As part of the Russia-France year, Russia was the special guest of the International Week for Transport and Logistics held in Paris between March 23-26.
With twenty logistics companies attending the forum to represent “Logistics and Transport in Russia,” the event shed light on the opportunities and challenges of a rapidly modernizing industry sector that attracts significant foreign investment, as highlighted in a special issue of French business daily La Tribune.
The fair’s organizers say the focus on Russia did not only stem from this year’s celebration of Russia-France relations, but also from the vast opportunities the country has to offer in the transport sector. “Twenty one percent of Russia’s public investments in 2008 were in the domestic transport network,” Alexander Kostyukov from the Russian trade mission to Paris, told La Tribune at the forum. Another €4.75 billion has been earmarked by the government to assist the development of the sector over the next 20 years. The program covers projects such as the construction of a network of cross-border transport between North-East China and the Russian Far East, as well as the development of an intermodal maritime complex in the Luga Bay.
What do French investors think?
French logistics groups admit that there is a long way to go before structural shortcomings on the Russian market can be overcome, and that patience and detailed knowledge of the market are key factors for successful investments. But they nonetheless acknowledge that the country has a competitive advantage in the sector and that there is a case for investing in Russia.
Elena Gordeeva, the head of the department in charge of Russian logistics at French home improvement retailer Leroy Merlin, told La Tribune that that the main difficulties in Russia remain a general lack of skills, lack of quality services and long distances between economic centers. The company nonetheless owns 14 shops in Russia, 10 of which have been opened over the past two years in regions as remote as Krasnodar, Omsk and Novosibirsk.
In a similar vein, General Director of Geodis Calberson Great East Gérard Zaoui calls for “prudence” when investing in Russia, because it is a “sensitive country.” Nonetheless, the Geodis group has expanded its activities there, La Tribune reports. “To grow in Russia, you must thoroughly assess the risks and recruit local management staff which is both top quality and loyal,” Zaoui recommends. “You should be able to rely on collaborators who fully master a legislation that is both complex and in constant evolution."
Another way to reap the benefits of the Russian logistics sector is to partner with regional authorities keen on opening up their region, as the success story of French logistics group Gefco in the Kaluga region shows. “It is a very dynamic region with an important capacity to welcome companies,” Gefco Executive Director for Global Development Christian Zbylut told La Tribune. Kaluga Governor Anatoly Artamonov signed an agreement last January allowing Gefco to develop activities in the region, which was chosen because of outstanding economic growth and because of partnership prospects with French car maker PSA Peugeot, recently established in the Kaluga area. Zbylut also said that fifty new foreign companies are likely to establish a presence in the region, according to Les Echos.
Key recommendations of French entrepreneurs to prospective investors in the Russian logistics and transport sector:
• Set up your own distribution network
• Avoid importing in small quantities
• Sign an import contract with local suppliers
(Source: La Tribune)
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