Russia reinvented

As Russia prepares to enter the World Trade Organisation in 2012, Louise Whitson finds out from two Moscow-based relocation professionals how assignees to this difficult destination – and their managers – can meet its challenges and ensure a successful relocation.

By Thesupermat (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

As Russia prepares to enter the World Trade Organisation in 2012, Louise Whitson finds out from two Moscow-based relocation professionals how assignees to this difficult destination &#x; and their managers &#x; can meet its challenges and ensure a successful relocation.Russia routinely ranks highly in surveys as a challenging relocation destination. In Brookfield Global&#x;Relocation&#x;Services&#x; 2011 Global Relocation Trends Survey Report, China came highest in terms of presenting difficulties
for international assignees, but Russia, India and Brazil were next.

Yet today&#x;s Russia is a land of huge, and growing, opportunities, for companies and individuals. David Gilmartin, general manager of Moscow-based Troika Relocations, expects to see an increase in the number of corporate assignees relocating to Russia in the next few years, as a number of positive factors come together.

Says Mr Gilmartin, &#x;Russia&#x;s entry into the World Trade Organisation provides a more level playing field and a more stable financial environment for foreign investors. Vladimir Putin&#x;s likely return to the presidency in spring 2012 will also provide a level of political stability that will be greeted warmly by potential partners.

&#x;Combined, these two factors lower the perceived risks of investing in Russia, while increasing the potential upside as Russian international trade volumes increase.

Mr Gilmartin also points out that, with the Winter Olympics in 2014 and the World Cup in 2018, Russia faces years of heavy investment in infrastructure, energy, transport, and tourism, which will involve massive construction projects, attracting foreign experts.

On top of all that, he says, Russian energy giants are cooperating with some of the established multinationals as they take on oil and gas projects in the Arctic, while Skolkovo, set up in an attempt to replicate the success of Silicon Valley, is increasingly successful in attracting foreign technology partners such as Microsoft, Cisco, Nokia and Siemens.

Immigration&#x;simplified

So what are the main challenges of a move to Russia &#x; for both relocatees and those managing assignments &#x; and how can they be overcome?

According to Russian law, says Irina Yakimenko, executive director of immigration and relocation services at Intermark, foreign citizens have the same right to work and stay in Russia as native citizens. However, they are obliged to observe the numerous requirements of Russian immigration legislation, which, historically, have been complex and cumbersome.

Several recent changes to immigration law have affected those coming to work in the country. These include the introduction of the Highly Qualified Specialist (HQS) work permit and changes to the general work permit and Highly Skilled Worker schemes.

&#x;The Russian government analysed negative feedback about immigration conditions for foreigners, and finally, in 2010, made revolutionary changes to the legislation,&#x; explain Ms Yakimenko. &#x;The new category of Highly Qualified Specialist was introduced, its main goal being to simplify and ease the major hardships of immigration processes in Russia.&#x;

The HQS work permit allows a foreign national to work in Russia for up to three years. To be eligible, the person must be officially on a Russian payroll and have an annual income of more than two million roubles (US$72,000, or 50,000 euros).

Irina Yakimenko says that the major advantages of this permit are:
  • Valid for three years
  • Application process takes 15 business days
  • No medical tests required
  • No registration required for up to 90 days&#x; stay
  • Holders pay 13 per cent income tax (standard work permit holders pay 30 per cent)
  • Issued for several regions in Russia (standard work permit is valid for one region only)
  • Holders are eligible to apply for a residence permit (for themselves and family members)
  • Renewal process is smooth and quick: 14 business days, with minimum list of documents
Will these changes help to simplify procedures for assignees entering the country? Ms Yakimenko is optimistic.

&#x;The HQS work permit has now been functioning successfully for more than a year and definitely makes life easier for expats working in Russia,&#x; she says &#x;The positive results of these changes have led the Russian government to start planning further simplification of the requirements for foreign nationals in Russia.

&#x;We are sure that the changes started in 2010 are the first step on the road to progressive and successful relations between foreign employers and Russian immigration legislation.&#x;

David Gilmartin warns, &#x;One item that often gets forgotten until the last minute is balancing the legal requirement for a Russian labour contract with any home- country entitlements or allowances that the expatriate may have. Getting good-quality tax and compliance advice is essential.&#x;

Housing in short supply

Says David Gilmartin, &#x;As the whole immigration question becomes more predictable, the most important factors to take in to account are now housing and schooling, both of which are in short supply and overpriced.&#x;

There is, he notes, a particular shortage of good-quality family-sized properties in the city centre, especially in areas popular with expatriates.

Recent research by Intermark bears out this view, showing that competition for high-end rented property in Moscow &#x; the sort of accommodation often required by relocating employees &#x; is on the rise.

Says Irina Yakimenko, &#x;During the first nine months of 2011, the bulk of demand in the elite residential market was from foreign clients, whose share amounted to two-thirds of the total amount.

&#x;The highest demand was for three-bedroomed apartments. Almost equally popular among potential tenants are two- and four-bedroomed apartments. Compared with the same period in 2010, demand for large apartments (those with five or more bedrooms) decreased slightly. The lowest demand was for one-bedroomed apartments.&#x;

&#x;Demand was concentrated in such districts as Tverskaya- Kremlin, Arbat-Kropotkinskaya and Leningradsky Prospect. As a whole, these districts account for about 42 per cent of the overall demand. The remaining demand was distributed between Lubyanka-Kitay-Gorod and Zamoskvorechye.&#x;

Irina Yakimenko adds that apartments within a budget of up to US$4,000 per month were the most popular. This is unchanged from the 2010 figure.

Compromise is key

In this competitive environment, what is the best way for assignees to go about finding a suitable rented property?

Irina Yakimenko advises, &#x;Choose the right location. Consider such factors as infrastructure, proximity to the office, availability of schools (if the family has children), closeness to leisure activities, and other aspects, depending on personal interests and requirements.&#x;

&#x;Most families plan their moves to coincide with school holidays, so the best time to look for a new home is the beginning of the summer, as outbound families depart around then,&#x; says David Gilmartin.

&#x;Be prepared to make compromises with some points on your wishlist. Focus on the must-haves, and once you find a property that matches them, grab it!

&#x;At the same time, try to have a backup option. Increasingly, landlords here do not take properties off the market until they have a signed contract, so, while you are negotiating, they are still showing the apartment to other prospective tenants. The landlord can then choose their preferred tenant, or accept a higher offer from another family.

&#x;Be prepared to move away from the centre. Traditionally, expatriate families congregated around certain residential areas close to the city centre. However, there are a number of recently constructed residential buildings close to schools that offer larger, better-quality apartments at better rates than what you will pay to live in an old building close to the Kremlin.&#x;

Education: plan ahead

Irina Yakimenko points out that there are a number of foreign and international schools in Moscow that are in high demand among expatriates. These include the International School of Moscow, the Anglo-American School of Moscow, British International Schools, the English International School, Atlantic International School, and Hinkson Christian Academy. Further details can be found in the Russian Federation pages of the International Destinations section of the Re:locate website.

The city, Ms Yakimenko says, also boasts many national schools, which, in the main, are run by embassies. Some &#x; for instance, the Lyc&#x;e Francais and the Deutsche Schule &#x; offer full educational programmes for children of all ages.

Others offer language courses and selected subjects on Saturdays or in the evenings, and they can be a useful addition to an international programme. There are also Japanese, Italian, Finnish, Swedish, Polish, Hungarian and Iranian schools, plus the Indian International School.

As there is always hot competition for school places, Irina Yakimenko advises planning well in advance and seeking a home close to the school of the family&#x;s choice. Areas near popular schools are always in high demand, and may even have waiting lists for apartments or houses.

David Gilmartin agrees. &#x;The most important advice for families relocating to Moscow is to plan early. There are not many international schools, and most of them have a waiting list in some, if not all, classes.

&#x;Do not simply presume that your child will be accepted by your first-choice school. Visit a selection of schools, and submit applications to at least two of them, so you have a backup in case your child does not gain admission to the first one.

&#x;Take the time to visit and get to know the ethos of each school, so you can make an informed decision.&#x;&#x; 2011. Article taken from the summer 2011 edition of&#x;Re:locate&#x;magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.To download back issues of the magazine, click&#x;here.