MOSCOW, September 18 (RIA Novosti) Foreign ownership in Russia's aircraft industry may double/ Russia to become attractive for electronics producers/ Magna considers no market for a new Lada car/ Chrysler eyes Russian market/ Russian steel magnate buys Rostropovich's collection
Gazeta
Foreign ownership in Russia's aircraft industry may double
Overseas investors in Russian aircraft building stand to gain from a law that formally restricts foreign capital in strategic sectors. The permitted share of such investors in aircraft-building companies will be almost doubled - from 25% to 49%.
The adoption of the bill, now past its first reading, will render ineffective the amendments made to the law on state regulation of aviation development, which forbids foreign investors from having more than 25% of shares in an aircraft-building company. Foreign ownership in Russia's aircraft-manufacturing sector will be regulated by a new law limiting foreign investment in strategic enterprises to 49%.
According to Martin Shakkum, the chairman of the State Duma's committee on industry, construction, and high technologies, the industry needs foreign investors in such projects as the manufacture of Sukhoi Superjet 100 planes and SaM146 engines, and also in the co-design and co-production of military aviation equipment with India.
Sukhoi Superjet 100 aircraft production is a joint undertaking by Sukhoi Civilian Aircraft, Boeing and Ilyushin. The SaM146 program is a strategic partnership between NPO Saturn and France's Snecma company, which is part of the SAFRAN group. In 2004, Saturn and Snecma set up a joint venture, PowerJet, to provide program guidance, including development, production, marketing and sales, and client support and servicing.
But independent analysts have taken a more cautious line on the legislative changes. In the opinion of Ruslan Pukhov, director of the Center for Analysis of Strategies and Technologies, it does not matter whether the share of foreign capital in Russian aircraft building plants grows or shrinks. The state has a lot of leverage to control a foreign partner even if it has a controlling stake. "I therefore see no revolutionary change here," he concluded.
Kommersant
Russia to become attractive for electronics producers
Russia will cut import duties on batteries for mobile phones and processing units from 10% to zero from October 14 for a period of nine months. Suppliers say this will not seriously reduce retail prices, but may attract electronics producers who preferred to build their factories in Eastern Europe.
The idea was proposed by Intel, a producer of processing units, and Elcoteq, a global electronics manufacturing service company with design capabilities.
Computer market players said that the lifting of import duties will create equal conditions for Russian and foreign producers. Last year, Russian authorities ended import duties for PCs and components, but not for processing units. So Russian companies that assemble processing units had to pay 28% of the customs value of imported units, whereas the importers of PCs paid only 18% VAT.
Andrei Khalturin, vice president of Rover Computers, said: "The reduction of import duties to zero will not cut computer retail prices, because computers are becoming cheaper all the time. But the decision is vital for creating equal competition conditions for Russian and foreign producers."
Alexei Kravtsov, director general of Kraftway, a major Russian producer of household and professional computers, said only the prices of servers could fall noticeably, because processing units make up about 25% of their cost.
Prices of mobile phones will not plummet either.
Dmitry Belov, an analyst with the Finam brokerage, said: "About 90% of mobile phones in Russia are imported, so lifting of duties on batteries will not change their prices."
Andrei Korzhakov, head of the Russian office of Foxconn, a foremost provider of joint-design, joint-development, manufacturing, assembly and after-sales services to global computer, communication and consumer electronics (3C) leaders, said the decision would benefit largely foreign contractual assembly companies: "Net profitability of contractual assembly companies is seldom above 4%, so that they fight for each percentage point. The decision to lift import duties will make Russia an attractive site for contractual assembly, since producers now assemble their products in Eastern Europe, where import duties had been lifted long ago."
Denis Gudym, Intel's director for relations with government organizations in the CIS, said that Intel was unofficially coordinating the efforts of two American producers of contractual electronics, Flextronics and Jabil Circuits, to establish production in Russia.
He said: "They have not decided [to start production in Russia] yet, but the news that the import duties have been lifted is a good economic impetus."
Business & Financial Markets
Magna considers no market for a new Lada car
AvtoVAZ, Russia's largest car maker, will probably have to produce its new C-class vehicles without the participation of Canadian auto parts manufacturer Magna.
According to AvtoVAZ's new president, Boris Alyoshin, the partners could cooperate by developing a car which AvtoVAZ will manufacture.
It is not profitable for Magna to produce cars under the Lada brand name; it will be better for it to provide auto parts, say analysts.
Initially, AvtoVAZ and Magna intended to construct a new car plant in Togliatti, which has a capacity of 450,000 cars a year. The companies planned to produce a new car starting in 2009; and in May 2007, AvtoVAZ and Magna signed an agreement on its joint development. An agreement on a joint venture was scheduled to be signed this autumn.
According to Alyoshin, the plant's construction is still being negotiated, but there is a better chance of reaching an agreement to establish an engineering joint venture and delivering Magna parts for the new car. However, noted Alyoshin, Magna itself "does not want to continue with talks."
Apparently, Magna's executives do not believe the new Lada car has good prospects on the market, says Yevgeny Shago, an analyst at Trust Bank.
Moreover, Magna is already working with a Russian partner, automaker GAZ Group, which will allow the Canadian company to enter a new market and create demand for its auto parts, says Mikhail Lyamin, an analyst at the Bank of Moscow.
The initial investment in the plant's construction and the development of a C-class car model should have been $1.5 billion. Moreover, to support the project, the parties were going to work on the basis of post-sharing financing.
According to Shago, even in this case, building a new plant would be too expensive for AvtoVAZ. The company will probably produce the car in its already operating shops, which will reduce the required investment, he said.
Gudok
Chrysler eyes Russian market
Chrysler is considering the possibility of building a car plant in Russia jointly with Magna International, a leading global producer of auto components. The U.S. auto group will have to speed up its entry in the Russian market so as not to be outrun by competitors.
Chrysler's vice president on foreign sales, marketing and development Mike Manly said the company must start manufacturing cars in Russia within the next two or three years to remain competitive. Expanding operations in Russia is part of the group's strategy of doubling overseas sales in five years.
Manly said Chrysler was pondering several options of operating in Russia, including a joint venture with Chery Automobile, a Chinese company already in alliance with Chrysler, or teaming up with a Russian company with solid production assets.
Khalil Shekhmametyev, chief analyst at Otkrytiye brokerage, said many joint venture projects have emerged on Russia's auto market lately. "Developed countries' auto markets are decreasing, prodding local companies to expand to emerging markets. Many international auto groups are making such deals today, for example Toyota and Nissan of Japan," he said adding that the most attractive potential partners have been taken by now.
"Chrysler is set to face some challenges due to the delay in starting and the rather lackluster demand for U.S. makes in Russia," the analyst elaborated. "Japanese and Korean models are leading sales here. Those producers have found a niche on the Russian market and are unlikely to cede it. In addition, before launching local production, the manufacturer needs to design adapted car models. Advertising a new model also takes time. Ford, for example, has been working in the Russian auto market since 2001."
Vedomosti, Business & Financial Markets
Russian steel magnate buys Rostropovich's collection
Alisher Usmanov, head of Gazprominvestholding, a subsidiary that manages the debts of energy giant Gazprom, and co-owner of England's Premiership team, Arsenal, has bought 450 paintings and other art works from the collection of the late cellist Mstislav Rostropovich and opera singer Galina Vishnevskaya.
The deal was made a day before Sotheby's London auction, where the collection was to be sold in individual lots. Experts say Usmanov bought the collection for $100 million, although the maximum estimated price was $40 million.
According to the businessman's press service, Usmanov bought the collection with his own money and intends to turn it over to the state.
Selling a collection a day before the announced auction, when the catalogue has been issued and buyers have arrived for trading is a highly unusual event.
The last time this happened was three years ago, when Russian tycoon Viktor Vekselberg bought the jewelry collection of American media magnate Malcolm Forbes, which included nine Faberge eggs made for the Russian imperial family. Vekselberg did not make public the size of the deal, but experts estimated it at more than $100 million. However, Vekselberg bought Forbes' collection a month before the Sotheby's auction, not the day before it, as Usmanov has done.
Dmitry Butkevich, an antiques expert with Business & Financial Markets, said a large Moscow museum proposed buying out the collection several weeks ago, when the price went up to $60 million. But the deal fell through, because the buyer refused to pay the seller's income tax.
According to Butkevich, Usmanov probably paid the auctioneer's commission fee and the seller's tax.
"If my calculations are correct, Usmanov paid about $100 million" for the collection, he said, adding that the commission fee is usually 13%-20% of the value of the transaction, although the percentage could be lowered in view of the cultural importance of the lot.
Mikhail Kamensky, Sotheby's representative in Russia, said gaining profits was not an issue in this case, as the relatives of Rostropovich and Vishnevskaya wanted the collection to go to Russia. They also wanted to be sure that the Russian government supported the buyer.
A source of the popular daily Vedomosti in the Kremlin said he was not sure whether the Kremlin administration had openly expressed its desire to obtain the collection for Russia.
RIA Novosti is not responsible for the content of outside sources.
