Finland and Russia pull together to defy the crisis

13.02.2012 — Analysis

The relations between Finland and Russia are thriving. The amount of Suomi's investment in the Russian economy has totaled 8 billion euros, while the total trade between the countries has reached 17 billion euros. In her interview to RusBusinessNews, the director of the Ekaterinburg representative office of the Finnish and Russian Chamber of Commerce, Lyudmila Safina, said that the impending crisis can hardly put a spoke in the wheel of cooperation - the neighbors have prepared a reliable "safety net" from joint projects.

- Lyudmila Shamilievna, the representative office of the Finnish and Russian Chamber of Commerce has been operating in the Urals for four years. Your office was opened in the crisis year of 2008, and the global economy is again going through tough times...

- It's true: Our office was opened right before the crisis. However, we did not feel its impact on our work; on the contrary, the number of applications from Finnish companies increased. We were able to conduct large-scale forums in Ekaterinburg, Kazan, Novosibirsk, Rostov-on-Don, and Samara.

At present, the gloomy economic outlook for the Eurozone countries is becoming increasingly persistent; there may be a new recession, but we can confidently state that the interest of Finland to Russia is steadily growing without any signs of being subdued. Furthermore, the prospects for economic growth of the main trading partners of Finland - Russia, Sweden and Germany - are relatively good. The well-balanced policy pursued by the Finnish government contributes to high competitiveness of the nation's economy.

Twice a year our chamber publishes a barometer of the Finnish and Russian trade, based on the polls conducted among representatives of more than 300 Finnish companies. The autumn conclusions show that the participants in the trade between Finland and Russia demonstrate moderate sentiments. One third of the companies reported some improvement, whereas almost half of the respondents noticed no changes in their exports and business operations. In the near future, half of the companies expect some improvement, while a third of the respondents think that their export to Russia and business in Russia will remain unchanged. One third of the companies intend to make investment in Russia.

- What is the performance in trade turnover and investment of Finland and Ural regions based on the results of 2011? Representatives of other foreign missions have repeatedly complained about the lack of reliability of the statistical data - foreign businessmen bringing commodities to the Urals prefer to get customs clearance for them in St. Petersburg or in Moscow. As a result, the trade turnover performance indicators are credited to these regions, leaving the Urals statistically empty-handed. Is the "metropolitan sequestration" critical for the overall picture?

- Today there are about 600 Finnish companies operating in Russia, and their number is adding up another 5-8% every year. Taking into account the population or GDP, Finland has invested much more in Russia than any other country - the amount of direct investment totaled about 8 billion euros. The volume of trade between Finland and Russia exceeded 14 billion euros in 2010, reaching 17 billion euros in 2011. As for the Finnish exports to Ural regions, the statistical data are not objective. It is impossible to estimate what quantity of products goes directly to the Urals. Therefore, we focus on other indicators - development of contacts, new representative offices, dealership operations, and implementation of projects - all of them evidence steady growth.

For example, the Finnish company - Industri Textil - is starting volume supplies of industrial filtration systems and equipment to factories in the Sverdlovsk and Chelyabinsk Regions. Two years ago, the trade between this company and Russia was 200 thousand euros; today, due to Ural contracts, it totals several million euros.

The YIT construction company is expanding its operations in the Urals. It is negotiating purchasing of several land parcels in Chelyabinsk where it intends to start residential development of about 20 thousand square meters.

- You said earlier that in the Ural Region Finnish companies act mostly as sellers of their products rather than investors. Has the situation changed? Are there any examples of Russian investment in Finnish projects?

- As I have already said, the amount of Finnish direct investment in Russia totals about 8 billion euros. The Kaluga Region is the best example of the Finnish investment activities, with its 10 manufacturing facilities launched by the Finns. Another good example is the North-West region, which is explained by its vicinity to Finland. The investment in the Urals comes from Fortum, YIT and Stockmann.

As for reciprocal investment, Finland is not the most interesting country from the perspective of Russian investors. There are about 2 thousand companies operating with Russian participation on the Finnish market; most of them have the minimum permissible equity capital (8 thousand euros) and operate mostly in trade, intermediary and consulting services, tourism, transportation and logistics.

However, there are examples of large-size investment. Russian businessmen invest in shipbuilding; the LUKOIL Company has its network of gas stations in Finland; Gazum (a subsidiary of Gazprom) also operates in Finland. The Norilsk Nickel Company has acquired Finnish mines. In the recent years, the Russian business has paid attention to Finnish real property. For example, LUKOIL, Peterburgskaya Nedvizhimost (Petersburg Real Estate), and Rosinka-Polyustrovo invest in Tahko, a holiday resort. Gazprom has built a cottage village in Finland, which is leased out through Russian travel agencies. The up-scale hotel in Kirkkonummi was also built with participation of Russian investors.

The projects for construction of a pharmaceutical factory in Finland are scheduled for completion. The investment comes from a group of shareholders from St. Petersburg. Renaissance Partners owned by Russian businessmen is making investment in soybean production in Uusikaupunki. The leading Russian systems integrator and provider of information technology - I-Teco - has opened the first Russian data center in Finland. The United Shipbuilding Corporation, OJSC, has become one of the owners of STX Finland's Helsinki shipyard. The railways companies of both countries participated in the project for launching of high-speed St. Petersburg-Helsinki train, which makes its trip within 3.5 hours.

- The Finnish business is quite diversified in the Urals - from developers like the YIT Company to the Finnish chain of department stores - Stockmann. There was even the office of the Hedman PartnersAttorneys-at-Law. Has anything changed?

- Unfortunately, the Ekaterinburg office of Hedman Partners was closed down. The demand for legal services in the Urals was not sufficient to have an office. I am aware of the situation, because our representative office also provides legal and accounting services; however, they are ordered quite rarely.

Finnish companies operate in Ekaterinburg both through their own representative offices and through dealers. The sectors of their interest are different - metal working, machine building, logistics, construction, building and finishing materials, medical equipment, retail sales, chemical products, telecommunications, and finance.

The last year opened new and promising opportunities for cooperation in education and information technology. Two teams from Ekaterinburg were selected for six-week training in Finland (out of the 100 best teams of Europe!). The projects are financed by investors from Europe.

- How important is the direct flight connection between Ekaterinburg and Helsinki for bilateral cooperation?

- At present, the Finnair Airline has increased the number of flights to Ekaterinburg to 4 flights a week. I can agree only partially with the statement that direct flight connection promotes development of relationships. Let's face the facts - flights are offered only when cooperation has been established, when an airline company is confident in steady passenger flows. The direct flight connection eliminates many logistics problems, enhances significance of the region and its awareness, thus contributing to even larger passenger flows.

Thanks to the direct flight connection, Finland is one of the most popular countries for Ural fans of winter tourism. Finnair flights are very convenient to businessmen - the flight from Ekaterinburg arrives in the morning when the business day is about to start in Finland. Besides, many passengers use the Helsinki airport - Vantaa - for connection flights to other countries.

- Representatives of Ural regions and Finnish businessmen regularly discuss cooperation opportunities in the wood processing sector...

- If you mean investment in the timber industry, Finnish investors prefer to invest in China and South America rather than in Russia.

As for the timber sector, Finnish harvesting equipment and machinery is well-represented in the Sverdlovsk Region. Harvesters and forwarders from Ponsse, John Deere, and Valmet have found their application at Fancom, CJSC, the Sverdles Production Association, the Lobva Timber Production Integrated Factory, the Sarginsky Integrated Logging and Lumbering Enterprise, Lesnoy Ural, LLC, the Turinsk Pulp and Paper Mill. Finnish equipment is held in high repute; Russian competing products yield it in efficiency and performance characteristics in challenging operating conditions.

In Ekaterinburg, the Ural State Forestry University opened the Finnish and Russian Training Center for operators of harvesting machines; the Ponsse Company installed a state-of-the-art harvester-exerciser for trainees of the center. The Ural State Forestry University also implements joint education projects with the Laurea University and Kuru College.

There is also high demand for Finnish equipment for sawmills, "forest power generation", home-building. High demand is for sawmill equipment manufactured by HEW SAW, sorting lines from PLAN-SELL, drying units from VALMET, wood-cleaving machines from PALAX; equipment manufactured by RAUTE and VALLON KONE is used in manufacturing of wide-side plywood.

The Ural forest techopark, together with technological parks of Lahti, Joensuu and the METLA Research Center, uses Finnish know-how and best practices in restoration of forests and post-logging treatment. At the moment, Finnish inventors are patenting new technology - manufacturing of transparent film from birch pulp. The method developed by Finland's VTT Center of Technological Research and the Aalto University will be used in large-scale manufacturing of film made from wood raw materials by using cost-effective reel-fed technology. We hope that this technology will be sought after in Russia, which is notable for its birch forests.

- Finnish people have vast experience in construction of cottages; today, the Sverdlovsk and Chelyabinsk Regions are placing a special emphasis on low-rise development...

- Finnish companies are active participants in regional projects of low-rise single-family houses. The cooperation is interesting both to individual builders and development companies. The conceptual principles underlying Finnish home-building are focused on environmental compatibility, energy efficiency and 10-year guaranteed quality; these principles fit perfectly into the Ural context. Russian buyers take particular interest in engineering solutions, light arrangements, and sauna availability. It took time to overcome the prejudiced belief existing on the market that the Finnish house is very expensive. Experience showed that due to advanced technologies, large-scale production and sensible marketing, products of Finnish companies can compete in price with products from local manufacturers, while offering European quality.

In the countryside, you can now often see attractive wooden houses familiar to everyone who has been to Finland at least one time. I would say that the Finnrost Company is especially active; it supplies Finnish panelized-frame prefabricated houses from Finndomo OY. In the Sverdlovsk Region there are dealers of nearly all Finnish manufacturers of wooden houses.

- In June 2011, in the Middle Urals the Finns demonstrated new technologies that open excellent opportunities for development of swamp areas. The technology developed in Suomi turns clay, peat, silty mud or soft soil into hard soil. Cement, lime, ash, plaster and glass can be used as binding materials. Even impassable swamp areas can be turned into sites suitable for construction. Is this technology sought after in the Urals?

- This project is in full swing. The joint venture - Nordstabrussia - has been set up. Finland supplied the equipment that was delivered to Ekaterinburg. Finnish laboratories study the soils. The required standard documentation is being approved.

- At the end of 2010, the Sverdlovsk Region was visited by a sizeable delegation from Finland. The issues discussed during the visit included the development of the state program - KOKO-RUSSIA, which was intended to facilitate cooperation among small-size enterprises of both countries. Has the program started operating and what is its outcome for the Urals?

- The members of the KOKO-RUSSIA Program are centers for entrepreneurship development from different regions of Finland; these centers help small and medium-size companies enter the Russian market. In the Sverdlovsk Region they operate through our representative office, attracting Finnish companies from different regions to participate in our projects.

- In 2009 your representative office opened the so-called Finnish Club in Ekaterinburg. What can you say about its performance?

- The Finnish Club offers a format for communication between the companies that represent interests of Finnish companies. Unfortunately, we do not organize membership events for them as often as we would like to. Approximately twice a year, we convene our meetings, brief them weekly about news, send the Finvesti magazine, provide visa assistance, give consultations, render accounting and legal assistance.

Almost every year our representative office organizes the visit of a large Finnish delegation to Ekaterinburg, forum and personal meetings. Business communication also takes place during meetings of the joint working group for economic cooperation, to which we invite all the partners of Finnish firms in the Sverdlovsk Region.

The interview was prepared by Valentina Mazharova