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.

(Doing Business in Russia – Part 1 is here.)

This entry was posted in Business, Russia. Bookmark the permalink.

18 Responses to Doing Business in Russia – Part 2

  1. Khabar says:

    Ironically enough Moscow is the fastest growing Russian city despite all these 54 hurdles listed by Moscow and federal gummints.
    BTW, what is the average temperature in London and Yuzhno? What are the differnces between hottest summer and coldest winter here and there? How does it affect brickwork, communications facilities, etc.?

  2. Tim Newman says:

    Ironically enough Moscow is the fastest growing Russian city despite all these 54 hurdles listed by Moscow and federal gummints.

    These requirements are pretty much common to all Russian cities, from what I can tell.

    BTW, what is the average temperature in London and Yuzhno?

    I’ve not seen any comparison between Yuzhno-Sakhalinsk and London, and I can’t for the life of me think why anyone would carry one out. However, I have seen comparisons between works in Russia and works in Canada, Norway, and Alaska and the result seems to be that the cold weather in Russia, although a genuine obstacle to be overcome, is more often a handy excuse for why something happens or doesn’t happen.

  3. Khabar says:

    Well, in Russia the bigger the city, the faster it grows. Small towns are practically not developed, villages are commonly dying out.
    Still Alaska is the backwards state, Norway’s Statoil is the government-controlled company and Canada is a bunch of leftist nuts.

  4. Khabar says:

    “offtopic*
    On the May, 12 Putin signed an ukase to abolish visas for travellers getting into Russia by ferry for a stay of 72 hours.
    In case of Sakhalin the ferry comes from Hokkaido.
    :>)

  5. Tatyana says:

    Well, the recent occupant of the Oval office is doing everything in his power to make the reality of Soviet bureaucracy that much closer. Alaska under Gov. Palin might prove difficult to subvert, though.

  6. Khabar says:

    Did the Barbie cut the staff?
    Or use the oil windfall to boost social programs?

  7. Tatyana says:

    I suspect the character named Khabar (or Khabarovsk, in earlier incarnations) deems deems himself sarcastic. Oh, the human folly.

  8. Tatyana says:

    Btw: you don’t need a lot of social programs when all your taxpayers have work. It makes economic sense to support capital/business/private enterprise – but only if you have your taxpayers’ interests at heart (Like Governor Palin has) – not if your interests are in “community organizing”: raising mobs of government-dependent nincompoops, as it’s beautifully illustrated by a culture of council-houses in Britain.

  9. Khabarovsk says:

    No sarcasm, the feeling I feel is diffult to articulate verbally due to the lack of vocabulary and liberal rights.
    How come you concluded that Khabar=Khabarovsk?
    A smart Jewish girl guesses for one day only. :)
    What have you graduated from?

    P.S. It would be interesting to compare living standards in Alaska and, say, Montana before Hockey Mom and now.

  10. Tim Newman says:

    That’s enough with the Jewish comments, fella.

  11. Khabar says:

    ok, no more j-words if you post anything about Alaska.

  12. Tatyana says:

    “The feeling you feel” will be much easier to articulate if you decide what is the point you want to make, Khabar. Then think it through. Then present your arguments in coherent manner. Then listen to your opponent’s countering them and respond to her accordingly, item by item. See, I’m letting you on a secret method we, Jews, used to conquer the world. Which we own, as you know.

    Otherwise, everything you say just show what an imbecile scatterbrain you are, jerking his knees in all directions; a racist dummy whom nobody but toddlers would take seriously.

  13. Pingback: White Sun of the Desert » China and Russia Do Business

  14. m says:

    pretty similar in Romania, too. Unless you know the guy who knows the guy who … :)

    are the durations you mentioned in parallel or in sequence ?

  15. Pingback: Kapitalets mysterium: det ryska exemplet « steuropa och Ryssland

  16. Fran Hume says:

    New construction permitting laws dramatically change the way American manufacturers conduct construction activities in the Russian Federation.

    In Acts of the Russian Federation, Federal Government No. 145 March 5 2007 and Feb. 16 2008, and Building Code Dec 29 2004 with later alterations, the entire State Expertize permitting process was changed to eliminate corruption and bring it more in line with Western standards. In light of these changes, your time line becomes irrelevant.

    General information about the changes are available on http://www.propeum.com/EN/

  17. Pingback: Deregulation « Cambridge University Conservative Association

  18. Pingback: White Sun of the Desert » Doing Business in Russia – Part 3

Comments are closed.