Finnish Firm Leaves, Citing Import Duties

Finnish electronics manufacturer Elcoteq is selling off its Russia operation, because high import duties on high-tech components have made working in the country unprofitable, the company said Tuesday.

Elcoteq, which offers outsourced production of electronic parts for communication technology, has struck a deal with Singaporean firm Flextronics to hand over its 550-person St. Petersburg plant.

The sell-off highlights the problems faced by firms attempting to manufacture high-tech products in Russia, Elcoteq CFO Mikko Puolakka said Tuesday by telephone from Finland.

"The problem is that it is cheaper to import ready-made goods into the country than the components," Puolakka said.

The value of the deal has not been released, but Elcoteq said it expected to book a one-off 3 million euro ($4.4 million) profit for its second-quarter results.

Although St. Petersburg, with its abundance of skilled labor, is in theory perfectly suited for manufacturing high-tech products, the high tariffs have made business unfeasible, Puolakka said.

And despite rumors that the unfavorable import duties could be slashed, nothing concrete has yet materialized.

"We have not seen any changes, and if the changes were to come it would take some time," Puolakka said.

Elcoteq moved to Russia in 1997 and opened its current plant in St. Petersburg in 2005. The company has facilities in Europe, China, India, Brazil and Mexico.