Finns Are Comfortable With Local Partners In Urals

26.10.2009 — Analysis

So far companies from Finland in the Urals region act as vendors of their products rather than as investors. The situation is changing, however. Lyudmila Safina, the Director of Ekaterinburg Representative Office of the Finnish-Russian Chamber of Commerce, informed RusBusinessNews in an interview that the Urals businessmen are willing to become dealers and partners of the Finns in joint projects.

- Mrs Safina, in the Soviet Union times Finland was probably the best capitalist friend of our country. This is why the Finns here had virtually no competition from the West here. Today, however, the competition in Russia and in the Urals in particular is rather high. The key activity of your organisation, evidently, is related to providing assistance to Finnish companies in promoting their products, is it not?

- The work of the Finnish-Russian Chamber of Commerce is aimed at the development of the economic ties between Finland and Russia. The Chamber has been registered in Finland more than 60 years ago, the headquarters of the organisation are in Helsinki. Managers of largest Finnish companies are on the Chamber's Board. The Chamber has representations in Moscow, Saint Petersburg, Ufa, and Ekaterinburg. The last one has been open very recently, in 2008, although the Finnish-Russian Chamber of Commerce has been working with the Sverdlovsk Oblast for more than 10 years. In 1996 the Sverdlovsk Oblast made a presentation in Finland and a working group on the bilateral cooperation was established.

- In which economic spheres do we cooperate?

- We cooperate in great many spheres, but predominantly we are not talking about direct investment but of equipment, technologies supplies, and industrial cooperation. It is worth pointing out that Finnish investments, first of all, go to areas bordering Finland, i.e. Saint Petersburg, the Leningrad Oblast, and Karelia. And, of course, Moscow.

At the moment a large investment has started in the Urals - the construction of a dry construction mixes plant in the town of Polevskoy. In general the Finns have quite a lot of experience working in the construction business in the Sverdlovsk Oblast. СJSC YIT Uralstroi is a Russian-Finnish investment and construction company founded by the well known Finnish company YIT in October 2006. YIT Uralstroi works in the sphere of housing construction in Ekaterinburg and the Sverdlovsk Oblast under the "YIT Dom" brand.

- Aren't the Finns deterred by the construction business in Ekaterinburg? There's always the talk of the problems obtaining a building plot, connecting to services...

- In this sphere the most important thing is to find a good Russian partner and then jointly with that partner work on the solution of these problems. This is the most important component of our work.

There are many examples of Finnish companies working in the Urals, there are many projects involving various spheres - metals production, machine building, agriculture, medicine, education.

Forestry engineering is one of the leading industries in Finland. There are more than 30 logging and harvesting machines made by John Deere, Valmet, Ponsse working in the Sverdlovsk Oblast. There is a Finnish-Russian Centre for Training Forestry Machinery Operators at the Urals State Forestry University.

What are Finland's strengths today? First of all, there are high-tech applied developments. The Finns offer products which would, for instance, help the reduction of the Urals companies' energy consumption and the increase of their competitiveness. The Finns are very good as subcontractors. For instance at the moment the Finnish company Vacon is supplying 180 transformers to the Kama pulp and paper mill (the Perm Krai). A line making newsprint is being converted there to make paper with light coating. So the Finns can help the modernization of Russian companies by supplying high-tech equipment.

- Timber processing is also well developed in Finland. In the conditions of crisis the Russian Government has increased duties on export of round timber. Has this step given the Finns a incentive to invest into timber processing in the Urals?

- In order to invest into Russian timber processing you have to have the well established sales system for your products in the country of origin. This is a rather complicated affair. It is easier for the Finns to sell equipment here than to become investors.

The core of the Finnish timber industry complex is the production of pulp, paper, cardboard, and goods made out of them. In the recent 15 years Finnish companies have invested almost a billion Euro into Russian forestry industry, but this applies more to the North West and Moscow regions.

It is the crisis, however, that made Finnish companies think of placing orders for timber and metal processing at Russian plants. Subcontracting is the correct term indeed.

It is worth pointing out that the reverse process is also taking place - there are Russian investments going to Finland as well. For instance a decision has already been made on the construction of a pharmaceutical plant in Finland where a Russian company is an investor. So far there are no investments from Urals companies. We are going, however, to hold a series of seminars for the Urals businesses and to tell them about the opportunities for the investment into the economy of Finland and how to start a company there.

- Obviously, you consult Finnish companies coming to the Urals regional market too. What sort of recommendations do you give them?

- We try to inform Finnish companies about all possible risks, show them what competition there is in the Urals, how to work in these conditions.

We give all kinds of different recommendations starting from the simplest - how to conduct negotiations, how to work with Russian companies. At the first stage of the contact very often there arises some misunderstanding and interesting projects are killed in the bud. The professional support is very important at this stage. This process is reminiscent of the gardening work when you put a seedling in the ground in the spring, you carefully water it, cover it to protect against cold, then open it so it does not burn under the hot sun. Then later when the plant is stronger the gardener can get on with other things and admire the beautiful tree that has grown.

- Finland has many competitors from Europe in the Urals. Germany, Italy, the Czech Republic offer not only their industrial products, but financial services as well, the insurance schemes for the implementation of purchases and joint projects. What can the Finns offer?

- There is a representative office of the Finnish bank Nordea in Ekaterinburg. Deals can be insured by the Finnish guarantee centre Finnvera.

We also offer legal support for Finnish business working in the Urals. This is done by Hedman Partners Ltd., a company established in Ekaterinburg in December 2008, a subsidiary of the Finnish legal services company Hedman Partners.

Some European countries first offer a credit facility to Urals companies and then later tie it partly to the purchases of products made in these countries. The Finns have it the other way around. They offer the products first, look for interested parties. Only after this the Finns start thinking about how to finance the deals if the Russian partner is short of cash.

- How many Finnish companies are there in the Urals today?

- Not long ago we have established a so called Finnish Club in Ekaterinburg. We are trying to gather all companies from Finland represented in the Sverdlovsk Oblast and their dealers together at least once every six months. Around 50 Finnish companies and their dealers meet regularly.

Of course, there are many more Finnish businessmen who come to the Urals to sign a one off contract. In September 2008 Finnair has started running the direct scheduled service between Helsinki and Ekaterinburg. We had felt straight away that economic ties have become more active as the influx of Finnish companies representatives to the Urals have noticeably grown. This kind of logistics is very important. When we, for instance, sing praises to the Krasnoyarsk Krai the Finns say that it is too far and ask how to get there.

As well as Finnish businessmen, 30 journalists from Finland have visited Ekaterinburg in August 2009.

- What was their interest?

- Their questions, first of all, revolved around the global financial crisis. They do know that the Sverdlovsk Oblast has suffered more than others due to the decline in the industrial production. The journalists were interested in finding out how this reflected on the living standards, whether we all are hungry and cold here. What they saw, however, was the prosperous Ekaterinburg. The guests visited shopping malls, restaurants, had a look at life of an average Ekaterinburg citizen. They left with a rather optimistic impression.

The interview has been prepared by Pavel Kober