Newsroom / News / Media / Info Magazine LGP NEWS 01/2022 / Strategic networking and investments abroad

Strategic networking and investments abroad

Strategic networking and investments abroad

The Russian Federation’s exceptional economic upswing, which began in 2002, led to a strong revival of foreign trade relations with the EU and naturally also with Austria, with a brief interruption in 2008/2009. 

Hardly any company – whether in trade, industry or agriculture - did not make an attempt to go into business with Russian companies. The result is that the EU continues to be Russia’s largest trading partner, accounting for around 50% of foreign trade. In 2012 Austria achieved its largest foreign trade volume to date with Russia, amounting to 7.5 billion euros. Russia thus ranks 9th in Austria’s foreign trade statistics. There was enormous direct investment on both sides over the course of this welcome development, which only began to level off from around 2016. 

The inflow of foreign capital was facilitated and driven on the Russian side by generous tax and fiscal policy measures. Real competition began among the regions as to who could provide the most favourable conditions for investors. The governors of the individual members of the Federation went on road shows throughout Europe to promote direct investment in Russia. It was successful. According to the Austrian Federal Economic Chamber, total foreign direct investment in Russia amounted to USD 406 billion at the end of March 2021, up 19% year-on-year. 

As of 2020, Austrian direct investment in Russia amounted to 4.6 billion euros. By far the largest share was invested in large industrial enterprises in the wood, paper/ cellulose, building materials, plastic and chemical sectors. In the opposite direction, the huge sum of 24.5 billion euros was sent into Austria by Russian investors according to the Austrian National Bank. Real estate was the primary focus of the investments, which is why unfortunately no employment or value-added benefits were generated. This is exactly where our experts from Lansky, Ganzger, Goeth, Frankl + Partner want to start strategically: in addition to Russia, the remit of our Senior Expert Counsel Dietmar Fellner extends across Belarus, Armenia and Azerbaijan to the five Central Asian states. 

The establishment of an extensive network with politics, public business and private entrepreneurship is a prerequisite for the success of his projects. The central authorities, such as ministries, business associations (TPP, RSPP, “Opora”, etc.) and private business associations in Moscow played a decisive role in creating an excellent bilateral business atmosphere, which was continuously expanded by countless official delegations travelling between Russia and Austria. Additionally, Dietmar Fellner organised annual “business missions” for Austrian companies to the regions of Russia and neighbouring countries. In this way, all new business leads from Kaliningrad to Vladivostok, from Murmansk to Nalchik, were tracked down. Contact with the governors and the regional associations provided important drivers for the success of the Austrian export industry and investors. At the same time, there was a growing understanding of cultural differences and specific features of the CIS region. 

Our current consulting focus is on identifying new business potential for companies from the CIS region in Europe, particularly in Austria, but also in Slovakia and North Macedonia. Capital from investors from Russia and other CIS countries is to be channelled in a targeted manner into future-oriented, promising and secure companies in Austria. The selection of such companies and the necessary legal assistance is an important task which is fulfilled professionally and confidentially by LGP. After all, investments in the real economy create added value for all parties involved, which will be particularly positive and lucrative in the anticipated post-pandemic economic upswing. 

While real estate in the form of apartments and land is subject to continuous price increases and is likely to reach a peak in achievable returns in the medium term, well-equipped companies can be bought cheaply in the near future, either outright or in the form of equity investments. There are also excellent opportunities for direct investments in Slovakia and North Macedonia, supported by the experts of LGP’s offices in Bratislava and Skopje. 

The LGP Office in North Macedonia, headed by Arlind Zeqiri, serves as a partner in the Balkans for investors and as the first point of contact for companies based there that want to do business in Central Europe. For foreign investors, the Balkan markets are of great strategic interest. North Macedonia has set ambitious goals to intensify direct investments, especially now that the political situation in the region has stabilised. It is vital to continue to take advantage of this positive trend and to ensure clear and attractive conditions for investors. 

Foreign trade activity between North Macedonia and Russia has increased noticeably in recent years. Experts expect further growth in the trade of medicines and fruits and vegetables from North Macedonia to Russia, as well as metal and oil and gas from Russia to North Macedonia. Our colleagues in Skopje have detailed knowledge of the political and economic background of the entire Balkan region, which can be a great help for our customers and partners from the CIS countries in developing project strategies. 

LGP’s office in Slovakia, headed by Martin Jacko, has long been an important fixture in LGP’s structure. Slovakia as a destination country for investors from Russian-speaking countries has great potential thanks to its central geographical location and its cultural and economic wealth. This is easily illustrated by an overview of trade and economic activity between Slovakia and Russia. Companies from both countries have a presence in the other and export-import ratios have been increasing for years. 

This lively foreign trade activity has been promoted by both sides, enabling 13 agreements between the governments of the two countries to be concluded in recent years. Several business missions from Slovakia to Russia have been organised recently, for example in the energy, metallurgy, agriculture and finance sectors. 

LGP thus offers full-service packages as an investment broker in Northern Macedonia and Slovakia, supports transactions and brings project developers and investors together. There is a mood of economic optimism in both countries, which should now be exploited. 

Russian language skills and understanding the cultural and economic needs of investors from the CIS countries are of great importance as well. Investments are also legally secured due to the outstanding connections that LGP offices have with the relevant decision-makers. 


AUTHORS:

Dr. Dietmar Fellner, Senior Expert Counsel at LGP
Anna Schumann, LL.M., Senior Legal Adviser at LGP

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