Opening address of Mr Kimmo Sasi in th international symposium "Construction in Russia today, 15 March 2000
Minister for Foreign Trade, Finland

Ladies and Gentlemen,

Construction is an essential part of all industrial and economic activities as well as of the utilisation of natural resources. Though building and construction in Russia is down at the moment, there are great needs for construction and investments. When the economic recovery in Russia restarts, and as we can see it is slowly restarting, it will cumulate in construction, and Russian as well as Western building and construction companies have to have operation models and plans ready in order to activate their business in Russia.

The trade between Finland and Russia grew dramatically after a few faltering years short after the break-up of the Soviet Union. Between 1995 and 1997, Finnish exports to Russia grew by more than 30%. This favourable trend in the Finnish export to Russia was cut by the collapse of the rouble in August 1998, an event that is very familiar to all of us here. During the last months of 1998, the Finnish export to Russia fell to half of the value of the export in the previous year. The effects of the devaluation of the rouble are seen in the Finnish exports to Russia in 1999. During January-November, Finnish exports declined by 35% from year to year, but a slight growth has been discovered towards the end of the year. Meanwhile, the import from Russia has grown by 12%.

According to preliminary information, the Russian GDP growth last year was more rapid than earlier anticipated. However, the effects of the recession are still noticeable as the level of GDP is still below that of late 1997. The growth comes mainly from industry. The boom in fixed investments lets us still wait for it, as the pick-up last year was only 1% higher than in 1998. Hopefully, we don't have to wait longer than till next month. The direction of the economic policy that the new president and the new government will choose is crucial as well as the co-operation between the new president and the Duma. They should create, and I sincerely believe they will, a fruitful environment for investments.

Regardless of the sometimes pessimistic economic prospects in Russia and the slow prospects for growth in the Finnish export, Finnish building and construction companies have a lot of perseverance when operating on the Russian market. It is estimated that there are around 120 Finnish building and construction companies operating in Russia, mainly in Moscow and St. Petersburg but also to an increasing extent in other main growth areas of the country. The economic crisis in Russia impeded temporarily the Finnish export of building materials, but a slight recovery began quite soon after the setback. Russia is regardless of its economic problems one of our most important export targets. The export of building materials has continued its slight recovery during last year. The low exchange rate of the rouble has promoted the transfer of various manufacturing processes to Russia and so have also several Finnish building material manufacturers. The Finnish project export wasn't affected in 1998, but in 1999 the project export is estimated to remain substantially below the normal level of FIM 2 billion, which has been the trend since 1994. Finnish construction planning exports have mainly been a part of project exports. Traditionally, Russia has top know-how in construction planning and design, and foreign actors can bring added value in the field of heating, plumbing, ventilation and electrical installation.

In the long run, Russia will still be the most important market area for the Finnish building and construction industry. Because of its historical background and geographical location, Finland has good chances to manage on the Russian construction market also in the future. Finnish building material manufacturers, constructors, construction planners and designers have a lot of expertise in doing business in Russia. They have construction know-how in arctic construction and they can take into consideration the requirements of arctic conditions for the whole nature. Finns also have plenty of experience of the Russian culture and administration and a lot of knowledge of their construction norms and legislation. Finnish building and construction specialists are among the best Western specialists, I dare assume the best, to operate at the concrete level in construction sites in Russia.

Even though the operational environment will remain unsteady, operating on the Russian market should be continued and also encouraged. During the 1990's, the priority of the Finnish government has been to promote the Finnish building and construction industry in Russia. Since 1993, the Working Group on Building and Construction of the Finnish-Russian Science and Technology Commission has been, in co-operation with its Russian partner Gostroi, pursuing to foster the market access of companies in the fields where they have difficulties in coming through themselves. Certification in the construction sector, licensing, land use, regional planning, real estate management and renovation have played the key role in the co-operation. The Ministry of Trade and Industry together with the Ministry of Environment has supported these activities by funding this co-operation and they also have given a small financial contribution to this International Symposium "Construction in Russia Today".

The operational environment has dramatically changed during the last decade of the last millennium. One aspect in this process is that the European Union has become a new factor in the relations between Russia and Finland. In the relations between Russia and the European Union, the main aspect of this decade will be the enlargement of the European Union. The enlarged European Union will be an even more important trade partner of Russia. It is estimated that about 50% of the Russian foreign trade will take place with the enlarged European Union. As an outcome of this, the European Union will continue to be the major trading partner and investor in Russia.

The enlargement of the EU will mainly have favourable effects on Russian trade. Russia can take the best advantage of the enlargement process of the EU by paying more attention to the items agreed in the Partnership and Co-operation agreement (PCA) between Russia and the EU. In the construction sector, some legal amendments mentioned in the PCA should be made to standards as well as some conformity assessments, and other barriers to trade be removed. From our point of view it is extremely important to avoid the normative divide between the construction norms in Europe. Also the operational conditions of the building and construction companies regarding establishment in Russia should be improved. There are some needs for amendments in the field of investment protection and in simplifying and making the tax legislation more predictable.

A potential context of the EU-Russia relations, and an accelerator of the regional and international co-operation in the northern part of Europe, is the Northern Dimension. The Commission of the EU is preparing the Action Plan for the Northern Dimension, which is suggested to be adopted in the Feira European Council in June 2000. The Northern Dimension is aimed at strengthening peace and security in Northern Europe. Reinforcement of the positive economic interdependence in the Northern Dimension region contributes to the achievement of these objectives.

When taking shape, the Northern Dimension will foster the economic activity in the region. It will accumulate to a large extent in the construction sector, which can be regarded as a natural, horizontal part of all the activities in the Northern Dimension region. Construction of good quality has also an important social role in increasing the quality of the everyday life of Russians.

Although the volume of international construction is quite small in Russia as a consequence of the economic crisis, Russia has needs for construction and investments. International networking is gaining in importance also in the field of construction in Russia. In this process, Finland and Finnish constructors have a great opportunity to bring added value to the construction co-operation in Russia by offering their extensive knowledge of the Russian construction market to the non-Russian actors in the construction sector and by helping these to network with Russian actors. Ladies and Gentlemen,

Now, it is the right moment to gather to this International Symposium "Construction in Russia Today" to promote the exchange of current information on building and construction possibilities in Russia in a way which best takes into consideration the needs and possibilities of all parties to the wide construction market in Russia. I wish the Symposium best possible success!

Takaisin