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. Last Updated: 07/27/2016

Germans Give Small Business a Moscow Home

MTGerman Ambassador to Russia Hans-Friedrich von Ploetz holding a spade at the groundbreaking ceremony Tuesday.
To the sounds of a saxophone and an Orthodox Church choir, German government and business officials took part in a groundbreaking ceremony Tuesday on Leninsky Prospekt in southern Moscow for a small and medium-sized business center.

Germany Economics and Labor Secretary of State Rezzo Schlauch, together with the country's ambassador to Russia, Hans-Friedrich von Ploetz, announced that REF, a venture by real estate developers Raiffessen Evolution and Raimund Forster, would finance the 50 million euro ($67 million) German House of Small- and Medium-Sized Business, which will be a center for Russian and German SMEs on completion in 2007.

The center, located close to a German-language school, kindergarten and housing complex built for expatriate Germans living in the city, will cater to German SMEs setting up in Russia and Russian SMEs, the officials said.

"This project is testimony to the fact that German and Russian economic and trade relations have reached a whole new level," Schlauch said. "This means that many small and medium-sized enterprises are planning to come or have already come to Russia."

The ceremony was part of this week's German Business Association's 10th anniversary celebrations, which also include Friday's Russia-Germany Investment Opportunities Conference in Moscow.

The business association now represents just under 500 companies, mostly German, as well as their local representative offices and subsidiaries. It recently began accepting Russian businesses as members. About 160 new members have joined the association since 2003, said Andrea Von Knoop, the head of the association.

Two other organizations, the Berlin-based German Chamber of Industry and Commerce, or DIHK, which has been in Moscow since 1993, and the Information Center for the German Economy, established last year, represent German business interests in Russia. Together with the German Business Association, DIHK, which Von Knoop also leads, plans to establish a Russian-German Chamber of Commerce.

The ceremony came a day after President Vladimir Putin lambasted federal and regional government officials, accusing them of doing too little to help the development of small and medium-sized enterprises in the country.

With bilateral trade of 31.3 billion euros ($42 billion) last year, Germany is Russia's largest trading partner and the fourth-largest direct investor into the country. In 2004, Germany exported 15 billion euros' worth of goods into Russia, and imported goods from Russia worth 16.2 billion euros ($22 billion), according to the German Business Association.

Hermann Schmitt, head of the German focus group of White & Case's Moscow office, said that of the four most promising markets for German business -- Brazil, India, China and Russia -- Russia was closest to Germany "in geography and in all other respects as well."

Von Knoop said that many German businesses were poised to move from "probing" the Russian market to a bigger commitment. "Before, Germany's small and medium enterprises only said that Russia was the market of the future. Today this is a reality," she said.

Civil engineer Sonja Thies' company, Thost, a Pforzheim, Germany-based project management business, is one of those considering taking the plunge into Russia. After Thost recently secured a contract to help build a chocolate factory for Ritter Sport in the Moscow region town of Chekhov, the company has been mulling whether to open a representative office in Moscow.

So far Thies said her time in Russia had been fun, if confusing. "More transparency would be helpful," she said.

"It may be a German thing, but back home we have books for everything that explain how to do this or that. Here it's unclear how to set up an office," Thies said, adding that her experience in Chekhov was adding to the confusion. "They first say you need these documents, and three months later it's the other way around."

She said Thost may try opening an office for a trial period of six months or a year. "Then we'll see," she said. "If it doesn't work out, we'll say goodbye."

Jean-Louis Vincent, a Moscow-based representative for Rohde & Schwarz, a German producer of testing and measuring equipment, as well as communications devices, said his company came to Russia 10 years ago, but registered a local subsidiary only in January. "Bavarians are careful," he said. "It's not so much about corruption. It's just that you don't know the exact procedures, which change all the time."