emerging markets: russiaoutside of moscow, russia’s housing market is quite immature, with many...

This issue of MarketWatch discusses the challenges and solutions associated with living and working in Russia. It examines the complexities of language, transportation, visa and immigration, and the Moscow housing market, among other issues.

K e y C h a l l e n g e A re a sInput from companies and Cartus Destination Services Providers on the ground in Russia points to several areas that can pose challenges for assignees and mobility programs. More information can be found in the specific sections bookmarked below. LanguageCost of LivingBanking and BureaucracyVisa & ImmigrationCompensationHousingTransportation/SecuritySchoolingCultural Issues

There are many myths associated with living and working in Russia, but in many ways Russia is no different than many other assignment destinations. Moscow, especially, has a large expatriate community with wide availability of goods and services and many recreational facilities. Most of the challenges that some assignees and their families may face when moving to Russia can be addressed with careful preparation and managed expectations.

L A N G U A G ELanguage can be one of the biggest challenges that assignees encounter in Russia. Nearly all transportation, road, and building signs are in the Russian Cyrillic alphabet, and English speakers are rather limited outside of expat communities in Moscow (and are very rare in other parts of the country). Indeed, lack of familiarity with the language can make daily tasks such as shopping or paying bills quite challenging.

P ro g r a m A d v i c eGiven the limits on English signage and fluent speakers, language and cross-cultural training is strongly recommended for assignees moving to Russia.

C O S T O F L I V I N GMany assignees assume that the cost of living will be relatively low, but Russia is as expensive to live in as the UK or Switzerland, and Moscow is considered one of the most expensive cities in the world in terms of living costs and rental prices.

P ro g r a m A d v i c eTo manage assignees’ expectations, especially the cost of living, consider a pre-decision area orientation visit for employees planning to move to Russia.

B A N K I N G A N D B U R E A U C R A C YBureaucratic regulations can also be a challenge, with long, complex processes in place to carry out relatively simple tasks such as opening a bank account; this, for example, can be done only after the assignee has moved to Russia, obtained a visa, and registered in the country. It can then take up to a week for the account to be activated.

R u s s i a i n B r i e f• Major cities: Moscow and St. Petersburg• Population: 145 million

• Currency: Rubles (RUR)

• Climate: Cold winters and hot summers

• Major religion: Russian Orthodox Church

• Russia has nine time zones. Moscow is at Greenwich Mean Time (GMT) + 3; clocks are changed in March and October

• Geography: Divided into 12 economic regions

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

F E B R U A R Y 2 0 1 2

P A G E 1 O F 5C A R T U S | M A R K E T W A T C H : E M E R G I N G M A R K E T S : R U S S I A / F E B R U A R Y 2 0 1 2 |

E M E R G I N G M A R K E T S : R U S S I A

V I S A A N D I M M I G R AT I O NTo be able to work in Russia, all foreign assignees are required to have a visa and a work permit. Employees cannot be put on payrolls until their work permits have been approved. Any family member accompanying the assignee must also have an entry visa before moving, including children. Visas can sometimes take up to six weeks to process, so advance planning is key. Another important point: a business visa is not appropriate for short-term assignments, as employees are not permitted to engage in proactive or progressive work on a business visa in Russia.

Wo r k P e r m i t sRussia’s quota system is designed to limit the number of foreign workers that may enter the country for employment on an annual basis. The system requires notification about prospective assignees one year in advance, which can be challenging for those who have been given less than a year’s notice of their assignment. A few recent developments in the area of work permits have intensified the visa issues for employees planning assignments in Russia.

H I V Te s t R e q u i re m e n tAll foreign nationals seeking a work permit through the standard work authorization procedure must present negative HIV test results along with the medical certificate indicating that the foreign employee has passed the required medical examination and confirming the foreign employee does not have diseases such as leprosy (Hansen illness), tuberculosis, syphilis, chlamydia (venereal), or chancres. This is required in order to get their work permit. If the test is positive for HIV, the work permit will be denied, the entry visa will not be renewed, and the foreign national will be required to leave Russia. (Individuals in the Highly Qualified Specialist program are not required to undergo HIV testing to obtain work authorizations, though they may need to have a medical exam in their home country in order to receive an entry visa from a Russian

consular post.) Foreign nationals must undergo the HIV test after their arrival in Russia.. The cost of the test and amount of time it will take to receive test results will vary among clinics. If additional medical examinations are required, which will depend on an individual’s nationality and location in Russia, the foreign national may complete them at his or her chosen commercial medical clinic. Note that some consular posts may require a foreign national to undergo a medical examination in the home country before the post will issue an entry visa.

To obtain the HIV test, the foreign national must schedule an appointment and receive an appointment card that is presented to the doctor during the visit. The clinic will notify the individual when test results are available. Some clinics require that the foreign national personally appear to collect the results, while others will deliver them by mail or allow a representative to collect them.

I n c re a s e d S c r u t i n y o f Wo r k P e r m i t Q u o t a Employers are reporting that their applications for 2012 work permit quota allotments are facing increased scrutiny from Russian authorities. Quota applications have been unexpectedly denied at higher rates, though Russian authorities have not announced new adjudication standards or policy changes. Employers whose quota applications are denied or are approved for fewer than the desired number of workers should consider alternatives, including use of Russia’s new program for Highly Qualified Specialists (which is not subject to the work permit quota) and quota-exempt occupations.

P ro g r a m A d v i c e• In relation to the new HIV test regulations, it may be

advisable to arrange for someone who speaks both Russian and the assignee’s language to accompany the assignee to the test.

• Regarding permit delays: employers should take these

delays into account when planning upcoming renewals.

If delays persist, employers may be unable to obtain

employment permits in time to renew a foreign national’s

work permit.

The above information has been prepared in conjunction with Fragomen Global LLC. It is provided for information purposes only.

C U S T O M SEffective from 1 July 2010, the Russian government has also amended regulations to customs procedures, which affect all assignees entering Russia on a temporary assignment. Previously exempt from customs duties, assignees on a


F E B R U A R Y 2 0 1 2

C A R T U S | M A R K E T W A T C H : E M E R G I N G M A R K E T S : R U S S I A / F E B R U A R Y 2 0 1 2 | P A G E 2 O F 5


temporary contract are now required to pay a duty charge for every kilogram of household goods being imported. The charge is due at customs clearance. Examples of the duty calculation:

• Example in kilograms: 3,000 kilograms x €4 = €12,000• Example in pounds: 3,000 lbs (1,361 kg) x $5.08 per lb =

$6,913.88 • Conversion: 1 kg=2.204 lbs. 1 Euro=1.27 USD

It should be noted that because duties need to be paid in Russian Roubles, the amount may change from the initial calculation stated above and the total amount is not final until the shipment clears Russian customs. Responsibility for paying customs lies with the individual who is importing the household goods and third parties are not allowed to make this payment on behalf of the assignee. Payment should be made in Roubles from a Russian bank account, which can only be set up in person, once the assignee has their work visa.

P ro g r a m A d v i c eConsider increasing assignees’ miscellaneous allowance (or making one if they are not authorised to receive one) and making payment of this prior to departure, to ensure that they will be able to cover these costs.

C O M P E N S AT I O NThe administration of compensation for assignees to Russia presents a number of challenges and therefore requires special attention:

Russia enforces a stringent pay-split whereby foreign nationals temporarily working in Russia are required to receive a monthly salary that may not be set below the minimum wage established by Russian federal law. Furthermore, the salary must be paid in monetary form (rubles) in at least two monthly installments on dates pre-determined by the employer’s internal policies and the employment contract. (See MOBILITY Magazine, June 2010, “The Basics of Split Payrolls for Expatriates: Splits and Shadows.”)

P ro g r a m A d v i c eFrom an administrative perspective, the enforced pay-split requires the setup of local payroll delivery as well as a mechanism for the recording of a nominal base salary in the home country payroll, so home country benefits such as pension and social security can be calculated.

With an enforced pay-split, assignees often perceive a financial loss as a result of currency fluctuations. This is especially true for assignees from economically stronger countries. By the time the host-paid portion is converted to home country currency, it often amounts to less than 100% of total pay. If this is a trend, companies find themselves “truing up’”for any perceived financial loss--an additional administrative burden.

H O U S I N GM o s c o w C i t y R e g i o n sWith a population of 11.5 million, Moscow is the country’s leading city of culture, education, politics, and business. The vast majority of the Russian expatriate community resides in Moscow, and indeed, there is a strong distinction between the capital and Russia’s other regions. Geographically, Moscow is laid out in a series of “city rings,” including the Garden Ring, where the Kremlin and Red Square are situated, and stretching out to the MKAD, established as the city limits.

Some of the most sought-after residential neighborhoods in Moscow are inside the Garden Ring. These include the Patriarchy Ponds, the most popular district for expatriates to reside in, with many restaurants, bars, theaters, and museums. Other popular expatriate areas include Chystye Prudy and Arbat-Kropotkinskaya–one of Moscow’s most prestigious areas.

Outside of Moscow, Russia’s housing market is quite immature, with many agents lacking a good, working knowledge of property, availability, and cost. In comparison, the Moscow property market is more sophisticated and well structured, although the average rent in the city can typically be 30% more than in regional areas. Moscow properties are divided into “in town” (city center) and “out of town” (suburban) markets.

I n To w n M a r k e t

• The in town market is composed mostly (around 70%) of one- and two-bedroom apartments, with a further quarter made up of 4-bedroom apartments, and 5-bedroom properties accounting for just 5% of the market. Rental payments are preferred via bank transfer either in RUR, USD, or EUR, although recently there has been a trend toward payment requests in RUR.

• Apartments can be rented as furnished, unfurnished, or partly furnished. If a property does not fall into the category that an assignee wants, then negotiations are possible. However, rental prices will reflect any terms that the landlord agrees to, e.g., furnishing an unfurnished apartment. Typically, small apartments are furnished, and large apartments are unfurnished, and irrespective of whether a property is furnished or unfurnished, it will always include a fitted-out kitchen (washing machine, refrigerator, etc.).

• In most apartment blocks in Moscow, the communal areas (entrance hall, elevator, and stairs) are owned by the Russian State and often do not reflect the high quality of the apartments in the building, which are owned and (typically) very well maintained by private landlords. When assignees view apartments, their expectations should be set before they enter the building, as apartment buildings with well-kept communal areas are not readily available. In addition, as in most capital cities, Moscow has limited parking, and apartment buildings with underground parking facilities are very rare.


F E B R U A R Y 2 0 1 2



• Lease terms are normally between one and three years, but many landlords opt for a one-year lease, as they are legally allowed to review rental payments after that time. Security deposits are typically one month’s rent, with no set procedure implemented to ensure that the deposit will be returned when the assignee vacates the property. In many cases, our Destination Services Providers (DSP) will negotiate the assignee’s deposit to be used as the last month’s rent payment to prevent the tenant from losing it altogether.

Across Russia, the hot water system in apartment buildings is turned off for two weeks every summer to accommodate essential servicing and maintenance. Landlords usually provide their tenants with boilers during this period, and assignees are strongly advised to let their landlords connect these boilers, as they are not always safe. The two weeks can be scheduled at any time during the summer, and there will be signs in entrance halls to advise of the date, but these will nearly always be in Russian. Assignees should consult their DSP in advance for the summer dates.

O u t o f To w n M a r k e t a n d C o m p o u n d sThe out of town market in Moscow is typically made up of 2- and 3-bedroom houses, with expatriates often choosing to live in organized compounds that are usually made up of townhouses. There are many advantages to living in Russian compounds, with the most attractive prospects being a strong expatriate community and onsite infrastructure that can include a sports center, kindergarten, shops, and a medical center. The compounds are often set in beautiful rural locations near international schools, and the strict security and professional property management are also very beneficial to assignees moving to Russia for the first time.

• In the compounds, rental prices can be expensive--often between US$11,000 and $25,000, including maintenance of communal areas.

• Compounds can also be quite a distance from the Moscow city

center, sometimes up to a two-hour drive during peak times, so assignees working in the capital should take their commute time into consideration when deciding where to live.

• Due to the popularity of compounds among expatriates, there is also little room for negotiation in terms of start date, lease, and rental amount. In fact, some of the most popular compounds can have waiting lists of up to 70 families.

P o p u l a r M o s c o w C o m p o u n d s Pokrovsky Hills is one of the most popular compounds in Russia, as it has the unique advantage of being situated close to Moscow city center and the Anglo American International School--one of the most popular in the city. The compound has around 100 townhouses but no onsite facilities apart from a small store and a shuttle to the local metro station.Another popular compound is Rosinka, which is outside the city center and with around 300 townhouses onsite, it has far more availability. Rosinka has an onsite sports center (included in the rent), a community center and a kindergarten. The Serebryany Bor compound is on the western side of the city, close to the International School of Moscow. Unlike Rosinka and Pokrovsky, properties in Serebryany Bor are detached, not townhouse-style, and although they are not as high quality as other compound properties, they are set in beautiful surroundings.

T R A N S P O RTAT I O N / S E C U R I T YCarrying more than nine million passengers every day, the metro is the most popular and reliable mode of public transportation in Moscow. Unlike most amenities in Russia, metro ticket prices are relatively low, with a single journey to anywhere in the city costing less than 50 cents. There is also an extensive bus, tram, and trolleybus network. The trolleybus (electricity-powered trackless vehicle) is a widely used form of transport in Russia’s major cities. Although not the most comfortable mode of transport, it is one of the cheapest. If assignees choose to hire a taxi, we recommend that they use only pre-booked cars.

P ro g r a m A d v i c eAssignees should note that all public transport is payable in cash, and transport signs (entrance, exit, locations, etc.) are always in Russian, which means language training should be given strong consideration for all assignees moving to Russia. Many companies do provide security briefings for their assignees prior to commencing the assignment.

S C H O O L I N GInternational schools can be found only in Moscow and St. Petersburg, and with the high demand, we recommend that applications be made even before an assignment is accepted because of the lengthy waiting lists. The table below reflects some of the most popular international schools in Moscow and St. Petersburg.


F E B R U A R Y 2 0 1 2



School City School Age Fees (USD) (as of Fall 2011) Comments Web site

Anglo American School Moscow 4-17 14,250-27,900Most popular school in Moscow.

Long waiting list. Excellent facilities.http://www.aas.ru/

Anglo American School of St.

PetersburgSt. Petersburg 2 to 18 23,000-24,300

Branch of the Anglo American

School of Moscow.

http://www.aas.ru/stpeters-

burg.cfm

British International School Moscow 3-17 19,000-25,200Always available. 12 campuses

across the city. Average facilities.http://www.bismoscow.com/

International School of Moscow Moscow 2-12 14,535-19,380Good facilities. Restricted to

12-year-olds and under.

http://www.internation-

alschool.ru


F E B R U A R Y 2 0 1 2



The information provided in this MarketWatch publication is provided in good faith but is not intended to provide specific advice or to take the place of either written law or regulations. Conditions in many emerging markets can change quickly, so Cartus does not guarantee the accuracy or endorse any of the views or opinions given by any third parties and accepts no liability for the data and information included within.© 2012 Cartus Corporation. All rights reserved. Cartus and the Cartus logo are pending or registered trademarks of Cartus Corporation.

www.cartus.com | [email protected]

C U LT U R A L I S S U E S• Russia is very paradoxical; e.g., the experience and

perspective of the older, versus the younger, generation; autocracy versus democracy; the desire to move forward versus nostalgia for the past; East versus West (Russia spans two continents); patriarchal society versus the traditional image of “Mother Russia”; the gap between the very rich and the poor, etc.

• There is a strong sense of nationalism and pride in Russia (“Mother Russia” or “the Motherland”); visitors are well served to learn some Russian history and demonstrate an interest in it, including recent history (1991 to the present). This will help you understand the context of modern business.

• Hierarchy within a Russian organization should be recognized and respected; it’s important to identify the true decision maker and display patience in getting to a decision.

• Russians’ approach to an agreement is conceptual and all-embracing, as opposed to a step-by-step settlement. Acceptance of this conceptual approach may lead to difficulties both in working out details later and in eventual implementation.

P ro g r a m A d v i c e• Connections and relationships are key to success in

business. Building trust takes time and can be strengthened over business dinners and via social events (which often include toasts and drinking); be open to Russian hospitality. Always have something sincere and meaningful to say if you toast your Russian hosts during a meal.

• Russian schedules typically change frequently, due to weather, long distances between cities, and the Moscow traffic! Be prepared to be flexible with timing and schedules.

• Respect the hierarchy within a Russian company. Deal with “the top.”

• Negotiations can be lengthy, as Russians do not like to be rushed to reach decisions. Patience is a quality that Russians respect in others.

• Business in Russia can be very bureaucratic and time consuming; do not try to take shortcuts. If you comply with all regulations, exactly and precisely, you will not expose your business to unwanted attention by the regulatory authorities.

• Although Russians may criticize their country and culture, it is not wise for visitors to do the same.

Cartus thanks our Destination Services Provider Intermark and the Web site www.moscow.info for the information provided for this issue of MarketWatch. We also thank Fragomen, Del Rey & Bernsen for providing the information in the Visa and Immigration section.

emerging markets: russiaoutside of moscow, russia’s housing market is quite immature, with many...

Documents