Logistics in Russia: Outlook, challenges and solutions
Ahlers organized a one day exclusive seminar to discuss opportunities and challenges in doing business in Russia. The choice of the venue: Living Tomorrow - the House of the Future - symbolizes the belief in a sustainable future. The content of the day was a mix of theory and case studies which attracted an international audience. People came over from Switzerland, Russia, Germany, Benelux and France.
The opening speech was held by H.E. Vadim Loukov, Russian ambassador in Belgium since 2004. The ambassador shared the ambitious investments of 381 billion euro in railway, the development of a multi-modal transportation Hub in St Petersburg, the modernization of the major sea and river ports: St Petersburg, Ust-Luga, Vostochny, Taman, Saratov and Nizny Novgorod and the modernization and expansion of multiple airports. He expressed the opportunities for foreign investors especially linked to logistics and infrastructure and praised the investments and operations run by Ahlers in St. Petersburg since 15 years. An international business conference on the topic of the intermodal transportation hub of Saint Petersburg will be held at the embassy in Brussels on 7 October.
The presentation of Prof. Dr. Koen Schoors, a reference on political and economic research on Russia emphasized the stability that Russia has gained under Putin by the growth of FDI (Foreign Direct Investments), the recovery of domestic investments and the wise management of the oil wealth which result in an extremely healthy federal budget. Economic growth reached a 6% average of GDP since Putin came into power. The future challenges are the demographic crisis, fair business practices and the risk of ‘Dutch Disease’. Russia has a negative birth growth rate since the collapse of the Soviet Union. This together with the economic boom leads to an enormous pressure on the labor market. Under president Putin first measures to stimulate domestic manufacturing/assembling already started and will continue to be a top priority for the new president Medvedev. KBC who has recently bought the ambitious Absolut Bank jointly presented their experience and growth path. On top of it, all participants got a manual indicating all procedures, legislation for private and ppp (private public project) investments.
Serge Rivet, Conséo consulting, proved the pace of adaptation being tremendous. Supply chain development in Russia is driven by the boom in Retail and FMCG (fast moving consumer goods). There is a shortage of modern warehouses, logistic specialists and rolling material. Different steps have to be taken at the same time to scale up with the market demands.
The case studies of Ahlers and Partner Logistics took the audience into the day to day practical challenges and opportunities. Ahlers being operational since 15 years eye-witnessed the major transition Russia was and still is in. Ahlers employs 185 people in St. Petersburg where it offers the full scope of services: international forwarding, customs clearance, warehousing (FMCG & Retail) and distribution. Partner Logistics shared their experience anno 2008 being in preparation for launching their first Russian project. Their focus is storage of frozen and fresh (4°C) food in automated warehouses.
All speakers agreed that Russia has great potential. The Federation is an economic powerhouse, but needs to scale up its investments in infrastructure, if it wants to fulfill the ambition of being the hub between West and East and vice versa.
Western companies that feel attracted by the economic growth in Russia were advised to arrive well prepared, to search for proper legal advice and make a careful selection of good local partners. Entering the Russian market is far from cheap, but the opportunities seem to be endless. Labor still is cheaper than in Western Europe, the real average income growth is +10% per year. Inflation now is moving up again, but has been around 10% for the last couple of years.
The day was concluded by a guided tour in the House of Future.
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