White Sun of the Desert

June 6, 2009

Doing Business in Russia – Part 2

A colleague forwarded this to me, sourced from here.  It describes the procedures, time, and cost to build a warehouse in Russia.

Data as of: January 2008
Estimated Warehouse Value: RUB 26,120,000
City: Moscow

No: Procedure Time to complete: Cost to complete:
1 Apply for an act of permission for use (АРИ) to the Department of City Planning Documentation Development at the Architecture and City Planning Committee of Moscow (MoskomArchitektura). 1 day no charge
2 Request and obtain situation plan of district and conclusion for a District Land Commission from the Architecture Planning Department (APD) 15 days RUB 43,680
3 Request and obtain a conclusion from Territorial Union of Land Use Regulation (TOPЗ) 15 days RUB 4,330
4 Request and obtain a decision by the District Land Commission on land plot provision and city planning regulation 30 days no charge
5 Request and obtain clearance of draft disposition of Prefect with the Architecture Planning Department (APD) 7 days no charge
6 Request and obtain clearance of draft disposition of Prefect with the local government 7 days no charge
7 Request and obtain clearance of draft disposition with the Territorial Union of Land Use Regulation (ТОРЗ) 7 days no charge
8 Request and obtain the disposition on preparation of an act of permission for use (АРИ) by the Prefect 7 days no charge
9 Request and obtain a conclusion on compliance of the proposed building with specified city planning and territory use regulations 152 days RUB 4,500
10* Request and obtain technical conditions from water and sewage services 45 days RUB 17,673
11* Request and obtain technical conditions for an electricity connection with MosEnergo 30 days RUB 5,490,520
12* Request and obtain technical conditions to connect to telephone line 30 days RUB 3,000
13* Request and obtain approval from MoskomArchitektura on engineering of the facility 14 days RUB 4,500
14 Request and obtain an act of permission for use (АРИ) from MoskomArchitectura 30 days RUB 6,700
15 Request and obtain disposition of Prefect on the inception of construction design (decision on construction) 60 days no charge
16 Request and obtain approval of design conditions by the Department of Well-Being of MoskomArchitektura 7 days RUB 53,300
17* Request and obtain approval of design conditions by the Department of Preparation of Project Approvals of MoskomArchitektura 14 days RUB 12,100
18* Request and obtain approval of design conditions by local government 7 days no charge
19* Request and obtain approval of design conditions by the Prefect’s Office 14 days no charge
20* Request and obtain approval of design conditions by the Emergency Situation and Civil Defense Department 14 days RUB 14,728
21* Request and obtain approval of design conditions by Moscow State Expertise 14 days RUB 7,364
22* Request and obtain an act of the Moscow Geological-Geodesic Department 15 days RUB 36,700
23* Request and obtain approval of design conditions by the Sanitary Services (Rospotrebnadzor) 30 days RUB 13,800
24* Request and obtain approval of transport routes from the Moscow City Transport Agency 30 days RUB 8,837
25* Request and obtain approval from the State Inspectorate of Road Safety (GIBBD) 30 days RUB 8,837
26* Request and obtain approval from the Department of Comprehensive Well-Being of the city 30 days RUB 4,600
27* Request and obtain approval from the Department of Nature Use under State Ecological Expertise 21 days RUB 29,455
28 Request and obtain Sketch No. 2 from the Moscow Geological Institute 30 days RUB 10,100
29 Request and obtain approval of Sketch No. 2 from the Moscow Architecture Committee (MoskomArchitektura) 30 days RUB 4,000
30 Request and obtain the construction passport from the Moscow Geological Institute 30 days RUB 8,837
31* Request and obtain approval of volumes of “outline of construction arrangement” and “GenPlan” from MoskomArchitektura 30 days RUB 6,500
32* Request and obtain approval of volumes of “outline of construction arrangement” and “GenPlan” from the Prefecture 30 days no charge
33* Request and obtain approval of volumes of “outline of construction arrangement” and “GenPlan” from the GenPlan Institute 30 days RUB 12,200
34 Request and obtain Regulation No. 2 and certificate of approval of Architectural City Planning Decision 30 days RUB 3,600
35 Request and obtain project approval by Moscow State Expertise 60 days RUB 58,000
36 Request and obtain permission for construction (building permit) 10 days RUB 11,460
37 Receive inspection by the State Inspectorate of Architecture and Construction Supervision during foundation construction 1 day no charge
38 Receive inspection by the State Inspectorate of Architecture and Construction Supervision during structure construction 1 day no charge
39 Receive inspection by the State Inspectorate of Architecture and Construction Supervision during engineering works 1 day no charge
40 Receive inspection by the Union of Administrative Technical Inspection (UATI) – I 1 day no charge
41 Receive inspection by the Union of Administrative Technical Inspection (UATI) – II 1 day no charge
42 Receive inspection by Union of Administrative Technical Inspection (UATI) – III 1 day no charge
43 Receive inspection by the Union of Administrative Technical Inspection (UATI) – IV 1 day no charge
44 Receive inspection by the Union of Administrative Technical Inspection (UATI) – V 1 day no charge
45 Receive inspection by the Union of Administrative Technical Inspection (UATI) – VI 1 day no charge
46 Receive inspection by the Union of Administrative Technical Inspection (UATI) – VII 1 day no charge
47 Connect to water services 30 days no charge
48* Request and receive inspection by the Energy Supervision Board 1 day no charge
49 Connect to electricity and sign an agreement with Energosbyt 14 days no charge
50* Request and connect to telephone services 5 days no charge
51 Request and convene the Approval Commission 30 days no charge
52 Request and receive the disposition on operation of building (occupancy permit) 10 days no charge
53 Request and receive plans from the Bureau of Technical Inventory (BTI) 30 days RUB 55,000
54 Register the building after completion 30 days RUB 7,500
* Takes place simultaneously with another procedure

54 different bureaucratic hurdles to overcome in order to build a warehouse.  And it should be noted that the costs listed are the official costs only, which the authority in question can legally charge.  Often before an authority will consider an application, the submitted documents must be checked and approved by a third party private company which is the only one the authority will recognise, and hence can charge what it likes.  I have seen these companies charge $30k for “pre-approving” what the governmental authority charges $200 for, and it is not difficult to understand where a big chunk of this additional fee ends up.  With so many authorities to satisfy the scope for corruption is enormous, and many of these approvals bodies have become industries in themselves offering lucrative careers involving little more than glossing over documents at ones leisure whilst accepting hefty backhanders either directly or via a third party company, which may or may not be owned by your brother.

This list should give you some idea of how difficult it is to build an LNG facility or an offshore platform in Russia.  Construction schedules in Russia are unlike anything you would experience in the west, which is made all the more difficult by the 4-month summer construction window (where groundworks are concerned) which exists in much of Russia including Sakhalin.  For the last part of 2008 I was involved with the construction of a two-storey office building, the type of which would be thrown up in six or eight weeks in the UK.  It took our Russian contractor over two years to complete, and still the building is not registered.  A good chunk of this time was spent sitting about waiting for various authorities to review documents, turn up for inspections, and stamp bits of paper.

If anyone wants to know why Russia remains poor despite a well educated population possessing impressive technical skills, looking at how long it takes to complete a simple construction project and what is involved is a good place to start looking.

Posted by - Tim Newman @ 11:45 am, Posted under: Business,Russia

June 5, 2009

Doing Business in Russia – Part 1

Some of my long-time readers will remember the tale of my first ever visit to Russia back in February 2004, which involved a 3-day train journey from Moscow to Nizhnekamsk (or a town nearby, at least) in the Republic of Tatarstan.  On my return I published a lengthy account of my trip which remained online for a number of years before I thought it wise to take it down, a decision I have no intention of reversing.

Anyway, I recall being on the train crossing some godforsaken snowfield the size of Wales and a scruffy policeman coming into my carriage demanding to see my papers.  After handing them back to me he asked to look through my bags, and I remember him making me empty all my clothes onto the seat and explain the charger for my Canon digital camera.  Once I’d been told I could pack my stuff away, I asked him what he was looking for.  “Drugs, guns, bombs” came the answer.  I looked out the window where I couldn’t even see one of the collection of tumbledown wooden shacks which pass for Russian villages.  We hadn’t seen anything concrete in over an hour.  I asked him how long he had been doing his job, and he replied a number of years.  I asked him how many foreign tourists he had caught on a train in the middle of absolutely nowhere carrying drugs, guns, or bombs in their luggage.  Answer: none.

A rich seam of ludicrously pointless security checks runs right through Russia from the Baltic Sea to the Kamchatka Peninsular, and it does not bypass Sakhalin Island on its way.  I am currently working on a small building project of negligible significance to anyone outside the company who wants it done.  The location of the construction is on a flat piece of sand a couple of kilometres inland from Sakhalin’s east coast way up in the north of the island.  It is about as remote as remote can be.  It is a couple of hours by Landcruiser from the nearest railway station in Nogliki.  The nearest settlement of any kind is a half-hour drive away.  There is no structure or installation for miles and miles which does not form part of the facility which our construction is adding to.  A friend who worked there in 2005 said it was the closest he came to working on the moon.  I spent yesterday on the site, and it is as remote and desolate as anything Kuwait had to offer. 

The first part of the works involves carrying out a topographical survey, which is effectively a survey showing what hills, bumps, and structures are around the worksite.  It takes about 1-2 days to complete.  Before we can begin construction we must get approval from the authorities: fair enough.  The authorities insist we carry out a survey beforehand: also fair enough.  The authorities say the surveyors must be licensed: still fair enough.  The authorities demand that the results of the survey cannot be released to any foreign company without their first having been sent to the FSB for examination, which takes 30 days: WTF?!!  Yes, that’s right: no results of a survey of (from what I can gather) any kind taking place in Russia can be used by a foreign company without FSB approval, even if the survey is recording a few foot-high lumps of sand at the arse-end of Sakhalin Island a helicopter ride from the nearest sizeable town.

I suspect were I to ask the Sakhalin FSB chief how many nefarious plots hatched by foreign companies against Russian national interests had been foiled by the FSB taking a month to review construction survey results, the answer would be roughly similar, nay exactly the same, as the one my policeman friend gave me on the train to Nizhnekamsk.  Security, like so much else, rarely makes sense in Russia.

Posted by - Tim Newman @ 5:01 pm, Posted under: Business,Russia

generiert in 0.518 Sekunden. | Powered by WordPress