Russia is asking for business aid from Estonia

  • 1998-08-27
  • By Andres Reimer
TALLINN - The St. Petersburg region administration offered Estonian entrepreneurs 130 of the region's industrial companies for sale at the Ivangorod investment forum.

The Russian side arranged the forum on Aug. 12 in order to persuade Estonians to invest billions of kroons in the Russian economy.

The St. Petersburg city council has made available almost 30,000 square meters of land in St. Petersburg to establish the Baltic Business Center. The center with a budget of about 25 million kroons ($1.7 million) will be erected on the banks of the Little Neva River by the Bourse Bridge.

The business center is included in the list of primary facilities of the city of St. Petersburg, which the town has selected to be constructed before 2000.

The Estonian head counselor in St. Petersburg, Mart Piiskop, said the Russians' initiative in finding business contacts simplifies the conclusion of Estonian-Russian economic agreements. According to Piiskop, the Russian business climate is not favorable at the moment, as political instability and the harsh tax system have had their effect.

"Western investors are pulling out of Russia one by one, whilst they can't make profits resulting from the unfavorable tax policies, " said Piiskop. "Here lies the reason for the Russians to set their sights towards Estonia," Piiskop added.

Russians offer good opportunities

Unlike in the past, Russians authorities now offer 100 percent sales of companies without setting the precondition of including Russian capital.

The St. Petersburg regional board promises that Estonian investments will be of considerable help in increasing the movement of Estonian goods toward the Russian market.

The region expects Estonian investment to contribute to its budget and reduce unemployment. "Monitoring Estonian journalism, we understood that Estonians are prepared to invest in Russia," said Aleksandr Svinjov, the St. Petersburg governor's representative. "Political obstacles in international relations must be overlooked in business," Svinjov said.

In May, Ilja Baskin, the president of Ust-Luuga Company Ltd., which is constructing a cargo port on the Baltic Sea, offered Aadu Luukas, the board director of the Estonian Association of Large Enterprises (EALE), a share in establishing the port. Baskin expects an investment of more than a billion kroons ($ 71.4 million) from Estonia, enabling to build four to five terminals of the planned 12.

Aadu Luukas forwarded the investment conditions to other members of EALE, but no one has shown any interest yet in putting money in Ust-Luuga.

Small firms have an advantage

The director of the Estonian Association of Small Enterprises and the Bastion Design firm, Indrek Stahl, said that it is feasible for small companies to invest in the towns of Ivangorod and Kingissepp and obtain 100 percent ownership, because Russian authorities are planning to establish a free trade zone there.

The region's board offered Bastion three sewing companies with 30, 70 and 170 employees each.

According to Stahl, the Bastion fashion company could be looking into an investment in the range of 2-3 million kroons.

The project manager for Russia at the Estonian Union Bank, Dimitri Volov said that the Union Bank will coordinate the establishment of its branch in Russia with the Baltic Business Center project.

"The danger of the Russian ruble sinking any minute, makes investors especially cautious," explained Volov. Though Russia's political and economic risks are very high at the moment, the board of the St. Petersburg region has put in a lot of work to open up the vicinity of St. Petersburg for Estonian firms.

On Aug. 12, Peeter Raid, the director of Epexim, which is the export branch of the Tallinn Dairy company, concluded a precontract with Gennadi Trofimov, the director of the Polugrafmas plant in Ivangorod, to start a dairy company there. Kristina Seimann, the public relations manager of Epexim, said that the export company has already launched a feasibility study, and possibly a small plant will be set up in Ivangorod.

Vladimir Davodov, owner of Nord DV, which manufacturers metal profiles, stated that in the near future his company will start producing pavement stones in Ivangorod. "The technology created at Nord DV is so simple that most of the expenditure goes for reconstruction of the production facilities," Davodov said.

(This article was first published in the daily Aripaev on Aug. 14)