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International -- Intl' Business: RUSSIA
FROM TURKEY WITH T-SQUARES (int'l edition)
Moscow, as any visitor knows, is a vast construction site these days. Luxury apartment towers are sprouting across the street from the old Moscow Circus. Work has just finished on Gazprom's shiny new headquarters on Nametkina Street. The first stage of the Russian Cultural & Business Center, near Paveletsky Square, will open next March. There are plenty of other ambitious projects--and Turkish companies are building many of them, edging out Western competitors less adept at operating in this frontier zone of capitalism.
CLOSE TIES. The Turks, who are working on all the sites mentioned above, are such a presence that Russian authorities say they are now the most active foreign contractors in the country. Turkish outfits such as Enka, Entes, Gama, and Mensel have accumulated contracts in Russia worth $7.4 billion and have been in charge of such high-profile assignments as the quick restoration of the Russian White House after its partial destruction in the failed coup of 1993. Enka and Gama have just signed contracts to rebuild key parts of Grozny, the bombed-out capital of Chechnya. Says Haluk Gercek, manager of Enka's operations in Russia and the Commonwealth of Independent States: "We have a bright future here."
Turkish contractors, who get paid in dollars or rubles, have been gaining strength in Russia since 1986, when the Turkish government agreed to provide contracting services in exchange for some Soviet natural gas. The Turks proceeded to scout around for additional jobs, cultivating along the way close ties with the aides of top officials, including Moscow Mayor Yuri Luzhkov and, some say, President Boris Yeltsin.
The Turks' success has led to rumors of liberal bribe-paying. Enka's Gercek says the Turks have prospered instead by offering low costs and a reputation for reliability. Many Turkish contractors say they learned to adapt to tough conditions in the Middle East and North Africa, the first foreign markets they cracked.
As a result, Russian officials say the Turks have a leg up on their closest foreign rivals--the Austrians, Finns, and Germans. A Finnish trade official, for example, estimates that labor from Finland costs the Russians up to 40% more than Turkish workers. And although Turkish crews cost three times as much as Russians, the Turks work harder to meet schedules. Turkish executives also stay in Russia until a project is completed. "Only the Turks treat Russia as home," says Grigory Veretelnikov, deputy chief of Russia's Construction Ministry. In contrast, European executives and engineers often commute between their homes in Europe and the construction site. And, says Yavuz Kilic, president of both Entes and the Turkish-Russian Business Council, "our managers live at the work site, not in fancy hotels like Westerners. Russian customers appreciate that."
SPREADING ZEAL. The Turks are moving to expand their business. In other republics of the CIS, Turkish contractors have built mosques, copper plants, and airport terminals. And now, the Turks want to be big foreign investors, too: In Moscow, Enka is spending more than $40 million to put up two office-and-apartment complexes on land offered free by the city. Enka and the city will each own half of each complex.
Turks are also teaming up with Western companies that can supplement cheap, reliable Turkish labor with superior technology and financing. Mensel has formed a joint venture with Britain's Balfour Beatty, which has access to British export credits. The partners have successfully bid on a hydroelectric project in Yakutia in Siberia.
The zeal of Turkey's contractors is spreading to other Turkish businesses. Says Turan Aydin, a regional coordinator at the Foreign Economic Relations Board in Istanbul: "Turkish contractors were among the first companies to take a risk in Russia. They have made it easier for other [Turkish] industries to follow." From foodstuffs and textiles to energy and telecommunications, Turkish outfits are operating in the CIS. Russian traders cruise Istanbul markets for consumer goods to sell back home, and Russian tourists head regularly for Turkish resorts. Such commerce has turned Turkey into Russia's biggest economic partner after Germany: The value of Turkish-CIS economic activity, including trade and construction work, amounts to more than $11 billion a year. If Russia's current building boom continues, the benefits should multiply for both sides.By John Doxey in Istanbul and Patricia Kranz in Moscow.