Russia joined the World Association of Investment Promotion Agencies
“Invest in Russia!”
Written by Elena Shmeleva
For International Property Investment Exhibition (MIPIM) a recently established Russian Investment Agency together with the Ministry of Regional Development formed a catalog of regional projects. The catalog includes 30 regions, more than half of which can be called successful. All successful Russian regions participated in this project.
At the conference “Invest in Russia”, held at MIPIM, we presented ten Russian regions. Virtually all of them being within the industrial zones have the rate of customs duties on imported equipment of zero percent, enjoy the discount of the property tax in the first five years, their transport tax is also about zero percent, and the income tax varies from 12 to 15 percent instead of 20.
From the preferences point of view the situation is very similar. In this regard the regions certainly compete with each other. However, the competition in general should be more coordinated. Each region has its strengths and weaknesses. Priorities need to be found. It can be natural or human resources, proximity to markets (big cities or ports), the existence of domestic demand, etc.
For example, in the region close to the mega-cities it is necessary to develop logistics. If there are ports in the region, or agriculture, or big enterprises, in this case there should be quite a different strategy. Thus, it is important that the regions identified their specific advantages and based on them attracted specific companies operating in these sectors.
Realized investment in any particular region is a success story for all the country. Therefore, though competition between regions exists, the overall success story (or vice versa) is much more powerful and important factor. And we will be helping regions to achieve success.
Which industry is more attractive to investors in the regions?
Yury Voicehovsky, CEO of the Russian Investment Agency: When it comes to Russia, of course, foreign investors are primarily interested in everything related to natural resources. The second large group is associated with our big domestic market and the areas around it – the real estate sector, retail, welding cars. The important factor is the availability of workforce.
It is important to define priorities in each region and to seek investors in these areas. You cannot run in all directions at once. And one of the important roles of the Agency is to track global trends, international players and to ensure interaction between investor and region.
Are you approached by foreign investors or regions?
Voicehovsky: Both. And by Russian investors too. When we say “Invest in Russia”, many see it as a reason for appealing only to foreign investors. This is not correct. Even now if you go to our website www.invest-rf.com, you’ll see links to regional agencies where projects are proposed for implementation. We plan to implement an information management system for working with clients, projects, and investors. Such an approach has been successfully implemented in Asia. One can see not only its neighbors who prepared investment proposals, but also the offers from potential investors.
How are you looking for investors?
Voicehovsky: In order to do this we actively use our international relations, participate in various forums, investment congresses as well as represent Russia in the World Association of Investment and Promotion Agencies. Before the beginning of this year, our country has not been represented there. Now all international investment associations are our natural sparring partners. We get requests from business alliances, trade missions, international companies and investors. During bilateral meetings we introduce investors to opportunities in Russia. We actively explore and use international experience. For example, the system of working with investors in France, where once a week they make conference calls with the regions that meet the requirements of investors and organize dialogue between potential partners at the federal and republican levels .
Have you managed to link foreign investor with the Russian project?
Voicehovsky: Sure. For example, we recently held a meeting with the development company from Dubai, which has already invested $ 1.5 billion in hotel business and is now studying the possibility of entering our market. This investor is also interested in opportunities in Tatarstan, and we arranged a meeting between the investor and the regional agency.
Should the regions pay for placement of their projects on your website?
Voicehovsky: No, no costs for any investors or for regions to be incurred. It is important to us that there is a constant flow of information from regions containing investment proposals. We do not intend to narrow it by introduction of payment. In the City of London they say: “Information is the king”, meaning that only the person who owns the information, can make the right investment decision. All information about the projects to investor, as well as information about investors to the region will be provided free of charge. We, at the Agency, of course, will have the items of income, but they will be collected from, for instance, a detailed tracking of individual projects, special studies, or other issues related to the implementation of the project.
What ratings do the foreign investors use?
Voicehovsky: The subject of ratings is now very popular. In Russia there are now many different rankings, including those done by Strategy Partners, National Rating Agency, Ratings of Ministry of Regional Development. Recently RUIE (Russian Union of Industrialists and Entrepreneurs) together with ASI announced about the creation of one more rating. “Doing Business” released its own ranking a few years ago, but only about twenty Russian regions were included there. The problem is that many international rankings are more about risks rather than returns. But any investment is still more about the risk-return ratio. Besides, many Russian ratings do not have enough weight among the international audience and they function as though for themselves only. This has created a vacuum in the middle. Therefore Russia in terms of ratings does not look very attractive. And apart from that many ratings are not very objective. There are ratings that are made from time to time, and they in terms of methodology also raise a number of questions. We are now in partnership with several well-known Russian players and the World Association of Investment and Promotion Agencies developing the concept of the rating which, on the one hand, would be recognized by international investment community, and, on the other hand, would cover all the regions.
When your rating will be ready?
Voicehovsky: I do not want to make premature estimates, since it is not a simple project. There are many technical issues around it. We already have a concept that we are discussing with our partners. We would like to present the rating this year.
How will you help investors? What exactly will you do? Can you describe it step by step?
Voicehovsky: It depends on the investor and his plans. To begin with, we will try to provide the investor with all the interesting information necessary for a more rapid decision-making on investment. We will find partners for him or bring him to a specific region. We will tell him about the projects already successfully implemented in the sector and new opportunities. And we will be ready to accompany him at all stages of the project. We already see that those investors who come to us, they remain in contact with us and express interest in maintaining a regular dialogue with us. We are a reliable local systemic partner. Now we are building a systemic dialogue with Asian (including Singapore, China and Japan) Investment Agencies and Foundations, those in the Middle East, Turkey and other BRICS countries. But this is only the beginning. We have many ideas and good experience in this field.
When will the first projects be implemented?
Voicehovsky: You know, I’m an impatient person. In addition, our Supervisory Board poses a very ambitious task. And we like it. For us every obstacle is a challenge and an additional motivator. Therefore, despite the fact that the Agency has only recently started its work, we want to implement first investment projects this year. And, judging from what is already being undertaken, despite the new external difficulties, I am confident that we will succeed.
Do you have any rivals or competitors?
Voicehovsky: We have no competitors in the literal meaning of the word. There are separate structures that are trying to implement some fragments of our concept. We had opponents, but we could not tell for sure if they wanted us not to invest in Russia, or to invest not in Russia? We say to everyone: “Invest in Russia”! And in the end, I’m sure, we can all unite around this important common goal.