- By Elmira Alieva
- Jun. 18 2010 00:00
One of the keys to economic growth, technological development ensures that an economy remains competitive. However, upgrading production quality and practices is impossible without the know-how. With over 400 subsidiaries or representative offices in Russia, French firms are playing a key role in providing both.
"We are currently working in 70 countries, but in Russia we have a special approach based on partnership. This is the most effective way to achieve efficiency," said Patrick Pascal, president of Alstom Russia.
The French conglomerate has been working for several years to build a strong relationship with Transmashholding or TMH, Russia's largest locomotive and rolling stock producer. In March 2010 during Dmitry Medvedev's state visit to France, Alstom and TMH signed an agreement to sell Alstom a 25-percent stake in TMH. "We bought shares, not because we wanted to gain control over a foreign company," Pascal explained, "but because this way we can develop joint manufacturing of new products, adapted for the Russian market."
Cooperation between French and Russian companies extends far beyond the simple division of profits. Innovation is both one of the Russian president's key focuses for economic recovery and a major topic for discussion at this year's St. Petersburg International Economic Forum, and French companies have become firmly established providers of technological expertise in Russia.
In return for eased access, numerous French companies, attracted by the immensity of Russia's markets, are sharing their advances with local firms. These include the introduction of new technologies in a range of sectors, particularly aerospace, energy, nano- and biotechnology, IT, and pharmaceuticals. Beyond pure technological advances, Russia is also benefiting from the skills and practices that French firms are sharing. But the knowledge flow is not simply one-way.
In return for eased access, numerous French companies, attracted by the immensity of Russia's markets, are sharing their advances with local firms.
Alstom and TMH have created a unified engineering center for the development of railroad technology. For TMH it is an opportunity to gain access to French high-tech knowledge, but for Alstom the deal gives the company access to orders from Russian Railways. In addition, according to Alstom representatives, the company is also interested in know-how from TMH, which is experienced in working in Russia and familiar with state standards and the specifics of the Russian railways.
French innovation in constructing high-speed trains is particularly pressing at the moment for Russia, which is set for serious and costly modernization of its rolling stock. Three years ago, Alstom received an order for four trains to run on the St. Petersburg-Helsinki route. Today the company is seeking an order for trains for the future high-speed line between St. Petersburg and Moscow, although this still remains in the planning stage. "Imagine what it will mean for the economy, if the train between Moscow and St. Petersburg takes only 2.5 hours. Experts believe that this will be one of the most profitable railways in the world," Pascal said.
Beyond transport technologies, Alstom is introducing its advances in energy technologies in Russia. The company is the general contractor on the construction of the TPP-26 heat and power plant near Moscow, which is set to become Russia's most efficient combined-cycle power plant. What is more, the company has also established a joint venture with state-controlled nuclear-equipment producer Atomenergomash, which has received a license to manufacture Arabelle half-speed turbines and high-power generators for Russian nuclear power plants. This joint venture is the first enterprise of this level to receive the latest Western technology in post-Soviet history.
French firms are present in high-level partnerships in other sectors key for the state. Total signed its first joint project with a Russian company back in 1991. To date, the company is the leading French investor in Russia. "One of the key strengths is that according to its policy, Total adheres to a principle of maximum local content on its projects, this implies the active participation of Russian contractors and professionals working on our projects, the transfer of technology and skills to local industry," said Pierre Nerguararian, general director of Total E&P Russie. "This is a basic condition to modernize and increase the competitiveness of local industry."
The list of mutually beneficial joint Franco-Russian projects in innovation, scientific and technology cooperation is long. These range from the construction of a section of the Moscow-Petersburg highway, a joint project between Vinci and the Federal Road Agency, Rosavtodor, to Thales and Snecma's technology that was used to create the Sukhoi Superjet 100 aircraft.
All this is not to say French companies cannot make it on their own in the Russian market. Orange Business Services, a trademark of France Telecom for the corporate market, appeared in Russia in 2006. Their autonomy does not stop the company benefiting business in Russia.
"Russia is getting all the benefits from our global presence," said Christophe Joanblanq, CEO of Orange Business Services in Russia and CIS. "Implementing our innovative products and solutions is making revolutionary changes in business processes, defining the activities of companies in terms of acceleration, efficiency and — as a result — productivity."
The company's global presence and experience in the local market is increasing efficiency for Russian businesses and the economy as a whole. Orange Business Services has been designed to facilitate the functioning of not only large Russian and international companies but also medium and small businesses. While the company's Smart IVR allows large corporations to handle high call volumes without a serious investment, Easy Office helps to organize telephone and Internet communication for small offices without the cost of the PBX and the Ethernet-switch.
Dassault Systemes also uses a partnership model for its work in Russia. Since entering the Russian market, the company has implemented numerous projects, both in its traditional spheres of work, such as aircraft and auto construction, energy and construction, as well as in areas such as packaging and consumer products.
"The Russian market is attractive, primarily as a result of the scale of ongoing projects," said Laurent Valroff, Dassault Systemes' director in Russia and CIS. For the company, cooperation is a two-way process. "The experience we have gained through cooperation with the Russian aviation equipment manufacturers we successfully applied in other industries."
The solutions that Dassault Systemes offers provide the usual range of advantages of involving external specialists. "The application by industrial enterprises of innovative technologies enables them to reduce costs, time to market and significantly improve their quality," said Valroff. As with various forms of cooperation, they have the added advantage for Russian firms of gaining recognition from international standards bodies. "Compliance with international standards makes any product, whether it be a car, plane or mobile phone, more popular not only domestically but also in the global market," Valroff added.
Working with Russian firms to meet international standards provides both sides with advantages, but the country's wealth of scientific skills is also aiding French firms in Russia. In 2004, Sanofi-Aventis, a French healthcare corporation investing in Russian production, created a clinical development department in Russia — one of the largest in the country. "We work with 500 research centers throughout the country. In cooperation with leading Russian scientists we are conducting multicenter studies, involving more than 7,000 patients," said Tatyana Galkova, director of communications at Sanofi-Aventis in Russia.
The company is involved in production as well as research in Russia. In April 2010 Sanofi-Aventis acquired a controlling stake in Bioton Vostok, a modern insulin production plant in the Oryol region. "We are injecting the Russian market with innovative technologies," Galkova said.
The company also plans to participate in the Farmpolis project, a Russian government initiative, aimed at localizing the production of innovative medicines, attracting high-tech platforms and providing sufficient resources for developing business and an extensive supply network. The plant is set to be part of a pilot scheme.
Since 2002, following the recommendations of the Franco-Russian Committee on Science and Technology, France and Russia have established a mechanism to encourage innovation. "Our goal is to promote partnerships between French and Russian research and development that have commercial potential," said Nicolas Quenez, a consultant on technological cooperation at the French Embassy in Russia. "The policy of cooperation is taking new forms, and we are working with FASIE and OSEO, as well as French and Russian ministries.
The policy brings together support from the OSEO, a French agency supporting innovation and small and medium-sized businesses in France and its Russian equivalent, the Foundation to support small businesses in science and technology. The FASIE in turn supports the Franco-Russian network of centers for technology transfer, whose aim is to promote Franco-Russian technology partnership for small and medium-sized enterprises, by creating an online database of proposals and requests and maintaining a network of support contacts. Over the last seven years the network has disseminated more than 500 technology proposals and requests.
"There are already examples where small businesses have started to implement joint projects," said Anton Yanovsky, a board member of RTTN, the Russian Technology Transfer Network. "And the producer of a particular technology is not necessarily France. There are many examples of Russian researchers and companies developing technologies in the field of nanotechnology and biotechnology, but they are not implemented in Russia because there are no major industries that could absorb such innovations, whereas in Europe there are such industries."
"On the other hand, Rusnano periodically discusses the fact that all our development institutions have a shortage of projects," Yanovsky said. "One way to remove this deficit is to try to study and transfer European experience and offer foreign companies the chance to set up joint venture opportunities through localization in Russia, providing them with access to the Russian market. To work all this needs the right professional infrastructure to support this activity. "
It is not only Russia's rapid growth and market size that attract French companies. The country's manpower also plays a role. "Quite a lot of highly skilled Russians are employed in French enterprises in Russia," said Mikhail Zhukov, general director of HeadHunter. "A distinctive feature of the French employers in Russia is their desire to transfer knowledge to Russian colleagues, limited only at the top of a firm or in a number of key positions that need to be filled directly from France, " Zhukov said.
Representatives of major French companies in Russia agree that they are satisfied with the level of education and skills of Russian professionals. For many international companies maintaining a balance between the majority of Russian staff with good knowledge of local markets and foreign employees who have different experiences and practices is key.
"It is a balance — the Russians are generally more effective on the local market, while the presence of French managers allows you to maintain a specific corporate environment and monitor the implementation of key decisions from headquarters," said Stanislav Smetana, senior consultant at Consort Group.
"The issue of hiring a Russian or French specialist is ambiguous, it all depends on the scope and the industry," said Maxim Kaurov, director at Staffwell. "Salaries of Russian managers are not inferior to Europeans' and often they are higher."
"In Moscow it is often cheaper to attract Europeans than a Muscovite," said Yury Mikhailov, managing partner of Consort Petersburg. "Although, of course, an employee that the company has brought from France will be much more expensive, given the additional costs of being an expat in Russia."
For the Russians the main attraction of the French employers is that they hire production and technological personnel from industries that are not in a good wage position in Russia, such as electronics, industrial automation systems and car and aircraft manufacturing. "For really highly skilled Russians, working for French companies is a rare and attractive opportunity to receive proper compensation and to learn new technologies in their profession," said Zhukov. "French employers are aggressively focused on the transfer of knowledge and values to Russian personnel — from production personnel to senior managers, spending probably more than representatives of all the Western countries for training and development of their staff. This is a clever policy, aimed at long-term growth."