Moscow is open to cooperation
Capital Ideas held a roundtable to discuss the Russian capital’s investment and economic potential with support from the Moscow Department of Foreign Economic and International Relations.
In spite of global crisis phenomena, the Russian capital continues to develop rapidly, and it would be unwise to not take advantage of the opportunities that are opening up for foreign business. This is something all participants of the roundtable “Moscow: the city’s economic and investment potential” agreed on. Organized by Capital Ideas with support from the Department of Foreign Economic and International Relations, the event brought together representatives of the Moscow government and business, heads of Chambers of Commerce from different countries, business analysts, managers, and journalists.
They discussed topics such as the politics of attracting foreign investment and the capital’s investment strategy through 2025. The discussion also covered the experience of and opportunities for foreign investors participating in Moscow tenders, direct investment risks and their impact on the overall investment climate, and Russia’s image through the eyes of foreign investors.
After pointing out that Capital Ideas has been providing support for the business community since 2013, Moscow Government Minister and Head of the Department for Foreign Economic Activity and International Relations Sergey Cheremin talked about the important contribution the publication makes to dispelling the myth that the city isn’t equipped for doing business. According to him, this misconception is proven wrong by the foreign entrepreneurs who appear on the journal’s pages.
“We are proud of the fact that, in spite of the current sanctions, no large or medium-sized business representatives have left the Russian capital or Moscow Oblast,” the minister said, “EU countries continue to invest the most into Moscow’s economy, along with the UK and the US.” According to Mr. Cheremin, companies from these countries feel comfortable in the city, and “the Moscow Government will do everything in its power to continue creating this favorable business climate.”
Sergey Cheremin said that Moscow continues to be Russia’s main driver in terms of economic development. The capital accounts for more than half of all foreign investment in Russia. Currently, the metropolis produces over 20 percent of Russia’s GDP. This is a city with tremendous economic and human potential — a renowned scientific and cultural center.
President of the Moscow Chamber of Commerce and Industry (MCCI) Vladimir Platonov invited foreign businessmen to work with the city. “We are not teachers or mentors, and you can come to us if you run into problems. We’ll start solving them,” he said to the audience, pointing out that working with foreign colleagues is one of the chamber’s priorities. The MCCI has signed over 140 agreements with chambers of commerce and industry from all over the world.
Vladimit Platonov is an advocate of CCIs from major cities joining forces. “This work started two years ago and is successfully underway,” he said, “And it’s not just about meetings, exchanges, and signing contracts: there needs to be a real platform that brings us together.” This is why an electronic platform of business offers called “Business Market” was created. Its purpose is to enable the system’s members – chambers of commerce and other organizations – to exchange business offers. It has already managed to expand its reach outside of Moscow, and even outside of Russia: agreements have been signed with Israel, Kazakhstan, Belarus, and a number of other countries.
Artyom Barashev, Deputy Public-Private Partnership Director of the City Agency for Investment Management cited the following figure at the round table: since 2013, foreign direct investment volumes in Moscow have grown by 107 percent. “Despite the ups and downs of an external nature, despite the crises, this figure continues to increase every year,” he said. In the first half of 2019, the city saw an increase of almost 20 percent compared to the same period from the previous year. “This suggests that Moscow continues to be attractive to foreign business,” the expert concluded.
Deputy Director General of the Moscow Export Center (MEC) Alexey Kolomeychuk talked about how Moscow supports the city’s exporters, pointing out that the MEC gets financing from the city budget, not the federal budget. This is due to the fact that Moscow is currently the largest exporter of products in the RF. The city’s organizations and enterprises currently export their products to 190 countries. “No other subject of the Russian Federation can top this figure,” Mr. Kolomeychuk said.
According to him, total exports from Moscow enterprises and organizations make up 43 percent of all Russian export volumes. In terms of non-energy exports, the total share of the city is 18.2 percent. And in absolute terms, from January to September 2019, Moscow exported $ 118 billion worth of products. The non-energy sector accounts for about $17 billion of the total.
“We are the organizers of the bidding process” – this is how Vasily Kalinkin, Head of Investment Attraction and Support Unit of the Moscow City Competition Policy Department, described his department’s role. He said that the department created “the primary tool – an investment portal that is a fulcrum for Moscow’s business and includes a number of offers that may be of interest to any legal entity.” They can be used by both Russian and foreign companies to obtain information that these companies simply cannot receive anywhere else. Statistics about the portal’s users are collected on a monthly basis. The client base is 80 percent Russian and 20 percent foreign.
Natalie Schneider, Vice President of the American Chamber of Commerce in Russia, which is celebrating its 25th anniversary on the Russian market this year, reported that the organization has about 500 members. Although these are primarily American companies, there are Russian, European, and even Japanese or Korean members as well. In her opinion, “the scope of trade and economic relations between the two countries is underestimated at the state level.” This is why the ACC has been polling US companies on the Russian market for the fourth year in a row, asking them to report the direct investments they’ve made into the Russian economy. According to survey data from 2018, “the sum of these investments comprised about $85 billion, which is approximately six times higher than the figure cited in official reports.”
Ms. Schneider said the issue is that official stats in the US only take into account the funds that are sent to Russia directly from the US, while multinational companies invest from profits made on the Russian market, as well as income earned in other European countries. Respondents were also asked to rate how important the Russian market is for them. It turned out that “for the majority of American companies, this is a key, strategic market.” US companies plan to triple investment volumes and open more production facilities in the RF in the next three years. According to Natalie Schneider, a quarter of American companies have already recognized manufacturing in Russia, and another half plans to do so in the next three years.
“Moscow pays a lot of attention to the investment and business climate, and a lot has been done in this regard,” the Vice President said, pointing out that Special Economic Zones, Industrial Parks, and the Special Investment Contract 2.0 open up a lot of opportunities in Moscow and Moscow Oblast.
Oleg Prozorov, Director General of the Belgian-Luxembourg Chamber of Commerce, advocated for enriching foreign companies’ cooperation with Russian partners with new formats. He pointed out that “almost all companies from Belgium and Luxembourg that operate in Russia have their offices in Moscow, which continues to be the center of decision-making.”
Frank Schauff, the CEO of the Association of European Businesses (AEB), emphasized that “over the past few years, the dialogue between foreign investors and the Moscow government has improved a great deal, and the city’s administration has become a lot more open.” He mentioned that Moscow is important for international and European companies, which manage their business in Russia and the CIS from the capital. “European companies are very loyal to the Russian market, and Moscow is the most important place for our business,” he said.
According to him, “the Moscow authorities are doing important work that will make the lives of foreign companies in Moscow easier.” At the same time, he said that improvements could be made to cooperation between the EU and the RF. Among other issues, the visa requirements are a problem according to Frank Schauff, so practical steps need to be taken to loosen the visa requirements on the Russian side.
AEB’s CEO also touched on the economic sanctions, which he believes impact investments from European companies. “This is the most important issue for the economic climate, which impacts how companies behave with respect to everything that affects their business in Moscow. Although companies aren’t leaving Russia because of the sanctions, direct investment volumes in Russia have dropped over the past few years,” he said, admitting that “the situation has improved over the last few months.”
Vice President of the Moscow Chamber of Commerce and Industry Suren Vardanyan, who was a moderator of the Capital Ideas roundtable, pointed out that “sanctions or not, trade turnover between Moscow and the US has increased. And not by an insignificant amount, but by more than 30 percent.” So far as the visa requirements are concerned, “we don’t like it either,” he said, “but you have to appeal not only to Russia, but also to Europe. The conversation should be about taking mutual steps in this direction.