After big companies dipping into oil and energy, it’s Russian Small and Medium Enterprises’ turn to take an interest in the Swiss markets. “In future, Russian firms will have more and more subsidiaries in Switzerland,” predicts Walter Fetscherin, head of the Swiss-Russia Chamber of Commerce. “A growing number are, indeed, involved in international ventures. Thanks to its political stability and high level of security, Switzerland offers very favourable conditions to Russian entrepreneurs, notably in the domain of holdings.” Maxim Kochetkov, a Russian diplomat based in Geneva, emphasizes that most Russian firms in Switzerland are in the services sector. “You’ll find lots of travel agencies, beauty salons, grocers,” he points out. “Most of these companies are owned by one person with dual Swiss-Russian nationality.” According to the diplomat, a Russian businessman’s chances of setting up a company in Switzerland without this asset are slim. Apart from these small businesses, numerous Russian companies based in Switzerland are directly affiliated with large energy or oil companies – resembling satellites of giants such as Gazprom, Rosneft and Lukoil.
What’s more, many wealthy Russians are investing in real estate, watch-making, the hotel and restaurant industry, leisure, new technologies or finance via small firms registered in Switzerland. That’s how Viktor Vekselberg, billionaire and third richest man in Russia, set up the Renova Management investment firm in Zurich in 2005. Similarly, the former surgeon Oleg Fedine is running the Detesa investment company based in Fribourg. Finally there’s Igor Khodorkovsky, who, after making a fortune in slot machines, built an ultramodern thermal baths center in Charmey (Fribourg canton), for some CHF 6 million.
In Russia, SMEs remain a minority, as opposed to Switzerland, where they constitute the economy’s backbone. And their history is short: they were only allowed to flourish when the big state monopolies were privatized in 1992. Their numbers have been soaring in recent years, however. “Today, they account for 15 per cent of Russia’s overall turnover,” underscores Fetscherin.
The Russian organization of small and medium businesses (Opora) counted close to 950,000 firms with less than 100 employees* in 2004, accounting for some 7.2 million jobs, or 12 per cent of the working population. These companies are mainly involved in trade, food, industry and construction.
Aware of their potential, the Russian government, which until recently focused almost exclusively on oil multinationals, slated two billion roubles (around CHF 90 million) to SMEs last year. As for the red tape, which, as Fetscherin points out, “remains ponderous, especially for small firms,” the Russian government is taking concerted action: in an effort to facilitate daily administrative chores, it has passed a law to better secure competition and it plans to review some 350 administrative regulations hampering SMEs.
“Thanks to negotiations between Switzerland and Russia, the administrative constraints will diminish in the coming years,” said Kochetkov. “That will encourage Russian capital asking for nothing more than to be invested in Switzerland.” In parallel, there are also 500 Swiss companies on Russian soil, representing a total of CHF 2 billion of direct investment. The Russian economy’s excellent performance in the last few years makes this market particularly attractive to foreign investors. Since the 1998 crisis, Russia’s GDP has grown by 57.6 per cent according to the World Bank.
This was noticed by Geneva’s authorities, who sent finance, tourism and political delegates to Moscow last September to woo Russian investors at the Geneva Economic Forum, organized by the Swiss-Russia Chamber of Commerce.
This effervescence is symptomatic of how much the business climate has improved in Russia, and it pervades the country’s entire economic fabric.
It is hard to imagine that until recently, protectionist laws prohibited citizens from investing more than US$ 150,000 abroad. This restriction was raised during the 1998 crisis to prevent the flight of local capital. Those days seem very distant now.
“For the last couple of years, Russians themselves are investing in Russia,” notes Fetscherin, “which goes to show that the country’s economic situation is on track to becoming more and more stable.”
