France Fostering Urals Seedlings

18.01.2010 — Analysis

- Mr Lormelle, how have the economic links between France and the Urals region been developing in 2009? Have they been affected by the global crisis?

- Of course, 2009 has not been easy. International cooperation declined during the crisis, predominantly this affected small companies. Small business which is no less important for us than large, has to develop and access external markets; however, it has lost the means required for this.

Several foreign companies, however, decided that in the conditions of the folding European market opportunities for development should be sought for in BRIC countries. Thus 2009 saw the emergence of several international players who have grown.

We are certainly aspiring to provide maximum assistance to French companies at the time of crisis so that they could develop international cooperation including that in Russia, in the Urals. The role of French Economic Missions is in offering services to small businesses for the support of their exports using the capacities of Ubifrance, the French agency for international business development.

The trade turnover between France and Russia in the last year has declined by about 40%. This is a rather serious drop but it is not as acute as indicators of trade between Russia and other developed countries. This is why, whilst in 2008 France took 9th place in the list of your country's foreign trade partners, now it ranks 6th. We have moved several positions only due to the fact that the decline of the trade turnover was not as severe as others. So now we need not only to keep the level achieved but to strengthen the economic cooperation.

On the contrary, the Ekaterinburg customs office demonstrates almost 40% growth of the trade turnover between France and the Sverdlovsk Oblast in 2009. This data is not quite correct as it only shows a small part of the real trade turnover - the main volumes go through customs offices in Moscow and St Petersburg.

- Nevertheless, how can this growth be explained?

- The customs statistics reflect the purchases of aircraft by the Ural Airlines carrier.

- How do you see advantages and disadvantages of the Urals in term of attracting French investment if we were to compare it to other Russian regions?

- The drive to invest is based, first of all, on the fact that there is a market and businessmen want to be present at this market. Investments help companies to be more competitive in a particular region.

There is a large market established in the Urals. I mean the one and a half million of people in Ekaterinburg and the concentration of some large cities around it - Chelyabinsk, Perm, Tyumen. The sum total of the Urals market is 12 million people. There are more large Russian cities further east from the Urals, but the distances there are thousands of kilometres and this is an entirely different logistics altogether.

It is more profitable for foreign companies to invest in Ekaterinburg as business is concentrated around here. 5-6 years ago foreign business was striving to invest in Moscow (most of the Russian market in literally every sector of the economy) but now the capital is saturated with offers while it is still possible to find points for growth in Ekaterinburg.

One of the pro's is that the process of active development is clearly visible, the region shows a continuous growth in the living standards and the spending capacity of the population. In the recent years services for business have developed rather well, this is also important. You can find legal, financial, logistics, and consulting companies here. There are other institutes for the support of foreign business too, diplomatic representations, for instance. There are direct scheduled flights to large European cities.

There are negative aspects too. Ekaterinburg is the administrative centre of the Urals Federal District but its connections to other large cities of the region have some room for improvement. Some cities often have independent and rather small players. If we are not talking about the large industry sector where key large interregional players are already in place the Urals market is not a unified whole, it remains a conglomerate of small markets. In this case it is harder for the foreign business to look for regional partners here.

Further growth of the trade turnover and the development of economic relations in general between the Urals region and France depend on the speed of growth of local companies at the interregional and federal levels. Ekaterinburg is a beacon for the Urals. But of course there are other Urals cities - Perm, Chelyabinsk, Ufa, Tyumen. Foreigners wanting to come to your region for a first time usually visit Ekaterinburg first and then go to other megapolises on particular businesses. Other Urals cities and towns, however, have also developed their own economic sectors.

- What sectors of economy have the best future in terms of furthering the cooperation between France and the Urals region?

- We have to develop all spheres. Of course, if we speak of the Urals then first of all we speak of the industry. In France we have interesting technologies and services required by Russian industrial enterprises. I am talking not only about technologies in equipment, but also in business management and improvement of product quality.

There are the two sectors where I see a good future for cooperation - the sustainable urban development and energy efficiency. There is a great potential for the development in these spheres in the Urals.

- In terms of improving Russian energy efficiency the French have a number of competitors. Germans, Czechs, Danes, Finns are actively working in the Urals market already...

- We are not deterred by international competition! France is a country of liberal economy, French companies compete with each other too, this is usual. Thank God for Russian partners who are ready to improve their energy efficiency and have the broad choice and might find the best solution which is offered by the French.

- German companies - Siemens, BASF, Viessmann, E.ON Ruhrgas - are already participating in the governmental programme "Ekaterinburg - Energy Efficient City". What can the French say to that?

- We are also working with Russia in the sphere of the improving of energy efficiency. In France we have ADEME, an energy agency similar to the German DENA (the participant of the Russian-German project "Ekaterinburg - Energy Efficient City" - ed.). ADEME is actively working with the Russian Ministry for Energy. We have concrete projects, contracts at the highest level, several companies are already working with several Russian enterprises. The French prefer specifics.

- Last year it was declared that there is a possibility of the implementation of several projects in the Urals with participation of French companies - establishment of new retail chains, manufacturing of automotive parts, provision of transport and logistics services etc. Are there any developments there?

- There is some progress in virtually all mentioned spheres. In 2009, for instance, French logistics operators Daher and FM Logistics established offices in Ekaterinburg to provide services to international and Russian companies. They work in accordance with European standards and technologies. When players of this type come to the market the quality of services for trade improves. I think that in 2010 the volume of French investment into the Urals region will grow.

Interview by Pavel Kober