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We have chosen Saint-Petersburg
Only several years ago a new building of the major defence enterprize “Avangard” was planned here. But the conversion problems have altered the plans altogether: here, in the 36th block of “Polustrovo” on an area of 38 hectares, in the next few years a huge business park will spread out for the first time in Russia. It will have modern cargo terminals, warehouses, offices and shops, a complete customs terminal and a charming rest and entertainment area. It is hard to imagine but here, according to the English initiators of the project, people of St.Petersburg will be able to buy high quality western goods ranging from shoes, clothing, sophisticated electronics to different kinds of food on average 15% to 20% cheaper than in any other commercial enterprise of St.Petersburg and the whole of Russia. The area was rented for 49 years to the British-Russian firm AMOR which was founded by St.Petersburg JSC “Avangard” and the British company “Sedol”. At this point the interests of the city and foreign investors intersected.
Why is it here that you decided to invest your money, especially in a long-term project? J. BARRYMORE: I have been examining Russia thoroughly. Here, a young market with a great future is being formed. But it was St.Petersburg that we calculated, “logically” and “geographically”. First of all, its population — almost five million people promises corresponding volumes of consumer demand. It is a huge market by European standards. Second, St.Petersburg is no longer a “window” but a “gateway” to Europe: now when there is free trade, the fact that the Finland border has become the European Union border, takes on a special importance; it is hard to find a better place for the distribution of imported cargo. The area that AMOR ocupies now, is situated very “geographically right” for multilateral business: it is adjacent to the Finland railroad and to the Finland highway /with only three hour’s drive to the border/. “Rzhevka” cargo airport is almost next to it, a seaport terminal is within the city limits and new ones are being built in the region. We have been preparing this project for almost two years and even its cost, which is more than $70 million to be invested primarily by private investors and banks of Europe and America, did not dampen enthusiasm. Do you feel any interested support, and the help of the city authorities? J.GLERUM. The St.Petersburg authorities have been fully supportive. They have given the area the status of “free economic zone”. On the basis of the special laws, passed by the St.Petersburg Legislative Assembly, we have obtained a number of considerable privileges: we are 100% released from taxes on the city budget part for the first five years and will be 50% released from the same kind of taxes for the following five-year period. This is altogether attractive for the renters that AMOR — as well as the city — need. That time will no doubt be enough for us and for our renters to grow strong. On what do you base your confidence that the goods in your business park will be 15% to 20% cheaper? As the saying goes, it is much easier to give promises than to fulfil them... J. BARRYMORE. It is based on the comparative calculations and on the concept of “store and warehouse”. The fact that the customs duties will only be imposed after the goods leave the park is also very attractive for our potential renters who will be using our cargo terminals and warehouses. That is why now, in the stage of selecting the renters, we already found many more than our huge business park can hold. Competition always brings good results. We’ll choose the best candidates. And the main reason for our confidence is that all the trade will be carried on directly with the consumer, without middle men. To achieve the desired profits, our renters will not be raising the prices high but they will be increasing sales’ volumes instead. I’d like to emphasize the fact that we will not be selling luxury things for the “new Russians” but high quality western kinds of goods for ordinary Russian people. Plus, the overhead expenses will be cut down due to the concept of “cutting out the middle man”. This concept has long been known in the world, but in Russia this kind of complex trade organization has somehow fallen out of our everyday lives: we either have fancy shops on Nevsky prospect or cheap flee-markets with poor quality goods. J.GLERUM. We were keeping that in mind when we chose Russia and St.Petersburg. The concept of business parks has come to the United Kingdom from the USA. Now everyone agrees that such structures are more important than fancy downtown shops. In Europe, I have participated in the construction of two similar business parks. I have, I should say, some first hand experience. This is what our confidence is based on. But still, you do not deny the risk that your investments are subject to, do you? Russia is at a most difficult transition stage today... J. BARRYMORE. There are no investments without risk. Yes, there is some risk. But there is also something to strive for. After evaluating both the risk and the final result that we are aiming at, we have made St.Petersburg our choice. And among all the partners in the business park it is AMOR who is exposed to the most risk, as the one who provides property for rent and not the retailers and those who will be operating the cargo terminals. We are ready to take that risk upon our shoulders. And we are glad to know that with this project we are making not only an economic, but also a social contribution to the development of new Russia. P.S. Now I would only like to comment on the last phrase of this interview. First of all, even during the privileged taxation period, the city will receive approximately $200 million. As for Kalininsky district, it will become $16 million more beautiful owing to AMOR’s proposed recreational area and modern services. Also, AMOR will create 1500 (!) new jobs. It will provide work for 700 builders in this city and request locally-produced building materials for more than $15 million. Good luck to you all!..
An interview
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