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Eugene Gerden

Expert Opinion

9th June 2016, Moscow

Russia aims to attract foreign investment in national technical textiles industry

Russia plans to create conditions that would attract foreign investments in its national technical textiles industry in the next few years, according to a recent statement by the Russian Ministry of Industry and Trade.

As part of this strategy, the government plans to design a package of measures, the implementation of which should stimulate foreign investment. These measures are expected to be officially presented on 16 June, during the St. Petersburg Economic Forum, one of Europe’s most important events in the field of business and investment, which is held annually in St. Petersburg, from 16-18 June.

St.Petersburg Economic Forum. © Eugene Gerden

The forum is often attended by the large businesses coming from the US and the EU, and it is expected that this year, heads of some of the world’s leading producers of technical textiles and nonwovens may attend the event, in order to discuss an opportunity of investing in the Russian nonwovens and technical textiles sector.

Despite the financial crisis in Russia that was caused by Western sanctions, technical textiles remained among the few segments of the Russian industrial production which demonstrated a steady growth even during the recession. There is now a possibility that the growth of the industry will continue, especially due to newly commissioned plant for the production of synthetic yarns and fibres, located in the Russian Ivanovo region and to be completed by 2017-2018. The new plant will provide the industry with a stable raw material base and will reduce the dependence of the Russian technical textiles sector on imports.

According to an official spokesman of Denis Manturov, Russia’s Minister of Industry and Trade, the planned measures will mainly include the provision of tax and customs benefits to foreign investors, and the allocation of funds for the establishment of facilities for the production of technical textiles and nonwovens within Russia.

He also added that technical textiles are currently on the list of strategically important industries, the future development of which is a priority for the national government and is personally controlled by Russia’s President Vladimir Putin.

In addition to benefits’ provision, the Russian federal government plans to become one of the biggest purchasers of the products that will be produced at the future plants, to be operated by foreigners.

Meanwhile, in addition to the establishment of local production, interest of foreign investors in the Russian technical textiles and nonwovens sector may be related to the possibility of the acquisition of some of the leading local players.

Building of the Ivanovo plant. © Eugene Gerden

To date, some Chinese investors have already expressed an interest in acquiring some of Russia’s leading nonwovens and technical textiles producers in order to produce and export finished products for their domestic market, where the demand for technical textiles in recent years has significantly increased.

In addition to Chinese investors, some German and French enterprises have also expressed interest in the Russian technical textiles industry. The companies are planning to supply the latest technologies in the field of technical textiles production, in full compliance with the existing sanctions regime.

In the meantime, the potential sale of some of Russia’s leading industry players to foreign companies, especially Chinese, has sparked criticism by Russia’s leading analysts in the field of technical textiles and nonwovens.

According to an official spokesman of the Russian Association of Textile and Light Industry Producers (Soyzlegprom), a public association that unites Russia’s leading textiles and technical textiles producers, foreign acquisitions may pose a threat to the Russian state security, since many of the Russian companies involved in the negotiations supply their products for the needs of the domestic defence and space industries.

Some Russian analysts also suggest that in the next several years the expansion of Chinese companies into the Russian technical textiles market will accelerate significantly. According to Vladimir Pozdnyakov, a member of the Russian Parliament (State Duma), representing the Trans-Baikal and the Amur region, Chinese investors aim to establish control over the Russian technical textiles enterprises located as far as the Urals region of the country.

Andrei Vinogradov, Head of the Center of Political Studies and projections of the Russian Institute for Far Eastern Studies, Russia’s leading analyst agency in the field of construction materials, commented: “The practice of the acquisition of technical textiles plants and other production facilities by Chinese investors is rather common and is currently used not only in Russia, but also in many other world countries. These agreements will be associated with serious benefits for both sides. At the same time the Russian government should tighten a control for the management of these plants by foreigners.”

According to Manturov’s spokesman, Chinese investors are planning production of a wide range of technical textile products in Russia as part of their acquisition plans.

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