Falk Tischendorf - Guide for Investors

In the meantime, a smart system of state support measures has been put in place in Russia, which will allow the implementation of investment projects in all key industry sectors to become more efficient. We at the Industrial Development Fund are interested in growing industrial production in the country and helping foreign investors to localise production in Russia, and we are always ready for constructive dialogue!

Roman Petrutsa

Director, Industrial Development Fund of the Russian Federation

Dear Ladies and Gentlemen,

You will not find a more export-oriented economy than the German economy. Every fourth workspace is directly dependent on the successful exports of German companies. A number of companies obtain a significant share of their incomes abroad. This share is particularly high for the so-called global players. In the case of Volkswagen it accounts for 80 % of total income, and in the case of the pharmaceutical giant Bayer approximately 90 %. In just the past ten years from 2003 to 2013 German exports increased by 65 %. The share of international business is also constantly increasing in the small and medium-sized business and family business segments and already for the sole reason that component suppliers are following in the footsteps of OEM manufacturers.

However, irrespective of the above, more and more family businesses and medium-sized business are focusing on foreign countries. Almost 40 % of medium-sized businesses actively work abroad, often on several markets at the same time, with a tendency to increase in size. Another 20 % plan to access foreign markets in the near future. Furthermore, market entry strategies differ: from pure exports on ex works terms and the organisation of a sales network abroad to localised production.

The decision to opt for the localisation of production is attributable to a company’s strategic interests, such a proximity to the client, the size of the market, staff expenses, wages, logistics, and also avoiding exposure to foreign exchange risks. However, on occasion this decision is due to the specific business framework, as is the case in Russia. Whoever localises production in Russia enjoys significant advantages compared to their competitors. The status of local manufacturer provides an opportunity to participate fully in state tenders, provides access to subsidies or tax breaks, and also offers a chance for the company to participate in major national projects. If you have any questions on this topic, you can always contact the department for small and medium-sized businesses at the German Eastern Business Association.

In the second part of the Guide for Investors “Localisation and Setup of Production in Russia” you will find out how to successfully organise the localisation process. I wish you a pleasant read!

Oliver Hermes

Chairman of the German Eastern Business Association

Dear Ladies and Gentlemen,

It should come as no surprise that the German consulting firm, which brought you the extremely successful two-volume guide for investors in the autumn of 2016, has now issued in record time a reference guidebook with new provisions on special investment contracts (SPIC 2.0.). We Germans are not much for talking – instead, we get right down to business. And we do so by working closely and constructively with our Russian partners.

Since the breakup of the Soviet Union, no other country has invested as much as Germany through its companies in the factories and assembly plants of the largest country in the world. According to the data of the German Bundesbank, in 2018 alone direct German investments in Russia topped EUR 3.2 billion. German companies have concluded more special investment contracts than the companies of any other country. It is not by chance, then, that the first special investment contract was concluded with a German company (Claas, a manufacturer of agricultural machinery). This company was quickly followed by the cutting machine tool manufacturer DMG Mori, the pump manufacturer Wilo, and the OEMs Mercedes and Volkswagen.

In our capacity as the Russian-German Chamber of Commerce (Deutsch-Russische Auslandshandelskammer, or AHK), which numbers more than 900 members, we act as an experienced local expert. Whether you are a medium-sized company, a market major, or a start-up, a company that has already invested in Russia or one that is just considering investing, we are always at your service as a point of contact. Our chambers in Moscow and Saint Petersburg employ more than 100 people. The AHK is also represented throughout the country by our regional authorised agents in Ekaterinburg, Krasnodar, Samara, Novosibirsk, and Vladivostok.

Of our 24 committees and working groups, I would highly recommend the Localisation Committee, where the new regulatory norms brought together in this guide are discussed on a monthly basis.

I congratulate BEITEN BURKHARDT, the company that prepared this guide in close collaboration with the Ministry of Industry and Trade, with this unique and vital project.

Best wishes for your business in Russia!

Matthias Schepp

Chairman of the Board of the Russian-German Chamber of Commerce (AHK)

Jens Dallendoerfer, Wilo Group Vice President Eurasia & General Manager of OOO Wilo Rus

On 13 October 2017, OOO Wilo Rus, the Ministry of Industry and Trade of Russia and Moscow Region concluded a special investment contract. This was the tenth special investment contract signed since the beginning of 2016. The investment programme Wilo will place its state-of-the-art technology in Russia, and the manufactured products will meet the strictest international standards of reliability and energy efficiency. The company looks at this project not only as the creation of production capacity, but also as a platform for future development.

Digital transformation is one of the greatest challenges of our time. Countries’ economies and corporations must be prepared to face these changes. To survive in such a highly competitive world marked by technological change, the company Wilo (one of the world’s leading producers of pumps and pumping systems) chose a new path with a clear direction for its group. Wilo’s implementation of its digital strategy will lead to a substantial increase in investment activity, including in Russia.

With the help of smart solutions, employees, products and services, all linked together, Wilo is striving to be a digital pioneer in the industry. In the context of digital transformation and innovative manufacturing technologies in conjunction with Industry 4.0, we have again developed production and logistics processes anew. In April 2020 we will inaugurate our ultra-modern manufacturing complex, our Smart Factory, in the city of Dortmund, where our headquarter is located.

However, not only at our Dortmund headquarters, but also at our new manufacturing site in Noginsk (Moscow Region), we want to establish new standards for the digital era. In doing so, we are concentrating on three key processes: Product Lifecycle Management (PLM), Supply Chain Management (SCM), and Customer Relationship Management (CRM).

The first order of business is to create a supplier structure. This issue occupies a central place for both Russian medium-sized enterprises and German enterprises in Russia. In its pilot projects, Wilo continues to evaluate selected Russian medium-sized enterprises in order to optimize its local supply chain in cooperation with our Russian partners. The purpose is to maintain German quality standards in Russian manufacturing. We plan to create a central digital logistics platform in Noginsk, which will be aimed at optimizing warehouse facilities, reserves in the warehouse, and supply times. This platform will be managed on an End2End basis and will have an EDI-based integrated order management system. Local suppliers will be effectively integrated and combined into a single network.