By Publisher Lee Kyung-sik, Editors Kim Hyung-dae, Ms. Joy Cho
Among the areas where Korean companies are most wanted in the Russian Federation are international production, development of industrial capacity, construction and regional infrastruec projects. This was disclosed by Trade Representative at a recent interview with Alexander Masaltsev of the Russian Federation in Seoul. Exerpts from the interview follow:
Question: What are the specific areas where you might want Korean companies to invest in your country?
Answer: Attractive for South Korean investors may be participating in projects based on international production cooperation - the development of industrial capacities, construction and regional infrastructure projects. Important areas of investment cooperation are petrochemicals and gas chemistry, timber processing, the pulp and paper industry, fish and seafood processing. The Russian-Korean cooperation in the peaceful use of atomic energy has good prospects, too.
As for the specific project that could interest South Korean investors, I would like to mention the ambitious project of the Korean Industrial Park on the territory of the Far East. It is expected that the volume of investments in the project will be over $ 170 million. The Agreement between the Agency for Investment Attraction and Export Support and the Korean LH Corporation was signed as part of the implementation stages of the project. This initiative is the part of the “nine bridges cooperation” strategy.
Q: Business companies of Korea and Russia greatly contribute to the promotion of economic cooperation between the two countries. Who are the Korean companies most actively contributing to the economic cooperation between the two countries?
A: Currently, there are world-famous South Korean companies operating in Russia, recognized for the high quality and affordable prices of their products. The company "LG Electronics" located in the Moscow region successfully operates and continues to implement the program of development and improvement of product
on. The opening ceremony of the new production and storage complex took place in 2019. The volume of investments to the construction is more than $ 25 million.
In February 2020, the manufacturer of instant products of LLC "Doshirak-Ryazan" announced a strategy of further development of production, involving investments of $ 20 million in modernization of the plant and creation of 100 new workers. Company’s plans are to launch an additional line for the production of instant noodles and construction of a warehouse of finished products.
Perhaps one of the most famous brands of South Korea in Russia the company "Hyundai Motor." Earlier this year, the 2-million car was produced at the site of the Russian company Hyundai, located in St. Petersburg. It is gratifying that the management of the South Korean company announced the construction of the plant for the production of engines. It is expected that the volume of investments in the project will amount to $ 170 million. The planned volume of production - 233 thousand pieces per year, at the same time more than 20% of products will be allocated for export.
Q: Who are the Russian companies most actively contributing to the economic cooperation between the two countries?
A: One of the good examples of long-term business partnership between our countries is successful work in the South Korean market of the world-famous Russian company Gazprom. In 2016, Gazprom and the Korean Gas Corporation (KOGAS) signed a cooperation agreement providing for LNG production, transportation and regasification projects. In addition, the main directions of further bilateral cooperation in the fields of scientific and technical cooperation, energy-saving, ecology and production of gas-powered fuel were defined.
One of the largest automakers of Russia "Autotor Holding" made a great contribution to the development of bilateral economic ties. Autotor’s collaboration with South Korean manufacturer Hyundai Motor began in 2011 with the launch of a pilot truck production. Since the beginning of the project, more than 100 thousand commercial and passenger Hyundai cars have been already produced at Autotor. At present, the joint project Atotor-Hyundai continues to develop cooperation, aimed at expanding of the model range, increasing the volume of production, deepening the technology of production and localization of components.
In 2016 the "Russian Helicopters" company signed a memorandum of understanding with the South Korean company "RH Focus Corp". According to the MOUI Korean partners got right to carry out the full range of after-sales services of Russian helicopters in the Republic of Korea, holds a strong position in the market of the Republic of Korea. In 2019, Russian Helicopters took part in the ADEX International Aerospace Exhibition in Seoul, demonstrating their technique at the official dealer’s stand for the first time. South Korea has the largest foreign fleet of Russian Ka-32 helicopters, which already earned the reputation as reliable vehicles.
Q: Does your country offer any incentives to the good Korean companies wishing to invest in your country? Please specify such offers?
A: In my opinion, the expansion of bilateral ties could be facilitated by the implementation of joint large-scale investment projects in the regions of Siberia and the Far East of Russia. The creation of new industries with the active use of advantages for foreign business within the areas of advanced development (ADT) and the Free Port of Vladivostok (FPV). In particular, today a preferential tax regime provided for residents of the ADT. The income tax for residents is 0-5% for the first 5 years, the next 5 years the tax is set at 10%. For large projects, there are delays in applying this benefit in case if they do not receive a profit several years after receiving the status (but not more than 9 years). There are also privileges on other taxes, such as benefits for insurance contributions at the level of 7.6% for 10 years, 0 tax rate on land and property for 5 years, and a reduced coefficient is applied for mining operations - 0-0, 8 for 10 years, and then coefficient 1 is applied.
In addition, residents of the ADT and FPV, as well as a free customs zone regime provide an accelerated VAT refund for the export of products for residents.
Q: What are the main Russian products/services desired to be introduced and exported by Korea?
A: According to authoritative experts, the coronavirus pandemic COVID-19 made serious adjustments to the international export structure. These changes did not bypass the Russian Federation as well. Thus, the Russian forest industry complex has the potential to increase export production. There is an increased demand for packaging paper and cardboard. It is also possible to predict the increase of the volume of supplies for the agro-industrial complex. At the same time, it is about demand for the whole line of food products, mainly for cereals, fodders, and vegetable oils. There is also the increase of requests for the supply of ethyl alcohol. In the case of epidemiological situation, the additional demand for polymer packaging has re-emerged, despite the trend for environmental packaging replacement before the epidemic. In addition, there is a growing demand for protective clothing made of polymers and rubber, as well as detergents and surfactants. According to the Trade Representation of the Russian Federation, the structure of Russian imports from the Republic of Korea will continue to be formed by high-tech equipment, vehicles and products of the chemical industry.
Q: Do you seek any Korean companies to invest in your country?
A: In this area of cooperation, it is still not possible to achieve good results in relation to the interests and capacities of the two countries. According to the Export-Import Bank of Korea, the inflow of foreign direct investment to Russia from the Republic of Korea in 2019 amounted to US$99.8 million, increased by 5.8% compared to last year. Unfortunately, the investments of each country do not play a significant role and practically do not stimulate the dynamic development of economies. In this regard, the Russian side attaches particular importance to the preparation of a Free Trade Agreement in the service and investment segments between the Russian Federation and the Republic of Korea. It should be noted that in 2020 the work in this direction was not interrupted even in the context of the global pandemic of the COVID-19. In terms of concrete examples of possible investments of South Korean business to Russia, I can mention a promising project of Webgate Inc company related with the localization of high-tech products on the territory of St. Petersburg Technopark. South Korean company Onnuriplan Co., Ltd is also interested in investing to the construction of the industrial masks production factory on the territory of Russia.
Please introduce in detail the activities of the Russian Trade representation in Korea?
A: The Trade Representation of the Russian Federation in the Republic of Korea is the State body that ensures the dynamic development of mutually beneficial trade and economic relations between our countries. It should be recalled that in accordance with the Decree of the President of the Russian Federation Vladimir Putin of May 15, 2018, Russian Trade representatives were transferred from the Ministry of Economic Development of the Russian Federation to the Ministry of Industry and Trade of the Russian Federation. This decision was made in order to increase the competence of Russian Trade representatives in the field of foreign trade assistance, integrating into the unified system of institutions of the Russian export promotion. In this regard, the Russian Trade Representation in the Republic of Korea considers its priority task to increase non-oil, non-energy exports, focusing on support of industrial enterprises of the Russian Federation. The Trade Representation of Russia seeks to promote cooperation between our countries, looking for new directions in the field of trade cooperation to help Russian exporters searching for business partners in the Republic of Korea, and South Korean businessmen searching for reliable counterparties in Russia.
Q: Who is your government minister in charge of international trade and commerce with countries such as Korea? Please elaborate on the minister and provide us with a copy of his picture for publication?
A: H.E. Mr. Denis MANTUROV - Minister of Industry and Trade of the Russian Federation. Professional activity:
1998 – Deputy General Director at Ulan-Ude Aviation Plant
2000 – Commercial Director of Mil Moscow Helicopter Plant
2001 – Deputy Chairman of State Investment Corporation (Gosinkor)
2003 – General Director of OPK Oboronprom
2007 – Deputy Minister of Industry and Energy of the Russian Federation
2008 – Deputy Minister of Industry and Trade of the Russian Federation
2012 – appointed Minister of Industry and Trade of the Russian Federation
Q: Please introduce yourself in detail as you are relatively new in Korea.
A: It so happens that my life has been inextricably linked to the Republic of Korea for more than twenty years. Having graduated from the Faculty of Oriental Studies of Khabarovsk State Humanitarian University in 1998, I worked for almost 10 years in the Government of Khabarovsk territory, coordinating international cooperation of the region with the Republic of Korea. In 2010-2012, I received my first experience in the Russian Trade Representatives system, being responsible as a consultant for interregional cooperation between our countries. After that, my professional career continued as the Head of the Department of International Cooperation in the Ministry of the Russian Federation for the Development of the Far East. In 2014, I returned to the Republic of Korea, being in charge of the economic direction at the Embassy of the Russian Federation for five years. In 2019 I was appointed as Deputy Trade Representative, and a year later on February 20, 2020 according to the Order of the Government of the Russian Federation I was appointed as the Trade Representative of the Russian Federation in the Republic of Korea.