracting investment because we have obtained from Soviet times the serious industrial and scientific base.

Another advantages are the balanced regulatory framework of the investment legislation, the favorable geographical location (proximity to Moscow, to the main transport highways), which optimizes the logistical component of any project. The good point is also the availability of high skilled human resources: scientific school  in Nizhny Novgorod is still one of the strongest in our macro-region and in Russia in particular. Our city is famous for specialists in software engineering, chemical industry, electronics, transport industry.  That doesn’t happen by accident that investors coming to our region, prefer to invest in sectors of automotive components manufacturing, engineering, petrochemical complex, building materials, glass production.

The main task, which should be solved by  the foreign investor is to obtain information about the “game rules” and the algorithms of existence in a local context. He has to meet new people and learn from their experience, and possibly to become partners. With this purpose in 2008, The Chamber of Commerce of Nizhny Novgorod Region was created  the Public Committee on Foreign Investment, and I have the great honor to be the head of this Committee.

During this time, the Committee held a dozen of public events, attended  by more than forty foreign companies. Recently, the meetings are  attended not  by foreign investors but also by domestic investors. Since May 31 the committee meeting has taken the format of visiting sessions: the participants will visit the investors’ enterprises  operating in the region.

In fact, the Public Committee on Foreign Investment is a dialogue between business representatives and government, an information platform, where the participants may exchange their views, the position of participants is formed  which can be brought to the attention of the authorities and serve as an impetus for changes in regional legislation, the introduction of any initiative at the federal level. For investors, this is an additional opportunity to meet with representatives of various agencies, ask them questions directly, and to understand that the Russian bureaucracy is not too frighten, as they might think.