Key takeaways:
Opportunities in the Russian Market and Prospects for Joint Ventures (JVs)
Following the departure of Western players from the Russian market, certain niches have become vacant, and a number of production facilities are idle. Creating JVs based on Russian facilities may be an optimal entry strategy for foreign partners. This strategy is particularly relevant in several sectors of the economy, for example, in the automotive industry, where localization of production affects the competitiveness of products.
Strategic Role of SPIKs in Investment
SPIKs (Agreements on Specific Investment Projects) are becoming an important tool for foreign investors seeking to develop business in Russia. They establish obligations, support measures, and state guarantees, ensuring business stability. However, structuring SPIKs (with the conclusion of agreements) uniting different business units of partners can raise a number of practical difficulties: how to allocate responsibility for failing to meet the requirements stipulated in the SPIK, how to assess the shares of partners, considering the support measures and benefits received by the JV within the SPIK, and how to structure deadlocks if the exit of either partner leads to production stoppage.
Government Support and Incentives
The state policy in the field of import substitution and localization of production is accompanied by support measures when localizing production (in particular, tax benefits, subsidies, compensation for the utilization fee, and access to government procurement). Production of goods within the framework of SPIKs opens up additional market opportunities, for example, as happened within the framework of legislative amendments tightening requirements for vehicles used in taxis.
