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Monday, January 23, 2006

Foreigners in Moscow

MOSCOW. (RIA Novosti economic commentator Vasily Zubkov.) - There is no doubt that there are more Europeans living in Moscow permanently or temporarily than in any other Russian city. Over 150 embassies, thousands of missions and companies from all over the world are based here. Foreign businessmen join clubs and associations, such as the American Chamber of Commerce (with more than 700 members, and not only Americans), the Russian-British Chamber of Commerce, Le Club France with hundreds of French businessmen, and the Union of the German Economy. Moscow is also home to international business organizations, such as the Association of European Business in Russia, the International Chamber of Commerce, and the International Association of Business Communications, etc. It is clear why more than 90% of foreign businessmen have chosen Moscow as their base in Russia. All central government bodies are located in Moscow. Some seven percent (13% if we count the Moscow Region) of Russia's population lives in Moscow. The city accounts for 20% of the nation's GDP and for over 30% of its retail trade. Small and medium businesses play a vital role in urban trade and services. Last year, Moscow's budget exceeded $16 billion. It accounts for the lion's share of the nation's business and about 80% of its capital. The urban economy is growing at a rate of more than 10% a year. Last year, Moscow's GRP went up by more than 20%, a record figure in history. Significantly, the growth of the real economic sector was 18%. In tentative estimate, Russia's GDP increased by 6.4% in 2005. The official unemployment rate is less than one percent. Salaries and wages are far higher in Moscow than in the rest of the country. In experts' estimate, the average annual per capita income is close to $8,000, or 250% more than in other Russian regions. Salaries are growing in both the private and the public sector. The latter represents a huge army of doctors, teachers and government employees. Moscow provides considerable financial benefits for pensioners and low-income residents by giving them various social allowances. The city spends 40% of the budget on social support. To finish the picture, there are 130 cell phones for 100 Muscovites. Is Moscow a comfortable place for foreigners? It certainly gives them a host of opportunities to establish business contacts: every Russian region has its mission in Moscow, and all big and medium provincial companies have affiliates in the capital. Moscow has a well-developed transport infrastructure and communications, an advanced financial network, which includes also major foreign banks, such as the French Societe General and the Austrian Raiffeisen Bank. Construction is making steady headway. In 2004, the Urban Land Institute (an international organization which studies the real estate market) named Moscow the most attractive city in Europe for real estate investment. A year ago some 3.4 million square meters of high quality office space were offered for rent or sale. The city and region are the biggest agglomeration in Europe. More than 40,000 jobs were created there last year. Moscow is one of the few places in Russia with positive demographic trends - the birth rate is ahead of the mortality rate. It has enough schools for foreign children - seven affiliates of the British School, which is attended by some 1,500 children from 60 countries, the French School, to name but a few. The class of world level consumers is growing in Moscow at an impressive pace. The flat rate of income tax at 13% and the still low cost of utilities allow the Moscow elite to spend almost two thirds of their income as they see fit - a luxury in industrialized countries, where more than half of the earnings can be eaten up by taxes alone. Whole districts and villages for the wealthy have been built in the suburbs of Moscow. For all its positive features, Moscow is among the world's three most expensive cities. On the positive side, Moscow has truly unlimited reserves of experts in all walks of life. Compared to other Russians, Muscovites are very dynamic and intelligent. They know full well the advantages of speaking other languages. A number of big recruitment agencies select qualified personnel for foreign companies. Information on vacancies is published in foreign language press. Salaries are the main incentive for 55% of local experts, followed by possibilities of promotion and career growth. As distinct from non-residents, Muscovites are much less interested in running companies they work for. Indicatively, foreign companies are gradually giving up "local staff tariffs," which are supposed to on the same level as the average local salaries. Gerard Lutique, Danone development director, who has worked in Russia for 12 years, believes that if a company pays a salary in rubles, it can expect its employees to spend their days in the office. But if it wants people to work, it should pay a handsome salary in dollars. Roger Pouliquen, head of a TACIS project in Russia, shares this opinion. He thinks that to achieve results Russian professionals should be paid as much as their European counterparts with the same qualifications. The times when companies paid salaries in envelopes are gone. Now all salaries, even very big ones, are legal and subject to tax.

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