Russian market offers unique opportunities for Belgian companies

2010 the ideal time for doing business with Russia
29 June 2010

Brussels, 29 June 2010 – A gigantic market, fast-growing economy, political stability, consumers who enjoy spending money... The fact that Russia has a great deal to offer Belgian businesses can be seen from the report "Doing Business in Russia 2010" produced by the Russian Services Group at Deloitte Belgium. What the Russian Services Group does is set out a number of do's and don'ts for operating in Russia. One very important example is to think in terms of partnerships and to build up a good personal relationship with your Russian partners. Russia also has special economic zones located all over the country that offer significant tax benefits. These are obviously highly attractive for foreign investors, who should make the best use of them.

While other world economies are only moving slowly back towards growth, Russia is well placed to recover very quickly (provided the oil price stays above 60-70 dollars a barrel). This should encourage foreign investors to take a good look at what the Russian market has to offer them. Russian president, Dimitri Medvedev, has said that the two-pronged aim of modernising the economy and attracting foreign investors is the country's most important political objective. The "Doing Business in Russia 2010" report, conducted by Deloitte Belgium's Russian Services Group, provides an overview of the benefits and obstacles involved with investing in Russia.

Benefits and drawbacks of doing business with Russia

Some of the issues that can be considered as Russia's main strengths include its proximity, expected growth of 6%, the modernisation and diversification of its economy (which would make the country less dependent on its revenues from gas) – and huge numbers of Russian consumers hungry for quality products. Another benefit not to be underestimated is the fact that Russia is the gateway to the other CIS markets. The perceived downsides are excessive bureaucracy, corruption, the language and major cultural differences. Finding a good Russian partner is also a problem for many Belgian companies.

Marc Hoessels, Partner and Russian Services Group Leader at Deloitte Belgium has a few good tips to offer: "Anyone planning to invest in Russia needs to do their homework very thoroughly. In particular, Russia has a totally different culture. Think in terms of partnerships from the outset and try to build up a good personal relationship with your Russian partners, because this is something they are very sensitive about." Mr Hoessels also points out that all too often businesses tend to service the Russian market via an agency or branch office instead of through a Russian subsidiary. "This not only involves risks, but also means that Russian customers don't view these companies as having 'a real presence' in Russia." This conclusion is also confirmed in Deloitte's 'Doing Business in Russia 2010' report, which shows that over thirty per cent of the businesses questioned only have an agency or branch office in Russia even though their sales on the Russian market are important to them.

Economic zones with tax benefits

Vassily Koeltyshev, Attaché at the Consulate General for the Russian Federation in Antwerp, sums up the benefits of Russia nicely: "Russia is the biggest country in the world. There's plenty of room for everyone." But at the same time he also has some good advice for business leaders: "Russia has special economic zones all over the country that offer attractive tax benefits. These zones make it very attractive for foreign investors. Russia also has low energy prices and lower wages, which makes higher profit margins possible. All of the local authorities want to attract investments and so are offering all kinds of help and benefits."

New customs union for Russia, Belarus and Kazakhstan from 1st July 2010

The customs union between Russia, Belarus and Kazakhstan comes into operation on 1st July 2010. This means that goods registered with customs in any of the three countries can move freely in the two others. This makes it possible for companies to find the 'easiest way', which is an additional argument in considering making a move into what is a highly promising Russian market.

Expand your business to Russia – seminar run by the Russian Services Group

The seminar "Expand your Business to Russia" was held in Antwerp on 9th June in Antwerpen. It was organised by the Russian Services Group at the Deloitte consultancy. "The Russian Services Group offers a typical package of services to Belgian companies wanting to do business with Russia," says Marc Hoessels. "Our aim is also to create a genuine community of companies already operating in Russia or planning to head in that direction. First and foremost, we want to put these companies in contact with one another, which is what this seminar was all about." There are a number of other initiatives on the agenda for the Russian Services Group over the coming weeks. These include contact days in conjunction with various business organisations. The Russian Services Group is available to put together a specific programme for companies intending to visit Russia as part of their investment plans. It can also place companies in contact with one another and with the right organisations, which should help smooth the path somewhat as investors take their first steps into the Russian marketplace.