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Localization in Russia

In 2017, the export value of goods European Union took to Russia was 82bn dollars. Thus, there is a bigLocalization in Russia amount of European companies operating with and in Russia. At the same time, Russia is making an accent on the locally produced goods. Many economic sectors have received a target from the government to import phase-out of certain products in the next few decades. This initiative is forcing foreign manufacturers to establish local production in Russia as well as to compete with Russian producers.

Russian business environment isn´t known as the most welcoming and for many, entering Russian markets seems like too big of a risk to take. No doubt, business in Russia requires good nerves but then again, most of the countries with big opportunities do. Also, there are many changes made towards more attractive operating environment. In an example, tax administrations, legislation for the legal entities and the customs process have been simplified.  Thus, it might be good time to update the old view of unwelcoming and complicated business environment of Russia.

At the time being export to Russia has been the most preferred option among European companies. In addition to the Russian preference to local production there are other cons to it as well like foreign exchange market which can be rather volatile. Additionally, the exporting company will have to compete with other much cheaper brands. Currently Chinese brands have increased their attractiveness recently as the purchasing power of Russian people has decreased. Despite of the favorable atmosphere, localization is not a bed of roses either. There is a risk of unstable economy and purchasing power, there are sanctions that are hindering the overall business and on also Russian business and industrial environment need some severe modernization. This can also be an asset for the foreign company with modern know-how.

There are multiple advantages companies can gain by localizing the production. Due to the ruble devaluation, the entry cost is low and through Russia it is possible to enter new markets, such as Eurasia. Also, localizing company is getting special support from the Russian federation. Not to mention the advantage of the local human capital resource.

Pros of the localization:

  • Low entry cost because of the national currency devaluation
  • Export opportunities to new areas, such as Eurasia
  • The support and incentives for localization from the Russian government
  • Opportunity to develop supplier base
  • Local human capital resource
  • Low operational cost
  • Opportunity to become first in one´s own niche

Cons of the localization:

  • Unstable economy and purchasing power
  • Sanctions
  • Price volatility due to the currency exchange rate fluctuations
  • Local suppliers need modernization

 

Special Economic Zone (SEZ) is a concept designed by the Russian Ministry for the economic development. It is an attempt of Russian government to attract foreign businesses to localize their production. There are 25 special economic zones with 660 companies and 25 000 work places in Russia. Because of the special economic status of SEZ, it provides company with the significant financial benefits and makes the whole localization process a lot easier. For example, by localizing the production in SEZ area, company acquires significant fiscal gains with the lower tax rate. Additionally, these zones are custom-free, which means no import duties or taxes. The land of the SEZ areas is cheap and the company gets one-window approach for dealing with the formalities. Also, there will be no minimum investment problem. Most importantly, the government of Russian federation has promised fixed rules in all SEZ territories till the year 2054.

Other attractive option for foreign company planning to localize in Russia – is an Industrial park. Industrial park is a good option to localize for the company, who doesn´t want to waste time in the construction of the production facilities. There are several good examples of companies that already implemented successful localization process. For instance, the Finnish paint manufacturing company Teknos has already localized its production in Maryino Industrial Park which is located in Petrodvorets district in St. Petersburg. Maryino Industrial Park provides a great investment opportunity for the foreign firms. It is created for localization of foreign enterprises and it provides ready-made facilities. This makes the localization project much easier. It is also possible to tailor the facilities according to the customer needs. Overall size of the park is 180 ha and the sizes of plots varies starting from the 0,5ha.

What comes to trafficking, Maryino park is situated very conveniently. It is situated in 20 minutes ride from the Pulkovo International Airport as well as from the Bronka seaport. It takes 3 minutes to get to the ring road which allows cargo-transport access to all arteries including those heading to Moscow and Finland. Maryino Industrial Park is partnering, among others, with the management company VTB Development, the engineering company Capital-Energo LLC, and with the VTB Bank (PJSC). The project is also supported by the St. Petersburg City Government.

For Teknos, the localization decision seemed to be benefitting. After the localization, Teknos increased its sales volume by 7 % (liters) and in 2017 it aimed to increase its yearly sales by 10%. In addition to Teknos, Maryino Industrial Park has already attracted companies Dipo, Admiral and Sarstedt.

One can thus conclude that there are plenty of opportunities to operate in Russia and each way has its pros and cons. The best operational mode must be selected according to situation and goals of each specific company. If you are interested in entering Russia but not sure which operational mode would be the most suitable, the team of Export Maker is happy to consult you. Export Maker has been taking companies of different fields to Russia and assisted them in choosing the right formula for the successful market entry.

Localization in Russia

References:
https://www.kauppalehti.fi/uutiset/sinnikkyys-palkitsee-suomalaisia—tuotanto-venajalla-elpyy/gUY9m6h8

https://schneider-group.com/wp-content/uploads/2017/03/SCHNEIDER_GROUP_understanding-localization-in-russia.pdf

Written by Miila Leisiö

Petri Sagulin

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Finland Gained Good Reputation Playing a Host for the World´s Two Great Powers

Photo: РИА Новости

The main news of this week is unclear to no one – meeting of two big leaders in Finland has been the headline of every newspaper. The world awaited president Trump and president Putin to meet with high hopes. For the sake of security and stability of our lives it is extremely important to have big leaders at the same table. There are several opinions whether the meeting between president Putin and president Trump was a success or not. However, one can safely say that for Finland this meeting was a success. It has been viewed that these couple of days were certainly a PR win: In a punctual Finnish way, everything was well organized and on time (at least everything that was dependent on the host country).
Even though the focus was undoubtedly on president Putin and president Trump, Finland got several positive remarks for its organizing skills. On the president breakfast, which was held between Mr. Trump and the president of Finland Mr. Niinistö, Mr. Trump was highly appreciating the “fantastic” hospitality Finland was showing. This meeting definitely did strengthen Finland´s public appearance of a trustworthy international summit organizer.

Photo: Корреспондент.net

After the information about the arrangement of the meeting in Finland was announced there have been debates on why Finland was chosen as the meeting place. Even though at the current moment we can not come up with any definite answer (surely, we can read the answer from the future biographies of today´s leaders), we can highlight at least three important reasons that definitely had an impact. Firstly, the geography of Finland played a big role. The last football game was held in Moscow just the evening before the big meeting and it was important that the meeting would take place somewhere relatively close to Moscow so that president Putin would be able to attend the meeting. Also, as president Trump was attending the NATO summit and visiting the UK, it was practical to arrange the meeting in Europe. Secondly, the history of Finland hosting high-level meetings played a big role. Meeting on 16th of July was already sixth of its kind. Finland has been the meeting place for Russia´s (and the former Soviet Union) and USA´s leaders six successful times before. Third reason could be the skilled foreign policy of Finnish president Niinistö, which has maintained good relations with both parties of the summit – Russia and USA. To sum it up, Finland in average provides a calm and coherent atmosphere for stormy meetings and as it is not in the center of the world, there are not so much hassle going on interrupting the attention from the main issues.
A lot of effort was put into this meeting in a short period of time. Not every country would have been able to put out a meeting of this size within this timeframe. The entire city of Helsinki was holding its breath the day presidents were supposed to have their meeting. The traffic was adjusted and partially stopped. The Finnish police force was making a real effort to put this event together so that everything would go smoothly as planned. The result was a successful, and everything went very well. All the guests were content with the welcoming host.
It might be that, at least if one asks the journalists, this is not the last time summits will be arranged in Finland. Not only the press center was nominated as the happiest in the world, but also surprisingly sweet strawberries and sauna situated in the yard of the press house gained popularity among the satisfied journalists.
I think it can be boldly said that Finland is a trustworthy and efficient collaborator and has shown its competence to function under the pressure. As president Niinistö said – “keep it simple” and things will proceed little by little forward. So far, this quote seems to be working!

Written by Miila Leisiö

Elena Baidakova

Operational Director, Russia

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Towards more sustainable business in Russia

Sustainable business in Russia

The blog text is written by Export Maker project coordinator Miila Leisiö


Green business is a hot topic all around the world, and even though Russia might not be the first country that comes to mind when discussing green business, it should not be ignored because it does play an active role in it. On July 5th, we attended a round-table discussion on green business in Russia. The reference point was the energy transition in Germany, also known as Energiewiende. The event took place in St. Petersburg and was organized by the International Business Association (SPIBA). The guest speakers were all experts on the green business field. Speakers of the event were Bernd-Georg Spies (Managing Director, Russell Reynolds Associates), Roman Ishmukhametov (Associate, Baker McKenzie), Irina Antyushina (Senior Sustainable Business & Communications Manager, Unilever in Russia, Ukraine and Belarus), Maxim Titov (ENERPO Executive Director, European University) and Vladimir Lukin (Manager, KPMG: Climate Change Related Risk Management and Low-carbon Development Projects in Russia).

Green or grey Russia?

For green business, there is good news – according to Maxim Titov, Russia is doing much more to increase its green development than is recognized in the international field. Maxim Titov brought up the UN´s sustainable development goals and reckoned that, in fact, sustainable development in Russia is in line with the UN´s goals. Also, Irina Antyushina, mentioned the increasing interest of Russians towards the responsibility of the company and eco-friendliness of the products they are buying. This development can be especially seen in big cities.  

Even though Russia is a major user and exporter of oil and gas and Russia has substantial inefficiencies in its energy consumption (especially when it comes to household consumption), over one third of consumed electricity in Russia is produced from nuclear and hydroelectric power plants as well as other renewable energy sources. Geographically, the division of energy sources is such that in the European parts of Russia (including Urals), the energy sources are primarily natural gas and nuclear energy while in Siberian parts and in the Far East, coal and hydropower are the most used energy sources. In Russia, the clean energy technology development is concentrated on the grid interconnection and on the support of the additional generation based on renewables. Additionally, Maxim Titov underlined that there are companies investing in wind and solar power. Thus, there is potential to increase the use of renewables (also other than hydropower) as the source of energy in the future in Russia. However, the development of renewable energy technology is rather slow, because of the lack of investments in the green business.

3 Ds of green business

Briefly about the German energy transition program; the goal of the German government was to decrease greenhouse gas emissions by 55% by 2030 from the level of 1990s and to increase the share of renewables by 50% in electricity consumption. The follow-up goal is to reduce greenhouse gas emissions by 80-95% by 2050 compared to the levels of 1990s and the share of renewables should rise to at least 80%.

The pros of the program introduced by Mr. Spiel were great; Energiewiende resulted in a 37% increase in renewable energy in 2017 and generated 330 000 new jobs. However, nothing comes without a price – according to rough estimates, the energy transition will cost German consumers 520 bn euros. Despite the high price, Germany remains one of the heaviest coal-users in Europe, having 40% of its energy from coal.  The question then arises – is it even useful to compare countries like Germany and Russia? Why would Russian consumers want to invest billions of euros in an economically unstable situation in the energy transition when they have (at least for now) large amounts of cheap black gold?

Bernd-Georg Spies named the three most important building blocks in energy transition; the “triangle of transition” consists of: decentralization (1), decarbonizing (2), and digitalization (3). In short, in the future, the electricity production will be increasingly decentralized, and consumers will be more active and play a bigger role in energy supply – today´s consumer is tomorrow´s “prosumer”. Evidently, the next step will be the shift from fossil fuels to renewable energy sources. Last but not least, digitalization will play a major role in the energy transition as it will help e.g. the transportation of energy and ease the metering.

Thus, what are the most crucial elements for a company when entering energy markets according to Mr. Spiel?

  1. Interest and understanding of digitalization. One must understand digitalization and the benefits it can bring to their business. It is important to keep up with the change.  
  2. Collaboration. A professional leader is not enough. It is highly important to include each and every one in the organization to the transition and change.
  3. Risk-taking capacity. The renewable energy business is highly risky, and it must be considered.
  4. Deeper understanding of the consumers In the future, consumers will have a bigger role in the energy field. With the help of new technology, it is possible to understand consumers’ needs better and act towards them.
  5. Excellent understanding of politics and regulations. As the energy business is a highly regulated field of business, careful observation of legislations and norms is necessary to be able to act in the energy business field.

There are many changes made in the Russian legislation towards a more ecological environment. Legislation is trying, little by little, to direct consumers to choose sustainable products. There are both carrots and sticks to encourage producers to act in a more sustainable way. Russia is executing legislative changes towards cleaner transportation; it imposed a zero-tax rate for imported electric cars (although, at the moment this initiative is cancelled, and it is planned to be reimposed). Additionally, education plays a major role in understanding the importance of green products.

All in all, it seems that hope in a greener future is high, and Russia has made some changes in its legislation to support this change. Also, especially the younger generation is interested in sustainable development and is driven to make the change. However, in order to take more active steps for the greener future, Russia is in need of foreign know-how. Here, foreign companies could play a big role by cooperating and sharing knowledge in the Russian field of sustainable business.

Petri Sagulin

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When you are going to expand your business abroad, don’t miss China

Why?

First, China is by far the biggest developing economy in the world. It is big enough to let firms attain huge scale. It has over 800 large cities, 200 of them with a population of over 1 million.

Second, Chinese language and culture are more homogeneous compared with Europe; Chinese physical infrastructures such as transportation and wireless broadband are new and excellent compared to developed countries such as the United States. For entrepreneurs, it is much cheaper to reach huge number of consumers in China.

Third, the bulk of Chinese consumers are young and eager to try new clever products, no matter if the brands are familiar or not. They adopt new technology quickly. For example, after mobile payment came, it became quickly very popular and now China is becoming a cashless economy. When ride-hailing services started – business idea likes Uber’s – the number of users increased 17-fold from 2014 to 2016. The amount of money young consumers in China spent on travelling last year is almost equal to the amount they spent on food.

pollution-2706961_1920Finally, many areas — especially many state-owned industries — are not efficient. So much so they are even be painful to consumers. Almost every aspect needs to be improved. For instances, parents and children suffer pains from rigid education system and outdated traditions. Pollution makes citizens spend more and more on clean-tech products. According young consumer trends’ report, expenses on anti-smog product increased almost nine percent from 2015 to 2016. Companies who put customers first and deploy the latest technologies have the upper hand and can easily develop fast.

What should you do?

Find a region of China which your business suits best. Neighbouring cities are likely to be similar in industry composition, government policy, and consumer preferences. For example, if your business is better-suited for developed cities – just like European cities – you might consider megacities like Beijing, Shanghai, Guangzhou and Shenzhen. For example, what kind of city Shenzhen is? More than 80 percent of Shenzhen’s residents are young migrants, from all across the country. They mainly speak Mandarin and spend most of their time away from their homes. People in the Shenzhen area are already active consumers of many categories.

Try to understand consumer’ preferences and trends in different areas. You know there are big cities and smaller ones. Some are rich, some poor. But what kind of cities they are? It might not be right to use a couple of words to describe a big city, but from those keywords, you can get some ideas. For example, the keywords are “house loan pressure” for Beijing, “entertainment” for Shanghai, and “food” for Guangzhou. If you want to develop tourism business, Shanghai might be a good place to start in. If you are food and beverage company, Guangzhou might be the first place to consider.

Select a proper way to enter the market. Your choice may be influenced by the resources you commit and the extent you wish to be involved. There are a couple of options companies can adopt; these include export, licensing, acquisition, and joint venture. Many companies are using a combination of these. You can for instance start with exporting. As the local demand increases and gains better understanding of the market, you can decide to shift to branching, licensing.

As the Chinese saying goes: It is better to travel ten thousand miles than to read ten thousand books. Take a flight to China and see and feel it by yourself. It will definitely be a fruitful experience.

The text has been written by Xiaohua Zhu.

Petri Sagulin

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Spring equinox, sunrise of new year resolutions in Iran

Iranian new year

The first day of spring is generally an ordinary day in many countries, while in Iran is Nowruz, meaning new day and first day of Persian new year. Persian calendar is a solar one, on the basis of great respect of Iranian ancestors towards the sun. Persian new year starts each year on the spring equinox, 20th or 21st of March. Nowruz, is symbol of nature’s rebirth and the most important non-religious occasion among Iranians and some other ethnicities including Afghans, Kurd tribes, Tajiks and Georgians. This ancient tradition has been celebrating over two millennia from the time of Cyrus the Great.

Traditionally, at the turning point of new year, all Iranian families gather around Sofreh Haft-Sin, an ornamental tabletop and Iranian equivalent for Christmas tree. It includes seven ingredients starting with Sin letter of Farsi alphabets, each of them bringing specific cultural meaning for wishing a prosperous year. Here are the most commonly used seven Sins:

  • Sabzeh: Green Grass, symbol of rebirth
  • Samanu: sweet dessert, Finnish Mämmi, symbol of affluence
  • Senjed: dried Oleaster, symbol of love
  • Sir: garlic, symbol of well-being and being restorative
  • Sib: apple, symbol of beauty and health
  • Sekkeh: coins, symbol of wealth
  • Somaq: dried Sumac powder, symbol of sunrise

Families decorate Haft-sin according to their tastes by placing in it the seven Sins and other ornaments like candles, painted eggs, vase of Hyacinth, Goldfish or Divan-e Hafiz (famous Persian book of poetry).

Iranian new year

The other old tradition is to make bonfires at the last Tuesday night of the year which symbolizes wishing the best for the coming year by getting power from fire, forgiveness and forgetting the old year’s disappointments and bad memories. The same night is also the high season of firecrackers for youngsters.

Esfand, Last month of Persian calendar, starting around 20th February each year, is also time for the spring cleaning that has to be done before Nowruz. Iranians welcome the coming year by removing the dusts, polishing the housewares and prettifying everything. Tick-tock of the clocks towards the new year, makes locals overwhelmed by Nowruz preparations. There is rush everywhere for undone shopping or accomplishing the residuals. Massive crowds could be seen everywhere from pedestrian crossings to shopping malls accompanying by huge traffic jams specially in the bigger cities.

The cash flow lowers in the whole country particularly for providing the new paper monies which is the most customary new year gift in Iran. The season is the busiest time for Iranian businesses due to the higher demand of internal market and closing the fiscal year, while international business activities might slowdown or almost stop around 20th of March. The whole new year season lasts usually two weeks and the common returning date is approximately 3rd of April equal to 14th of Farvardin, first month of the Persian calendar.

The calendar is different in many ways. In the first half of the Persian year, months are 31 days, next 5 months have 30 days and the last month has 29 days which becomes 30 days in the leap years. Working days also are different in Iran and while many other places around the globe are enjoying their relaxed Saturday mornings, Iranians have their most hectic time of the week. Working week in Iran starts on Saturday and ends generally Wednesday afternoon, with some exceptionally open organizations till Thursday noon. Therefore, the number of official working days common between Iranians and the rest of the world should be considered as 3.5 days! However, many engaged businesses try to adapt themselves with the calendar differences, in order to remain active.

Apart from the calendar differences in Iran, likewise all other societies, there are also cultural communalities and dissimilarities which knowing them is definitely a trump especially for the involved businesses. Here are some general hints to the Iranian culture, however, this does not mean to constructing any generalization about the culture and neglecting the personal ways of behaving.

On the basis of Iran’s major warm climate and the rich Persian literature, Iranians are warm, hospitable, articulate and societal people. The food tables are generally colorful and the usual table decorum is spoon and fork because of types of cuisines. Along with many other social etiquettes in Iran, there is a culture of offering, called Taarof, which is more for the initial meeting occurrences. It means that your host will offer you food or other things several times to get sure you are comfortable at their places.

Iranian new year

The culture is generally family-centered and social rather than individualistic or private. People are usually very polite and formality especially in the working culture is appreciated. The working culture is more hierarchical and formal dressing addresses respect. Generally, respecting others is highly appreciated among Iranians specially towards seniors, teachers and newcomers.

Having the old Bazaar and trading culture back to the 17th century, makes Iranians generally interested to negotiate and making deals. There are preparatory speeches and enumerating the pros and cons for making requests or introducing a new subject. Indirect and private discussions, especially while requesting or disagreeing, is sign of politeness in the eyes of locals, especially arguments should be made in solitude. In a nutshell, these great expressive folks appreciate more socializing along with attentive behaving and talking.

At the end, East Consulting, wishes all a great spring and a prosperous Persian new year for the celebrating nations.

The blog text was written by Houra Saghafifar.

Petri Sagulin

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Current trends in the health sector of Iran

trends in the health sector of Iran

Healthcare and wellbeing are among the fundamentals of every society and its importance should be elevated in a more populated one. Iran with almost 80 million people (2013 Census), mostly young (around 60% under 50 years old), is not an exception to the rule. That large population demands a great deal of various health services which have been engaging many organizations and businesses for resolving the health-related issues in the country. What are the current trends in the health sector of Iran?

The centralized health sector of Iran is extremely dependent on public sector and despite of existence of private sector and NGOs; all the decisions and procedures should be in parallel with the strategies of Iranian Ministry of Health and Medical Education. There are approximately more than 800 medical institutions and 100,000 hospital beds. Advancing from highly educated and experienced specialist doctors in the country, who are also available privately with affordable prices, approximately 200,000 healthcare/wellbeing visitors and 30,000 medical tourists have visited Iran during the past few years annually.

As a result of experiencing years under different EU-US sanctions, the unexpected and outrageous fluctuations of Iranian currency to USD and consequently, the national policies for promoting domestic and cost-effective production, there have been many progresses and innovatory productions by local businesses and researchers. Pharmaceutical industry, as core of healthcare, has been considerably growing particularly during the sanctions and its market value was 2.5 billion USD in 2014. Iran now is exporting healthcare services to some of its neighbors and also African countries like Kenya. Easing the sanctions, increasing rate of imported medicines and services in line with exporting the health services to other countries will be elevating the market growth in the coming years.

However, in spite of all the emerged developments, another piece of news estimated that at least 167000 hospital beds are still required to fulfill the current demands and by rule of thumbs, there is a need for building about 200 hospitals with 1000 beds. Currently, Iran is struggling with serious health issues including the followings:

  • Air pollution
  • Cancer disease
  • Road accident injuries and deaths
  • Diabetes and stroke
  • Post-surgery problems
  • Lack of hospitals and clinics with advanced facilities

The alarming air pollution indexes and decreasing level of precipitation put the country’s air quality generally as moderate to poor specially in the bigger cities. Tehran, capital of Iran with about 15 million metropolitan population is in a more hazardous condition in a way that sometimes schools have to be shut and older people have to avoid going outside.

trends in the health sector of Iran

Tehran

One of the side effects of the air pollution is the increasing incidence rates of different disease such as stroke and various cancers. There are lots of nationwide preventive care programs mainly for cancers and also other informative health programs mainly to instruct people for post-stroke, diabetes and generally having a healthy lifestyle because of existing water pollution and inadequate garbage disposal system.

Comparing to the global standards, unfortunately Iran is among the countries with higher risk of road accidents’ fatality. There are many contributing factors to the considerable amount of car crashes in Iran including inadequate services for public transportation, ever-increasing number of private cars, affordable penalty fines, ineffective road bans, huge traffic jams as a result of complicated urban structure specially in the bigger cities.

Another issue is the increasing rate of surgical problems, mainly because of the ongoing trend of beauty surgeries in Iran particularly among the younger generation. This trend, not only demands providing considerable amount of surgical facilities, but also causes many post-surgery side effects which needs to be rectified. Therefore, there are currently many beauty clinics and hospitals that have to continually increase or update their equipment and systems, from laser technologies to clean rooms, in order to minimize the treatments’ risks.

Considering the aforementioned issues in a populous Iran, there are huge demands for updating the infrastructure of the current health care services or constructing new facilities. There are many under construction or new projects for building different sizes hospitals which are mostly announced through tenders from both public and private sectors. Tenders are usually in Persian, and to accomplishing the application processes, and possibly winning them, it is recommended to follow the cases through local networks or benchmark them. There are also various opportunities to reconstruct and renovate the old hospitals, and equip them with newer technologies and accessories. Reportedly, there are many ongoing projects in collaboration with European companies including building 320-beds hospitals in different cities with Austria and construction of a vast Neurosurgery center in Tehran with Germany.

To summarize trends in the health sector of Iran

There are certainly many opportunities in the country, potential of engaging different health service providers particularly from the following sectors:

  • Hospital/health-care/clinic construction
  • Medicinal chemistry and pharmaceutical production
  • Cancer treatment
  • Nanobiotechnology
  • Organ transplants
  • Manufacturing surgical equipment
  • Advanced automotive health technologies
  • Educational health and well-being programs
  • Clean air/Solutions for air pollution
  • Water purification/desalination
  • Garbage disposal systems
  • Waste management
  • Medical tourism
  • Nursing services/daycare

It is undisputedly important to evaluate the market in advance by reviewing the relevant sources. Also, it is highly recommended to participate in the field-specific exhibitions in the country both for advertising the products/services and also having a tactile experience of the differences in business culture trough networking with the locals.

East Consulting’s team of experts are delighted to announce their readiness for supporting the interested businesses during Iran Health 2017, the next important health exhibition in Tehran, May 2017. Please do not hesitate to contact us for more information.

Jonne Pöyhtäri
Managing Director
040 412 3945

Markus Johansson
Sales Director
045 690 1866

Link to Invest in Iran

The blog text was written by Houra Saghafifar.

Petri Sagulin

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2016; a milestone in business relations between Iran and Finland

Year 2016 dawned with uplifting news of eased economical sanctions in Iran, which has been shaded there for many years. Meanwhile two-way business visits between Iran and Europe particularly Scandinavia had been already started. Finland has been among the highlights by beginning with its historically largest delegation visit organized by Team Finland in December 2015. Numerous Finnish business owners from many different sectors including water resource management, waste management, energy efficiency, renewable energy, woodcraft, forestry, health and ICT accompanied minister for Foreign Trade and Development, Ms Lenita Toivakka during the visit.

east consulting lenita toivakka

Photo: https://www.tasnimnews.com/en/media/2015/12/08/938128/tehran-hosts-iran-finland-business-seminar

And this was just a preliminary step for the succeeding frequent business visits between Iran and Finland. Many business events were organized in 2016, mainly through active cooperation of Iran and Finland embassies, internationalization network of Finland, Team Finland, and the chambers of commerce from different provinces of the both countries as collaborative organizers.

The visit of Iran’s minister of foreign affairs, Mr. Javad Zarif, was among the highlights right before the summer season in Finland. The visit was accompanied by a large delegation mostly coming from banking, ICT, health, agriculture, mining, energy, construction and trading. The event started with B2B roundtables, continued by various introductory presentations around current trends of doing business with Iran and finalized by ministerial keynotes. The main focus of negotiations were solving banking/money transferring issues, practical methods for trade financing (guarantees and payments), contemporary possibilities of partnership between Iranian-Finnish traders, finding solutions for accelerating logistics processes and considering the open trade as a new motive for more favorable business collaborations.

business relations between Iran and Finland

Photo: East Consulting

This happening also initiated other similar smaller-scale events, particularly between chambers of commerce from both sides. Autumn 2016 could be considered as the high business season between Iran and Finland with several held events in forms of seminars, workshops and visits aiming for introducing the possibilities of collaboration, following the current trends and facilitating the challenges in between. One of the most notable events was the Iran seminar in Helsinki House of the Estates, organized by Team Finland with the joint contribution of Finnvera and Finpro, August 2016. The event was focused on financing and investments and there were welcoming speeches, addresses and presentations mainly from remarkable names including Finland’s minister for Foreign Trade and Development Kai Mykkänen and ambassadors of Iran and Finland. The seminar was followed by Q&A sessions about practicalities in doing business with Iran, the same day in Helsinki and a week later in Kuopio, in presence of Ambassador Harri Kämäräinen. The latter other important events could be named as delegation visit of Iran’s Zanjan province chamber of commerce organized by south-Savo chamber of commerce and also Sanandaj chamber of commerce visit organized by FinnCham which both were mainly focused on agro-industry and mining.

The climax of Iran and Finland relations has been the phenomenal recent visit of President Sauli Niinistö, in company with high-ranking delegation, to Iran, October 2016. Preluding the national anthem of Finland and welcoming ceremony by the Iranian counterpart, President Hassan Rouhani, was an official launch for the numerous alongside happenings.

business relations between Iran and Finland

Photo: http://yle.fi/uutiset/osasto/selkouutiset/torstai_27102016_radio/9256817

Outcomes of this festivity, apart from the historic authoritative meetings, press conferences and other important occasions, were few signed agreements and memoranda of understanding, with the common theme of enhancing the ties and facilitating the economic relations between two countries. Technology transfer in the fields of energy, health, mining, agriculture, clean-tech, ICT, bio-economy and water/waste management were addressed among the negotiations. In addition, both sides showed a great interest towards launching a direct railway between Tehran and Helsinki, facilitating the cooperative investments and finding solutions for ongoing challenges in banking.

business relations between Iran and Finland

Photos: East Consulting

East Consulting Ltd., not only has been enthusiastically following the news and current trends between Iran and Finland, but also has been actively participating in most of the occasions. In addition to be an inside observer of the held events, East Consulting also collaborated in few events by facilitating the organizer with its services like training and interpreting. Last but not least of the noted events, was a business networking seminar event in Tehran, November 2016, in a joint collaboration between East Consulting Ltd. and Iran Business for Future association, part of ICCIMA (Iran chamber of commerce).

There were introductory remarks from commercial attaché of Finland embassy with the theme of Finnish business culture and opportunities for collaboration. In the following, managing director of East Consulting, Jonne Pöyhtäri, gave a comprehensive presentation about general practicalities of business communication and also possibilities of technological partnership with Finnish companies especially in the fields related to energy, health, water desalination, biotech, and forestry. The session was followed by a speech from an Iranian parliament member and finalized with the Q&A session, which brought many useful discussions to the table. The focuses of final negotiations were on current challenges involved in monetary transactions with Iran and also some issues with logistics particularly on the way of constructing the railway connection to Finland through Azerbaijan.

All the effort of the whole East Consulting team in the year 2016, was for meeting our clients’ expectations, from all over of our covered geographical locations. The spirit of East Consulting team has been created on the basis of multiculturalism, mutual understanding and customer satisfaction. Our biggest wish for the year of 2017 is to overcoming the present challenges on our way to serve our precious customers with the uppermost services possible and being even more insightful agents to them. We wish you all a prosperous year ahead!

The blog text was written by Houra Saghafifar.

Petri Sagulin

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Anastasia Konova joins East Consulting team in St.Petersburg office!

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Anastasia has Master’s degree in the field of Social Studies from Saint-Petersburg State Economic University. She also studied in Finland at Mikkeli University Of Applied Science as a part of Erasmus program.

Prior she worked as purchasing manager and sales department manager at Russian companies involved in international activities. From that experience she got deep knowledge of transborder relations and trade, developed her sales skills and understanding of internationalization processes.

Anastasia is coming from research company Tradepartner with HQ in UK, where she performed market studies and did matchmaking procedures for foreign companies, aiming to enter Russian, CIS and Eastern European market. She led more than 200 business development projects for well-known European manufacturers for example Finnish company NPE Kulpan Oy and Swiss company MPS Swiss and has outstanding references for the made job. She speaks fluent English and basic French.

Elena Baidakova

Operational Director, Russia

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Good old Persia welcomes you

Iran toivottaa tervetulleeksi

Located in the heart of Middle East, big consumer market of 80 million people and being a resource-rich country with strategic geographical connection to Gulf area, East-Asia, Russia and Europe, makes Iran a favorable trading destination. GDP of Iran is around $400bn, which makes it the second largest, economy in the Middle East and 29th globally. Iran is land of great world heritages as Persepolis, Naqsh-e Jahan square and other tremendous historical/touristic attractions. In addition to natural resources, it has a young (50% under 35) and educated population with 5 million enrolled university students – of which 60 % are women – and 800 000 skilled graduates every year.

As of being in economical/political sanctions for many years, Iran has been attempting to persevere independently and expand domestic production. However, in order to return to the global market, especially Europe, the infrastructures and technologies need to be reconditioned in many fields. These improvements could be a unique opportunity especially for European firms to either invest or resume business collaborations. Simultaneously, upgrading of the structures, easing of the sanctions and releasing of Iranian frozen assets is expected to amplify the economy and decline the inflation rate in coming years.

There are various opportunities for financiers such as oil & gas, transportation, petrochemicals, tourism, mining and power generation. Also, there are requirements for building expertise and updating technologies of many industries like welding, aviation, railways, ICT and banking. Additionally, as country has majorly hot climate and is going towards water crisis, there is a huge demand for water resource management and usage of solar energy. Construction sector in Iran also needs to be modernized. There are lots of projects for improving or building expressways, railways, ports, airports, logistic warehouses and hospitals. Hotel construction especially under license of reputed international hotel chains, adds value also to Iran’s tourism industry.

Since there are still conflicts between U.S. and Iran, other countries could be pioneers of re-establishing the business relations. As Iran has been in closer economic ties with Europe, particularly Germany, Italy and France, they could take advantage of their previous relations for leading the future markets in Iran. Many companies in Scandinavia have also showed interest in Iranian market. NICC (Norwegian Iranian Chamber of Commerce) has been opened in 2016 to ease business communications. Sweden also intends to build a trade office in Iran to facilitate business relations.

The Finland-Iran relations have been also showing a significant rise, majorly after the Ms Lenita Toivakka and her accompanying big delegation visit to Tehran in December 2015. Afterwards, there have been some intercultural communications like ‘Four seasons in Finland’ photo exhibition in Tehran organized by Finland’s embassy and unveiling the first Finnish translation of Shahnameh, the world’s longest epic poem written around 1000 years ago by a celebrated Iranian poet, Ferdowsi. Last but not least, Iran’s foreign minister, Mr. Javad Zarif visits Finland in May 2016, with a big business delegation mainly in banking, health, ICT and mining sectors.

Persia welcomes you

Finland’s President Sauli Niinisto and Iranian Foreign Minister Mohammad Javad Zarif and, Switzerland, January 2016, annual meeting of the World Economic Forum. Source: http://myinforms.com/en-me/a/34391450-irans-zarif-to-make-official-visit-to-finland-next-week/.

Likewise every other business, there are also risks and uncertainties for entering to Iran market and money-transfer difficulties seems to make it more challenging. In addition to the existent prevailing competitors, inflation rate, ownership issues and mediocre relations between Iran and U.S. might influence the quality of business communications. However, with respect to the fact of existing trades between Iran and rest of the world particularly Europe, there are solutions to the mentioned risks such as collaborating with local partners/advisors, making finance through financial institutions or LC payment.

Persia welcomes you

Nasima Razmayar Afghan member of the Finnish parliament and Houra Saghafifar, new Iranian member of East Consulting, May 2016

Iran is in the brain-drain top list with approximately annual migration of 150 000 skilled workers and academic elites. Approximately 4 million Iranian immigrants live abroad, mainly in North America and European union and majority of them are university graduates and/or skilled immigrants. This could be taking in to consideration by international companies intending to have business relations with Iran. Since the business culture is majorly based on local networks, skilled Iranian graduates living in the target countries could empower and ease business communications.

Here in East Consulting, we have already started to build our ties with Iranian companies and utilize our services with local knowhow and a professional network inside Iran. In order to facilitate our trials, we have accommodated our team with a skilled local member Houra Saghafifar. We aim to act as a gateway for Finnish companies, investors and organizations that are indeterminate of how to establish their businesses in Iran. Conversely, Iranian firms concerned in expanding their businesses to Europe and more specifically to Scandinavia could benefit from our services. Our team wishes to minimize the risks and provides you with the excellent services based on local expertise. Welcome to Iran!

The blog text was written by Houra Saghafifar.  

Petri Sagulin

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Overview of Baltics

Baltic states attract foreign investors despite their fluctuating economic development. After the countries regained their independence in the early 1990s, all of them suffered an economic crisis, climbed price level and corruption, but after all the Baltics took its place as one of the best performing economies in Europe. However, this upturn was ended by economic crisis in 2008 when the area’s GDP reduced by one fifth. The Baltics recovered from the crisis reasonably fast and each country continues to perform economic growth with the annual real GDP increase between 1.6% – 6.2%.

The future looks bright. According to the International Chamber of Commerce’s (ICC) Open Market Index (OMI) 2015 the Baltic countries were rated #11 (Estonia), #20 (Latvia) and #23 (Lithuania). The report was based on observed trade openness, trade policy, accessibility for foreign direct investment and trade-enabling infrastructure. Furthermore, in April 2016 the World Economic Outlook (WEO) forecasted the annual real GDP percentage in the Baltic countries to become between 2.2% and 3.6% in next two years. WEO is a survey by IMF (International Monetary Fund) staff published twice a year.

ICC Open Market Index 2015

ICC Open Market Index 2015

One of the absolute advantages of the Baltics for business globalization is taxation benefits. With corporate tax level of 15% Latvia and Lithuania perform one of the lowest rates in EU. Moreover, in Lithuania business environment has gone through significant changes within the issues pf property registration and import/export trade conditions to become beneficial for companies considering internationalization. Whereas in Estonia retained earnings are not taxed until profit distributions are made, which gives possibility for profitable business to allocate funds e.g. for growth. In addition to taxation benefits, labor force costs in the Baltic region are much more inexpensive compared to Nordic countries for example. Amongst other things, truly cheap operational labor, its quantity and availability have raised hype in various industries in Lithuania. This can be seen as a great opportunity to set up production for instance.

The Baltic’s specifics and local characteristics should be taken into account. With English and Russian it’s possible to get along even though Estonians are willing to communicate in their mother language. When analyzing cultural aspects, the Baltics can be seen as a diverse area – Estonians, Latvians and Lithuanians generally do not share any common Baltic identity, which can prospectively bring challenges for internationalization process in one go. One thing to be noted is the reactive course of action in Estonia, which will require proactive companies to get used to it.

When reviewing industries in Estonia, IT sector should be highlighted. Praxis research institute forecasted over 4000 vacancies to become available in Estonian IT industry by 2020. This process will be fostered by local startup companies and larger international operators. Industrial production should be noted for Latvia and Lithuania. According to Eurostat’s statistics, industrial production grew by 4.6% in Latvia and by 10.5% in Lithuania compared to previous year with the Lithuania’s growth being the second highest in the EU.

Prevailed consideration of the Baltic region as a challenging market seems to be left behind. Current growth trend has created positive and energetic atmosphere in the Baltics. While Estonia can almost be considered a Scandinavia-like stable area for growth, Latvia’s and Lithuania’s recent advance provides excellent chance to establish in the region. The Baltics should definitely be regarded as an opportunity in the Eastern Europe.


If you are interested in business opportunities in Baltic markets, please contact

Suvi Metsola, suvi.metsola@eastconsulting.fi, +358 40 731 0223

Petri Sagulin

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