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How understanding of Asian partners attracts large investments
Head of the Investment and Development Agency of the Khabarovsk Territory Vyacheslav Kushnarev told EastRussia about the results of the Agency's work and the specifics of doing business with Asian partners on the example of successfully implemented investment cases
- Vyacheslav Anatolyevich, how do you assess the effectiveness of the Agency for Investment and Development of the Khabarovsk Territory over the past six months?
The Agency's work should be evaluated not by us, but, first of all, by those investors who are already working in the Khabarovsk Territory and implementing their projects.
The agency carries out the tasks set by the supervisory board, headed by the governor. In 2015 we launched an investment card of the Khabarovsk Territory http://investmap.khabkrai.ru/, which currently contains 66 investment sites and 99 investment projects. The sites are divided into different categories - territories of advanced socio-economic development (SARSER), special economic zones, industrial parks and industrial sites, and others.
At the same time, the Agency prepared investment passports for the city of Komsomolsk-on-Amur and 8 municipal districts. Passports contain all the necessary information about the territories that is useful to potential investors. All passports are posted on the investment portal and on the investment card on the pages of the respective municipalities.
- How else can you evaluate the effectiveness of the Agency?
We work in accordance with a program to improve the investment climate of the region, which indicates the quantitative and qualitative indicators that must be achieved in a year. For most of the indicators, the Agency exceeded the plan.
The plan provides for the provision of information and consulting support to at least 15 enterprises. The number of initiators of investment projects who received information, consulting and organizational support in 2015 was 61 companies. The total number of information requests on measures to support investors in the Khabarovsk Territory, including obtaining the status of a resident of the TOP and industrial parks of the Khabarovsk Territory, amounted to more than 350. The number of enterprises that used the organizational support of the Agency was 31, the number of events, workshops organized with the invitation of all interested parties - 58.
- Still, the main criterion is the concrete implementation of investment projects in the Khabarovsk Territory with the help of the Agency, isn't it?
Everything is correct. If we talk about the support of large investment projects, then in the third quarter there were 9 of them, while the actual number of investment projects supported by the Agency according to the “one-stop-shop” principle was 47 with an investment volume of over 50 billion rubles. If we talk about specific examples, today, thanks to the Agency's work, 11 investment projects are being implemented in the region. One of them lies in the field of development and involves the construction of a hotel complex "Apartment - Hotel" in Khabarovsk by the company "Smena-Trading" CJSC. The construction is designed for two years, the amount of investment is about 465 million rubles, while 90% of the financing will come from the company's own funds. Another project is the construction of the "Extension to the building on the street. Muravyov-Amursky, house 9 "Far Eastern Development Company LLC with an investment amount of 1213,8 million rubles.
- What other investment projects are being implemented in the region thanks to the Agency?
There is such an interesting investment project with 450 million rubles of investments from the JGC Corporation for the creation of a greenhouse complex in the Avangard industrial park. The products of the greenhouse complex (the first pilot batch of tomatoes) have already begun to be sold in the region in a test mode. Now negotiations are underway with large retail chains and representatives of the restaurant business, the company has already created its own brand. We expect the project to start operating at full capacity next year and export premium organic vegetables to China. I want to emphasize that sometimes the Agency performs sometimes unexpected functions so that investment projects come true.
- Which for example?
It happens that we select rental housing options for employees of both Russian and foreign companies who came from other regions or from abroad to work in the Khabarovsk Territory. We also selected and recommended office premises to our partners. Investors themselves say that it is much easier for them to rely on us, because we know the conditions and specifics of the local market. In addition, the Agency's employees help to fill out the necessary documents and application forms for obtaining a visa by the management of foreign investors. We consider it important to establish such a system for the provision of a package of services, which would be characterized not only by a formal, but also by a more individual approach.
- If we talk about the work of the Agency in the context of the TOP "Khabarovsk" and the TOP "Komsomolsk", what companies, applied for residency in the TOP, did the Agency manage to attract?
The agency worked with absolutely all companies that applied for the status of a TOP resident. A cooperation agreement was signed between the Agency and the Fund for the Development of the Far East and Siberia, under which the Agency works with all residents. Companies received all the primary and necessary information about preferences, the procedure for obtaining resident status. We were directly involved in filling out application documents. At the same time, we brought in two specific investors who were considering the possibility of doing business in the TOP in the Far East. Having received comprehensive information, the companies decided to become residents in the TOP of the Khabarovsk Territory. These are RBEF OJSC with a project to build a plant for the production of composite products (while a business plan is being developed) and Trest Zapsibgidrostroy LLC with a project to build a plant for the production of steel sheet piling structures and building materials with an estimated investment of 500 million rubles. Moreover, Zapsibgidrostroy initially considered the option of building a plant in Primorye. However, having visited Khabarovsk, received the necessary information support and looked at investment sites in Khabarovsk, Komsomolsk-on-Amur and Sovetskaya Gavan, the company's management decided to work in our region. I would like to emphasize that the company management paid special attention to the comfort and quality of information support provided by the Agency.
- What other companies is the Agency negotiating with at the moment?
Now we are negotiating with a Primorsky investor - VL-Park LLC of the CSN group of companies - on the construction of a production and logistics complex with an estimated investment of 1 billion rubles. The company has extensive experience: in Primorye, they launched the largest logistics center and announced that they would be the first residents of the open port in Vladivostok. The company showed interest in locating its complex on the territory of an industrial park on the basis of Khabarovsk Building Ceramics Plant, which is being created with the support of the Agency. The industrial park assumes investments in the amount of 2000 million rubles. with the creation of 300 jobs. According to experts, this is an ideal site, to which all the necessary engineering communications are connected, there is a road infrastructure, railway entrances, water, sewage, gas. There are already two factories and an office building on the territory. The Agency is currently looking for resident partners for the park. In particular, we are actively working with the Korean company Korea MECEN IPC Co. Ltd, which is ready to place the production of modern building materials on the territory of the park.
- Is working with foreign investors different from working with Russian?
Yes, they have a special system of doing business, and they need more initial information, including on the specifics of Russian legislation. Accordingly, they need more time to make a decision than Russian companies. An example of the successful practice of our Agency was the agreement reached with the Thai company Sutech Engineering Co. Ltd. on the construction of a plant for the production of 1500 tons of refined sugar per day in the Sovetskaya Gavan PSEZ with an investment of $ 200 million.
- Tell us more about the algorithm of the Agency's work with a Thai company ¬- from attracting an investor to signing a cooperation agreement.
The agency is very active in working with trade missions of the Russian Federation abroad, in Asia, in particular. As part of this systematic work, we received information about the intentions of a Thai company to enter the Far East market. As part of the initial correspondence, the Agency invited the company to visit and see the Khabarovsk Territory. In advance, the Agency's specialists prepared and translated into English information on the parameters of industrial sites on the territory of the Khabarovsk Territory, including on the territory of the Sovetskaya Gavan SEPP. If we talk about the timing, the first meeting took place on March 27, and on March 28, the Agency's specialists prepared the necessary information with translation into English for Sutech Engineering. Within three days, the information was delivered by the Thai company through the channels of the trade mission. A week later, we held talks with the sales office in Thailand on joint actions and steps on this project.
Taking this opportunity, I would like to thank the sales office in Thailand for their active position and quality work on this joint project. On April 29, we have already agreed on the dates for visiting and inspecting the sites. Already on May 13, a Thai delegation arrived on a visit, during which a number of meetings were held with representatives of departments and ministries of the Khabarovsk Territory. After that, a working group was created from representatives of the company, the Ministry of Investments of the Territory, the city and the Sovetskaya Gavan region to consolidate actions for the implementation of this project.
- How many times has a delegation from Thailand visited the Khabarovsk Territory?
The specialists of the Thai company came to us twice, having managed to inspect the site, to obtain the necessary technical and economic information about the cost of engineering equipment and engineering support of the site. Two weeks later, the Agency's specialists visited Thailand for a detailed study of the cooperation agreement. Frankly, for four days in Thailand, we simply did not leave the office, because we needed to prepare documents according to world standards. Following the results of work in Thailand, an agreement was signed between the company and the Agency for the provision of information and advisory services and support for the investment project.
At the Eastern Economic Forum in Vladivostok, an agreement was officially signed between the Governor of the Khabarovsk Territory and the management of Sutech Engineering. Today the company starts technical surveys directly on site. Moreover, the company presented the first draft design of the plant with reference to the ground. The plant, according to the Thai side, should start operating next year.
- The main foreign investors in the Far East are representatives of Asian companies. Are there any peculiarities when working with them?
If we are talking about features, here we need to talk not about the specifics of working with them, but about the specifics of doing business with Asian partners. For Koreans, for example, most corporations are associated with the state. This is, as a minimum, the state's share in large Korean corporations, as a maximum, the system of rotation of business personnel to power, from power to business, developed in Korea.
- In your opinion, is this an obstacle or help?
This is helpful because government support automatically goes to large corporations. Large projects begin to be implemented, as a rule, within the framework of government agreements, which, to a large extent, makes it easier for corporations and the state to understand. There are a large number of investment projects implemented in this way, such as the Korean corporation Hyundai and its agricultural project in Primorye.
As for medium and small businesses, the peculiarity is that Korean businesses actively interact with the local Korean diaspora in the Far East. Practice shows that this is a successful cooperation, because representatives of the Korean diaspora are well aware of the specifics of doing Korean business and, at the same time, have an understanding of doing business in Russia.
A Korean proverb will tell about another national peculiarity: "If everyone knows about a party, then it becomes uninteresting." In other words, it is important for Koreans to have some exclusivity when implementing a project. Korean companies do not like to disclose information about the project ahead of time.
- Is Japanese business different from Korean?
Japanese businessmen have an interesting decision-making system. Often the Russian partners do not understand why the Japanese ask the same question several times during the negotiations. This should be taken calmly, since the system of primary collection of information and decision-making from the Japanese is a very important procedure. They collect information for a long time and from all sources. They can be called perfectionists, because their system involves the adoption of one decision, final and unambiguous.
- What about the specifics of Chinese investment?
This is also a very interesting system. Historically, we have been working with the territories bordering the Khabarovsk Territory. But we must not forget that 90% of investment projects, one way or another, are implemented with the support of the Beijing government (we are talking about projects in the central and western parts of Russia). Most of the private financial resources are located in the south of China: Shanghai, Guangzhou, Shenzhen. Unfortunately, they know nothing about investment projects in the Russian Far East. Although the conditions created in our country, believe me, are no worse than in Europe and Asia. In order to get to know about us, we need intensive work on correct positioning, and this work takes more than one year.
- That is, work is needed to bring information to the end investor?
The problem isn't just about getting it across and telling. You shouldn't think that Asian investors have huge plans for the implementation of investment projects in the Far East. Our neighbors have long and successfully cooperated with European countries and the USA. Asian partners have an understanding of the large investment profit margins they can obtain, while at the same time they have an understanding of the risks. And the third important point - they do not have the amount of the necessary information to understand that these risks are actually minimal. This is the big problem.
- Is that the only problem?
The Chinese have a clear understanding of how to make money. At the same time, Far Eastern businessmen have a rather low level of understanding of the standards for conducting investment projects with foreign partners. Most Far East business owners do not have much experience with a foreign party. When the Chinese come with an investment proposal, representatives of the Far Eastern business, as a rule, announce inflated prices, not realizing that the Chinese partners calculated absolutely everything before arriving. This approach immediately repels the Chinese partners. Russian businessmen often do not understand why, after active negotiations, the Chinese, having returned to their homeland, do not report their decisions. The answer is very simple. They always travel prepared, receive information during negotiations, come to their place, once again weigh everything, and then, unfortunately, draw negative conclusions about starting a business in the region.
- At the same time, they do not give feedback even on a negative decision?
For Chinese businessmen, this is even a moment of insult. There were examples when Russian partners a month later 2-3 they lowered the price again, inviting the Chinese to continue negotiations, not realizing that in this case there would be an even greater refusal. The Chinese perceive this as disrespect for partners.
- And how can this problem be solved?
It is very important that there is an intermediary as, as the Chinese say, a “bridge” between Russian and foreign business. Our Agency often acts as such an assistant in the initial negotiations. For the Eastern Economic Forum, we prepared presentation materials in different languages for Far Eastern businessmen. Next year, we plan to hold a series of training seminars for businesses on how to negotiate, and in general on understanding the specifics of doing business with foreign partners.