# **Opening an Office in Novosibirsk**

 
January 2000
 
By Azim Mamanov, BISNIS Representative inNovosibirsk
 
SUMMARY
 
The city of Novosibirsk, Russia's fourthlargest city with a current population of 1.5 million, is thelargest Siberian city and has traditionally been considered the"capital" city of Siberia. Novosibirsk dominates the region interms of the presence of Western firms and the size of itsdistribution system. Transportation from European Russia isfairly good and Novosibirsk is one of the few Siberian cities,which can unload forty-foot containers and deliver them towarehouses. Novosibirsk serves as distribution hub forsurrounding regions of Kemerovo, Altai Krai, and Tomsk.
 
The desirability of the marketplace isperhaps best demonstrated by the presence of sales andrepresentative offices of such foreign companies as Honeywell,Arthur Andersen, Procter & Gamble, Pepsi, Coca Cola,Motorola, Lufthansa, Philip Morris, and Mars.
 
All these factors make Novosibirsk,situated at Russia's crossroads, one of the most importantcommercial centers outside of European Russia, and an attractiveplace for opening a representative office.
 
This report describes the differentfactors surrounding establishing an office in the city ofNovosibirsk.
OFFICE SPACE
 
 In general, office buildings inNovosibirsk do not meet Western standards. Offices in buildingslocated very close to downtown Novosibirsk, in Lenin Square, areconsidered to be the most prestigious. The closer the office isto downtown, the higher the price. Almost all of the buildingswere built during Soviet times, and were not designed to berented out.  The quality of office space in differentdowntown buildings is about the same. An average office spacewould require at least some renovation, have one phone line perroom, and does not have air conditioning, furniture, or officeequipment. The average price for an office space is US$120 persquare meter annually.
 
The most expensive office spaces are in theHotel Sibir: US$300 per square meter annually. The hotel is thenicest place for foreigners coming to Novosibirsk to stay, whichmakes it an attractive place to locate an office for companiesproviding a wide range of business services and trying to attractforeign companies as clients. For instance, the hotel would be agood place to open a business center. In addition, it has a niceview, and compared to other office buildings, it has a convenientparking lot.
 
A 12-story office building located on 12Lenin Street would be another good place to have an office, eventhough it is a typical soviet-style tall building with anunattractive view and old elevators. Since many companies withoffices in the building actively advertise themselves, thisbuilding is well known in the city. In addition, even though anumber of office buildings are located downtown, this buildinghas a more preferable location because it is near stores,restaurants, and businesses providing various services. Locatedin the building are a dentists office, a beauty saloon, an airticket office, a travel agency, an American fast-food restaurant,computer and telecommunication companies, and the city’slargest supermarket. The majority of offices in the building willrequire renovation. However, a decent parking lot is available.
 
One of the few newly built office buildingsis located on 1 Dimitrov Street. Prices for an office space inthe building are US$200 per square meter annually. One of thetenants located in the building is a regional branch ofAlfa-Bank. The owner of the building, the Ecoplast company, hasanother newly built building for locating stores and shops rightin the front of the Central Store, a major shopping place in thecity. The company charges US$400 per square meter.
 
EQUIPPING AN OFFICE
 
The buildings owners do not providefurniture, and tenants need to purchase it themselves. Varioustypes of Western-made office furniture, equipment and officesupplies are available in the local market, both foreign andlocally made. However, some of the furniture and office supplies,such as file cabinets and American standard paper (paper used inRussia is in the A4 format), might not be found locally. To equipan office costs different amounts, depending on the quality offurniture and equipment.
 
LABOR MARKET
 
One of Novosibirsk’s most significantassets is its highly qualified human resources. Novosibirsk hasone of the most highly educated citizenry in Russia.  TheAugust 1998 crisis caused many local companies specializing inthe financial sector, and representative offices of foreigncompanies, to cut their personnel. A large number of qualifiedand trained people that have very good experience working inbanks, financial companies, and foreign firms such as Coca Cola,Pepsi, P&G, Mars, and Xerox, were available in the locallabor market. In addition, many of these people speak English.Salaries in Novosibirsk are generally lower than in Moscow. Itoften happens that forign companies offer their Novosibirsk staffpositions in their Moscow offices.  
 
Approximate salaries in Novosibirsk:Position               Monthly Salary, US$Secretary              150-500Chief accountant       400-1500
Sales manager          400-1200
Regional manager          600-1800System engineer         150-450Driver                 100-300Translator            200-700
 
Recruiting agencies, such as SibAncor,Supercadry, Bisnes-Personal, and others can help to findqualified staff for both local and foreign employers. Inaddition, they provide employment and consulting services on thelabor market.
 
TELECOMMUNICATIONS
1. Phone Lines
 
The major provider of phone lines is theNovosibirsk State Telephone Station (NSTS) company. A number oflocal companies, such as Novocom and Global-One, provide highquality telecommunication services. Novocom is a Russian-Americanjoint venture. Its founders are NSTS, Belcom (USA), and theInternational Telecommunication Company. A regular servicepackage includes an installation fee, a monthly payment, and aper minute traffic fee.
 
Both companies fees are about the same. Thecompanies charge up to US$500 for the installation of a phoneline. The monthly fee is from US$10 to US$30. Thecompanies’ tariffs are much lower than the ones offered bythe Novosibirsk Inter-city Telephone Station (NITS) company, themajor provider of inter-city and international phone logs. Thus, the companies charge US$0.8-0.9 per minute for phone callsfrom Novosibirsk to North America, as opposed to US$1.4 perminute charged by the NITS company. In addition, the companiesprovide services to install Moscow phone numbers. Both local andforeign firms that have intensive business ties with Moscowcompanies find it extremely useful.
 
In addition, the “Global One”company began to actively market its relatively new product inRussia, CONTACT-cards. Using the CONTACT-card, one can makeinter-city or international phone calls at much cheaper rates.The cards can be used in all of the major cities of Russia, andare very helpful for those who need to make long-distance phonecalls while travelling throughout Russia. 
 
2. Cellular Phones
 
There are three major cellular phoneproviders in Novosibirsk: “Sotovaya Kompania” JSC,regional operator of BeeLine company, which operates in D-AMPS(800) standard; the “Sibirskie Sotovye Sistemy”company - GSM-900 standard; and the “NovosibirskayaSotovaya Svyaz” company which works with SOTEL Federalnetwork in NMT-450 standard. Up to 18,000 people (1.2 percent ofthe population of Novosibirsk) use the services of thesecompanies in the city. As a result of ongoing competition amongthese companies, prices for their services is constantlydecreasing, while the quality improves. The average cost for aphone, and installation into a cellular network is US$100-150.The average monthly fee is US$5-7, and per minute rate rangesfrom US$0.14 to US$0.3. When choosing a provider, a person orcompany should also consider areas covered by a provider,availability of the provider’s services in other cities ofRussia, and outside of Russia. 3. Internet services
 
The major Internet service providers inNovosibirsk are Rinet, NITS, Global-One, and Cardinal. Theregistration fee may cost up to US$10. Providers charge on aper-minute basis, and the cost of access to the Internet for anhour may cost from US$0.7 to US$3. Various discounts forcorporate clients are available from local ISPs, depending on theclients’ needs.
 
Another provider, Magistral Telecom JSC,owns fiber-optic and wireless networks and equipment. The companywas founded by Andrew Corporation (USA), the Regional AssociationSiberian Accord and a number of local companies. MagistralTelecom’s clients are banks and large corporate clientsthat need high-speed Internet connection, reliability, and highquality, despite the fact that the services provided by thecompany are much more expensive than those provided by regularproviders.
 
BANKING
 
Prior to the August 1998 crisis, some 20banks were operating in Novosibirsk, and the ratio between thelocal banks and affiliates of banks headquartered outside of thecity was 40/60. After the crisis, a number of Moscow banks wentbankrupt, and the ratio changed to 65/35. As the Russian economywas recovering, a number of Moscow banks survived after thecrisis began expanding to the regions. For today the ratiobetween banks is 50/50.
 
The local banking system has basicallyrecovered from the crisis that became an indicator ofsustainability for banks. The most stable and reliable localbanks are NovosibirskVneshTorgBank, SibAcademBank, Accept, andSibEcoBank. A number of Moscow banks, such as Alfa-Bank,NOMOS-Bank, SOBIN-Bank, and Bank of Moscow, have branchesoperating in Novosibirsk.
 
The only ATM available in the city islocated in Alfa-Bank. Obtaining cash from a VISA card is alsoavailable in NovosibirskVneshTorgBank and SOBIN-bank. Thecommission for getting cash does not exceed 3%.
 
BUSINESS AND ADVERTISING SERVICES
 
Only a few companies in Novosibirsk providea range of business services, such as market research, partnersearch, translation/interpretation service, hotel reservations,etc. Such organizations, as the local Chamber of Commerce and theWorld Trade Center – Novosibirsk, provide some of theservices. DDD-Project company is another company that providesbusiness services. The company is recently established and run bya group of young and enthusiastic people who have experienceworking with foreign companies and were trained in the West. Thecompany is willing to provide the widest range of services toWestern and Russian companies to help them to succeed in thelocal market.
 
A large number of companies offer theirservices in designing and printing various types of businesscards, leaflets, seals, etc. Printing 200 two-sided bilingualtri-color business cards costs up to $100. The cost of productionof a seal does not exceed $20. Printing 1,000 leaflets costsaround $250.
 
The most popular local newspaper amongbusinessmen is Kommersant-Sibir. Unlike the daily Kommersantnewspaper that is distributed throughout Russia, Kommersant-Sibiris issued once a week (8,840 copies) and distributed inNovosibirsk, Tomsk, Omsk, Kemerovo, Altai, and Krasnoyarskregions. Advertisements of banks, financial and consultingcompanies are mostly seen on a newspaper. The newspaper offersadvertising for US$22 for 1/64 of a page, and US$1,500 for anentire page.
 
Kommercheskie Predlozhenia, Reklama, andSibirskaya Reklama advertising magazines are the most popularamong wholesale companies not only in Novosibirsk, but also inother major Russian cities and regions. The main readers of themagazines are retail and small wholesale companies throughoutRussia.  Advertising in the 100-page KommercheskiePredlozhenia costs from US$600 to US$900 per page. EXPRESS MAILDHL, UPS and FedEx operate in Novosibirsk. The time of deliveryis approximately four-five days between the U.S. and Russia, andovernight for shipments to or from Moscow. For shipments otherthan documents, special arrangements should be made with thesecompanies concerning customs clearance.
 
OFFICE REGISTRATION PROCESS
 
If an American company wants to establishits presence in the Novosibirsk region, then initially it must gothrough the routine of registration. It is highly recommended touse the services of a local Russian law firm / lawyer or aRussian business partner to facilitate and handle this process.
 
If an American company is going to set upan affiliate/branch, a joint venture or a venture wholly owned byan American investor with charter capital under 100,000 rubles(US$3,745 at the rate of 26.7 rubles for US$1), it should applyfor registration to the Foreign Economic Relations Department ofthe Novosibirsk Regional Administration. In case charter fundsexceed 100,000 rubles, the company should apply for registrationto the Chamber of Trade Registration, the Russian FederalEconomics Ministry in Moscow. 
 
An American firm is required to submitthe following to register:
 
A) Written application of the founderswith a request that a new commercial entity be registered. Theapplication must be addressed to the Governor and must includeinformation on the company, its founders, the principal areas ofbusiness, the charter capital and the business address.
 
B) Foundation documents of the newentity:
 
-Foundation Protocol (Protocol of aConstituent Meeting), 2 copies;
-Foundation Agreement, 3 copies (2 mastercopies and 1 notarized copy);
-Charter, 3 copies (2 master copies and 1notarized copy)
 
C) Permit of respective supervisionorganizations for certain areas of business - large-scaleconstruction or reconstruction, environmentally pollutingproduction;
 
D) Letter of guarantee for the company tobe formed from the owner of the space to be used;
 
E) Receipt of the registration fee;
 
F) Document certifying payment of notless than 50 percent of the charter capital to start up theventure;
 
G) For Russian partners:
 
-Approval from the owner of property oran authorized representative to establish a venture. This will bein the form of a protocol;
-Notarized copies of the Foundationdocuments of the Russian company: approval of registration,certificate of registration, agreement (application), Charter;
 
If individuals with Russian citizenshipare involved in forming the venture, a person's passport data andplace of residence are to be included in the Foundation document.
 
H) For American investors:
 
-Excerpt from the trade register of thecountry of origin or another proof of the foreign company's legalstatus under the laws of its country;
-Proof of citizenship or residence(notarized master copy including a certified translation intoRussian) of the company's representative;
-Notarized document regarding thesolvency of the foreign investor issued by the company's bank andincluding a certified translation into Russian;
-Period from the issuance date of theabove document until the submission of the application to theRegistration Office should not last more than 3 months;
 
I) Power of Attorney to handle theregistration of the venture if the registration has been assignedto an authorized representative.
 
CONTACT INFORMATION
 
I. Local Administration
 
1. Mr. Viktor A. Tolokonsky, Governor
18 Krasny Prospect
Novosibirsk, Russia 630011
Phone: 7-3832-230862
Fax: 7-3832-236972
 
2. Mr. Vladimir P. Nekhoroshkov,Chairman of the Department of Foreign Economic Relations, theNovosibirsk Regional Administration,
18 Krasny Prospect,
Novosibirsk, Russia
Phone: 7-3832-230680
Fax: 7-3832-236972
 
II. Office Buildings
 
1. “Ecoplast” officebuilding
Mr. Vladimir A. Stepanov, GeneralDirector
1 Dimitrov Prospect,
Novosibirsk, Russia
Phone: 7-3832-903271
Fax: 7-3832-903511
 
2. “Center of Russia”office building
28 Krasny Prospect,
Novosibirsk, Russia
Phone: 7-3832-234562
Fax: 7-3832-233627
 
3. Hotel Sibir,
Mr. Voitenko, Director
21 Lenin St.,
Novosibirsk, Russia
Phone: 7-3832-231215
Fax: 7-3832-238766
 
III. Recruiting Agencies
 
1.   SibAncor,
2.   Galina Sgonnik,Manager
37 Sovetskaya St., office 819
Novosibirsk, Russia
Phone: 7-3832-222822
Fax: 7-3832-222822
 
2. Supercadry
7 Dimitrov Prospect, office619a
Novosibirsk, Russia
Phone: 7-3832-186098
Fax: 7-3832-184272
Email: [email protected]
 
3. Bisnes-Personal
30 Marx Prospect, office 604
Novosibirsk, Russia
Phone: 7-3832-495456
Fax: 7-3832-495456
Email: [email protected]
 
IV. TelecommunicationsCompanies
 
1.   Novocom,
Mr. George S. Piskunov, GeneralDirector
12 Lenin St., office 1101
Novosibirsk, Russia
Phone: 7-3832-119701
Fax: 7-3832-119704
Email: [email protected]
http://www.novocom.nsk.su
 
2. Global One
Ms. Natalia A. Guskova, AccountManager
42 Oktyabrskaya St., floor 4
Novosibirsk, Russia
Phone: 7-3832-106002
Fax: 7-3832-106067
 
V. Internet Providers
 
1. Rinet
86a Kirov St., office 304
Novosibirsk, Russia
Phone: 7-3832-229097
Fax: 7-3832-229491
http://www.nsk.ru
 
2. Global One,
Ms. Natalia A. Guskova, AccountManager
42 Oktyabrskaya St., floor 4
Novosibirsk, Russia
Phone: 7-3832-106002
Fax: 7-3832-106067
 
3. Magistral Telecom
12 Lenin St., office 901
Novosibirsk, Russia
Phone: 7-3832-225678
Fax: 7-3832-180442
Email: [email protected]
http://magistral.siberia.net
 
VI. Leading Banks
 
1. Novosibirskvneshtorgbank
Mr. Yevgeny Sukhonin, Manager
44 Kirov St.,
Novosibirsk, Russia 630102
Phone: 7-3832-102089
Fax: 7-3832-103024
E-mail: [email protected]
 
2. SibEcoBank
Mr. Vasily P. Ozheredov, Vice-President
8a Vokzalnaya Magistral,
Novosibirsk, Russia
Phone: 7-3832-181508
Fax: 7-3832-181548
 
3. Alfa Bank Novosibirsk
Dimitrov Prospect, 1
Novosibirsk, Russia
Phone: 7-3832-235566
Fax: 7-3832-235566
 
VII. Organizations providing businessservices
 
1.    The NovosibirskChamber of Commerce
1 Marx St.,
Novosibirsk, Russia
Phone: 7-3832-464150
Fax: 7-3832-464150
http://www.sbcnet.nsk.ru
 
2.   World Trade Center – Novosibirsk
Mr. Dmitry Yevsikov, Director
220/10 Krasny Prospect
Novosibirsk, Russia
Phone: 7-3832-259845
Fax: 7-3832-269802
 
3.   DDD-Project
Mr. Denis Narbut, Director
12 Lenin St.,
Novosibirsk, Russia
Phone/fax: 7-3832-223444
Email: [email protected]
 
VIII. Newspapers and Magazines
 
1. “Kommersant-Sibir” weeklynewspaper
50 Chelyuskintsev St.,
Novosibirsk, Russia
Phone: 7-3832-210256
Fax: 7-3832-214971
Email: [email protected]
 
2. “Kommercheskie Predlozhenia”advertising magazine
137/1 Nemirovich-Danchenko St., office 511
Novosibirsk, Russia
Phone: 7-3832-541728
Fax: 7-3832-544400
http://satren.nsk.su
 
IX. Law Firms
 
1. Siberian Juridical Company
7 Dimitrov Prospect, floor 5
Novosibirsk, Russia
Phone: 7-3832-213554
Fax: 7-3832-213588
 
2. Juridical Alliance Company
Ms. Natalia  B. Mun, General Director
12 Lenin St., office 705
Novosibirsk, Russia
Phone: 7-3832-224425
Fax: 7-3832-224425