January 2000
By Azim Mamanov, BISNIS Representative in Novosibirsk
SUMMARY
The city of Novosibirsk, Russia's fourth largest city with a current population of 1.5 million, is the largest Siberian city and has traditionally been considered the "capital" city of Siberia. Novosibirsk dominates the region in terms of the presence of Western firms and the size of its distribution system. Transportation from European Russia is fairly good and Novosibirsk is one of the few Siberian cities, which can unload forty-foot containers and deliver them to warehouses. Novosibirsk serves as distribution hub for surrounding regions of Kemerovo, Altai Krai, and Tomsk.
The desirability of the marketplace is perhaps best demonstrated by the presence of sales and representative offices of such foreign companies as Honeywell, Arthur Andersen, Procter & Gamble, Pepsi, Coca Cola, Motorola, Lufthansa, Philip Morris, and Mars.
All these factors make Novosibirsk, situated at Russia's crossroads, one of the most important commercial centers outside of European Russia, and an attractive place for opening a representative office.
This report describes the different factors surrounding establishing an office in the city of Novosibirsk.
OFFICE SPACE
In general, office buildings in Novosibirsk do not meet Western standards. Offices in buildings located very close to downtown Novosibirsk, in Lenin Square, are considered to be the most prestigious. The closer the office is to downtown, the higher the price. Almost all of the buildings were built during Soviet times, and were not designed to be rented out. The quality of office space in different downtown buildings is about the same. An average office space would require at least some renovation, have one phone line per room, and does not have air conditioning, furniture, or office equipment. The average price for an office space is US$120 per square meter annually.
The most expensive office spaces are in the Hotel Sibir: US$300 per square meter annually. The hotel is the nicest place for foreigners coming to Novosibirsk to stay, which makes it an attractive place to locate an office for companies providing a wide range of business services and trying to attract foreign companies as clients. For instance, the hotel would be a good place to open a business center. In addition, it has a nice view, and compared to other office buildings, it has a convenient parking lot.
A 12-story office building located on 12 Lenin Street would be another good place to have an office, even though it is a typical soviet-style tall building with an unattractive view and old elevators. Since many companies with offices in the building actively advertise themselves, this building is well known in the city. In addition, even though a number of office buildings are located downtown, this building has a more preferable location because it is near stores, restaurants, and businesses providing various services. Located in the building are a dentists office, a beauty saloon, an air ticket office, a travel agency, an American fast-food restaurant, computer and telecommunication companies, and the city’s largest supermarket. The majority of offices in the building will require renovation. However, a decent parking lot is available.
One of the few newly built office buildings is located on 1 Dimitrov Street. Prices for an office space in the building are US$200 per square meter annually. One of the tenants located in the building is a regional branch of Alfa-Bank. The owner of the building, the Ecoplast company, has another newly built building for locating stores and shops right in the front of the Central Store, a major shopping place in the city. The company charges US$400 per square meter.
EQUIPPING AN OFFICE
The buildings owners do not provide furniture, and tenants need to purchase it themselves. Various types of Western-made office furniture, equipment and office supplies are available in the local market, both foreign and locally made. However, some of the furniture and office supplies, such as file cabinets and American standard paper (paper used in Russia is in the A4 format), might not be found locally. To equip an office costs different amounts, depending on the quality of furniture and equipment.
LABOR MARKET
One of Novosibirsk’s most significant assets is its highly qualified human resources. Novosibirsk has one of the most highly educated citizenry in Russia. The August 1998 crisis caused many local companies specializing in the financial sector, and representative offices of foreign companies, to cut their personnel. A large number of qualified and trained people that have very good experience working in banks, financial companies, and foreign firms such as Coca Cola, Pepsi, P&G, Mars, and Xerox, were available in the local labor market. In addition, many of these people speak English. Salaries in Novosibirsk are generally lower than in Moscow. It often happens that forign companies offer their Novosibirsk staff positions in their Moscow offices.
Approximate salaries in Novosibirsk:
Position
Monthly Salary, US$
Secretary
150-500
Chief accountant 400-1500
Sales manager 400-1200
Regional manager
600-1800
System engineer
150-450
Driver
100-300
Translator
200-700
Recruiting agencies, such as SibAncor, Supercadry, Bisnes-Personal, and others can help to find qualified staff for both local and foreign employers. In addition, they provide employment and consulting services on the labor market.
TELECOMMUNICATIONS
1. Phone Lines
The major provider of phone lines is the Novosibirsk State Telephone Station (NSTS) company. A number of local companies, such as Novocom and Global-One, provide high quality telecommunication services. Novocom is a Russian-American joint venture. Its founders are NSTS, Belcom (USA), and the International Telecommunication Company. A regular service package includes an installation fee, a monthly payment, and a per minute traffic fee.
Both companies fees are about the same. The companies charge up to US$500 for the installation of a phone line. The monthly fee is from US$10 to US$30. The companies’ tariffs are much lower than the ones offered by the Novosibirsk Inter-city Telephone Station (NITS) company, the major provider of inter-city and international phone logs. Thus, the companies charge US$0.8-0.9 per minute for phone calls from Novosibirsk to North America, as opposed to US$1.4 per minute charged by the NITS company. In addition, the companies provide services to install Moscow phone numbers. Both local and foreign firms that have intensive business ties with Moscow companies find it extremely useful.
In addition, the “Global One” company began to actively market its relatively new product in Russia, CONTACT-cards. Using the CONTACT-card, one can make inter-city or international phone calls at much cheaper rates. The cards can be used in all of the major cities of Russia, and are very helpful for those who need to make long-distance phone calls while travelling throughout Russia.
2. Cellular Phones
There are three major cellular phone
providers in Novosibirsk: “Sotovaya Kompania” JSC,
regional operator of BeeLine company, which operates in D-AMPS
(800) standard; the “Sibirskie Sotovye Sistemy”
company - GSM-900 standard; and the “Novosibirskaya
Sotovaya Svyaz” company which works with SOTEL Federal
network in NMT-450 standard. Up to 18,000 people (1.2 percent of
the population of Novosibirsk) use the services of these
companies in the city. As a result of ongoing competition among
these companies, prices for their services is constantly
decreasing, while the quality improves. The average cost for a
phone, and installation into a cellular network is US$100-150.
The average monthly fee is US$5-7, and per minute rate ranges
from US$0.14 to US$0.3. When choosing a provider, a person or
company should also consider areas covered by a provider,
availability of the provider’s services in other cities of
Russia, and outside of Russia.
3. Internet services
The major Internet service providers in Novosibirsk are Rinet, NITS, Global-One, and Cardinal. The registration fee may cost up to US$10. Providers charge on a per-minute basis, and the cost of access to the Internet for an hour may cost from US$0.7 to US$3. Various discounts for corporate clients are available from local ISPs, depending on the clients’ needs.
Another provider, Magistral Telecom JSC, owns fiber-optic and wireless networks and equipment. The company was founded by Andrew Corporation (USA), the Regional Association Siberian Accord and a number of local companies. Magistral Telecom’s clients are banks and large corporate clients that need high-speed Internet connection, reliability, and high quality, despite the fact that the services provided by the company are much more expensive than those provided by regular providers.
BANKING
Prior to the August 1998 crisis, some 20 banks were operating in Novosibirsk, and the ratio between the local banks and affiliates of banks headquartered outside of the city was 40/60. After the crisis, a number of Moscow banks went bankrupt, and the ratio changed to 65/35. As the Russian economy was recovering, a number of Moscow banks survived after the crisis began expanding to the regions. For today the ratio between banks is 50/50.
The local banking system has basically recovered from the crisis that became an indicator of sustainability for banks. The most stable and reliable local banks are NovosibirskVneshTorgBank, SibAcademBank, Accept, and SibEcoBank. A number of Moscow banks, such as Alfa-Bank, NOMOS-Bank, SOBIN-Bank, and Bank of Moscow, have branches operating in Novosibirsk.
The only ATM available in the city is located in Alfa-Bank. Obtaining cash from a VISA card is also available in NovosibirskVneshTorgBank and SOBIN-bank. The commission for getting cash does not exceed 3%.
BUSINESS AND ADVERTISING SERVICES
Only a few companies in Novosibirsk provide a range of business services, such as market research, partner search, translation/interpretation service, hotel reservations, etc. Such organizations, as the local Chamber of Commerce and the World Trade Center – Novosibirsk, provide some of the services. DDD-Project company is another company that provides business services. The company is recently established and run by a group of young and enthusiastic people who have experience working with foreign companies and were trained in the West. The company is willing to provide the widest range of services to Western and Russian companies to help them to succeed in the local market.
A large number of companies offer their services in designing and printing various types of business cards, leaflets, seals, etc. Printing 200 two-sided bilingual tri-color business cards costs up to $100. The cost of production of a seal does not exceed $20. Printing 1,000 leaflets costs around $250.
The most popular local newspaper among businessmen is Kommersant-Sibir. Unlike the daily Kommersant newspaper that is distributed throughout Russia, Kommersant-Sibir is issued once a week (8,840 copies) and distributed in Novosibirsk, Tomsk, Omsk, Kemerovo, Altai, and Krasnoyarsk regions. Advertisements of banks, financial and consulting companies are mostly seen on a newspaper. The newspaper offers advertising for US$22 for 1/64 of a page, and US$1,500 for an entire page.
Kommercheskie Predlozhenia, Reklama, and
Sibirskaya Reklama advertising magazines are the most popular
among wholesale companies not only in Novosibirsk, but also in
other major Russian cities and regions. The main readers of the
magazines are retail and small wholesale companies throughout
Russia. Advertising in the 100-page Kommercheskie
Predlozhenia costs from US$600 to US$900 per page.
EXPRESS MAIL
DHL, UPS and FedEx operate in Novosibirsk. The time of delivery
is approximately four-five days between the U.S. and Russia, and
overnight for shipments to or from Moscow. For shipments other
than documents, special arrangements should be made with these
companies concerning customs clearance.
OFFICE REGISTRATION PROCESS
If an American company wants to establish its presence in the Novosibirsk region, then initially it must go through the routine of registration. It is highly recommended to use the services of a local Russian law firm / lawyer or a Russian business partner to facilitate and handle this process.
If an American company is going to set up an affiliate/branch, a joint venture or a venture wholly owned by an American investor with charter capital under 100,000 rubles (US$3,745 at the rate of 26.7 rubles for US$1), it should apply for registration to the Foreign Economic Relations Department of the Novosibirsk Regional Administration. In case charter funds exceed 100,000 rubles, the company should apply for registration to the Chamber of Trade Registration, the Russian Federal Economics Ministry in Moscow.
An American firm is required to submit the following to register:
A) Written application of the founders with a request that a new commercial entity be registered. The application must be addressed to the Governor and must include information on the company, its founders, the principal areas of business, the charter capital and the business address.
B) Foundation documents of the new entity:
-Foundation Protocol (Protocol of a Constituent Meeting), 2 copies;
-Foundation Agreement, 3 copies (2 master copies and 1 notarized copy);
-Charter, 3 copies (2 master copies and 1 notarized copy)
C) Permit of respective supervision organizations for certain areas of business - large-scale construction or reconstruction, environmentally polluting production;
D) Letter of guarantee for the company to be formed from the owner of the space to be used;
E) Receipt of the registration fee;
F) Document certifying payment of not less than 50 percent of the charter capital to start up the venture;
G) For Russian partners:
-Approval from the owner of property or an authorized representative to establish a venture. This will be in the form of a protocol;
-Notarized copies of the Foundation documents of the Russian company: approval of registration, certificate of registration, agreement (application), Charter;
If individuals with Russian citizenship are involved in forming the venture, a person's passport data and place of residence are to be included in the Foundation document.
H) For American investors:
-Excerpt from the trade register of the country of origin or another proof of the foreign company's legal status under the laws of its country;
-Proof of citizenship or residence (notarized master copy including a certified translation into Russian) of the company's representative;
-Notarized document regarding the solvency of the foreign investor issued by the company's bank and including a certified translation into Russian;
-Period from the issuance date of the above document until the submission of the application to the Registration Office should not last more than 3 months;
I) Power of Attorney to handle the registration of the venture if the registration has been assigned to an authorized representative.
CONTACT INFORMATION
I. Local Administration
1. Mr. Viktor A. Tolokonsky, Governor
18 Krasny Prospect
Novosibirsk, Russia 630011
Phone: 7-3832-230862
Fax: 7-3832-236972
2. Mr. Vladimir P. Nekhoroshkov, Chairman of the Department of Foreign Economic Relations, the Novosibirsk Regional Administration,
18 Krasny Prospect,
Novosibirsk, Russia
Phone: 7-3832-230680
Fax: 7-3832-236972
II. Office Buildings
1. “Ecoplast” office building
Mr. Vladimir A. Stepanov, General Director
1 Dimitrov Prospect,
Novosibirsk, Russia
Phone: 7-3832-903271
Fax: 7-3832-903511
2. “Center of Russia” office building
28 Krasny Prospect,
Novosibirsk, Russia
Phone: 7-3832-234562
Fax: 7-3832-233627
3. Hotel Sibir,
Mr. Voitenko, Director
21 Lenin St.,
Novosibirsk, Russia
Phone: 7-3832-231215
Fax: 7-3832-238766
III. Recruiting Agencies
1. SibAncor,
2. Galina Sgonnik, Manager
37 Sovetskaya St., office 819
Novosibirsk, Russia
Phone: 7-3832-222822
Fax: 7-3832-222822
2. Supercadry
7 Dimitrov Prospect, office 619a
Novosibirsk, Russia
Phone: 7-3832-186098
Fax: 7-3832-184272
Email: root@supercdr.nsk.su
3. Bisnes-Personal
30 Marx Prospect, office 604
Novosibirsk, Russia
Phone: 7-3832-495456
Fax: 7-3832-495456
Email: business@personnel.nsk.su
IV. Telecommunications Companies
1. Novocom,
Mr. George S. Piskunov, General Director
12 Lenin St., office 1101
Novosibirsk, Russia
Phone: 7-3832-119701
Fax: 7-3832-119704
Email: sales@novocom.nsk.su
http://www.novocom.nsk.su
2. Global One
Ms. Natalia A. Guskova, Account Manager
42 Oktyabrskaya St., floor 4
Novosibirsk, Russia
Phone: 7-3832-106002
Fax: 7-3832-106067
V. Internet Providers
1. Rinet
86a Kirov St., office 304
Novosibirsk, Russia
Phone: 7-3832-229097
Fax: 7-3832-229491
http://www.nsk.ru
2. Global One,
Ms. Natalia A. Guskova, Account Manager
42 Oktyabrskaya St., floor 4
Novosibirsk, Russia
Phone: 7-3832-106002
Fax: 7-3832-106067
3. Magistral Telecom
12 Lenin St., office 901
Novosibirsk, Russia
Phone: 7-3832-225678
Fax: 7-3832-180442
Email: sales@siberia.net
http://magistral.siberia.net
VI. Leading Banks
1. Novosibirskvneshtorgbank
Mr. Yevgeny Sukhonin, Manager
44 Kirov St.,
Novosibirsk, Russia 630102
Phone: 7-3832-102089
Fax: 7-3832-103024
E-mail: nvtb@nvtb.nsk.ru
2. SibEcoBank
Mr. Vasily P. Ozheredov, Vice-President
8a Vokzalnaya Magistral,
Novosibirsk, Russia
Phone: 7-3832-181508
Fax: 7-3832-181548
3. Alfa Bank Novosibirsk
Dimitrov Prospect, 1
Novosibirsk, Russia
Phone: 7-3832-235566
Fax: 7-3832-235566
VII. Organizations providing business services
1. The Novosibirsk Chamber of Commerce
1 Marx St.,
Novosibirsk, Russia
Phone: 7-3832-464150
Fax: 7-3832-464150
2. World Trade Center – Novosibirsk
Mr. Dmitry Yevsikov, Director
220/10 Krasny Prospect
Novosibirsk, Russia
Phone: 7-3832-259845
Fax: 7-3832-269802
3. DDD-Project
Mr. Denis Narbut, Director
12 Lenin St.,
Novosibirsk, Russia
Phone/fax: 7-3832-223444
Email: ddd@mail.cis.ru
VIII. Newspapers and Magazines
1. “Kommersant-Sibir” weekly newspaper
50 Chelyuskintsev St.,
Novosibirsk, Russia
Phone: 7-3832-210256
Fax: 7-3832-214971
Email: daily@rh.nov.net
2. “Kommercheskie Predlozhenia” advertising magazine
137/1 Nemirovich-Danchenko St., office 511
Novosibirsk, Russia
Phone: 7-3832-541728
Fax: 7-3832-544400
IX. Law Firms
1. Siberian Juridical Company
7 Dimitrov Prospect, floor 5
Novosibirsk, Russia
Phone: 7-3832-213554
Fax: 7-3832-213588
2. Juridical Alliance Company
Ms. Natalia B. Mun, General Director
12 Lenin St., office 705
Novosibirsk, Russia
Phone: 7-3832-224425
Fax: 7-3832-224425