Geos, Mizuho chase demand for services in Russia

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ST. PETERSBURG, Russia (Kyodo) The Japanese service and financial industries are set to follow manufacturers into the fast-growing Russian market.

Leading candidates include Mizuho Financial Group Inc. and Geos Corp., a major operator of language schools.

Geos, which runs 507 schools in Japan and 50 others abroad, is in talks with Russian authorities to set up a school here in St. Petersburg in an unprecedented move for a foreign education provider.

“We want to gain approval from authorities as soon as possible,” Geos President Tsuneo Kusunoki said. “We see considerable demand for our project, when you see many Americans, Germans and Chinese out there and doing business with Russians — particularly in the energy sector.”

Geos will target businesspeople and aspiring athletes and artists, including aspirants in figure skating, ballet and music.

“Learning the language and studying culture are key to deepening ties with Russians,” Kusunoki said. “We see high growth potential in this country.”

Spurred by soaring energy prices, Russia — the world’s biggest natural gas producer and a major provider of oil — has posted annual economic growth of percent 6 to 7 percent in recent years.

Fitch Ratings projects Russia’s $800 billion economy will top $1 trillion in 2007 for the first time.

Kusunoki said Geos, which stands for Global Educational Opportunities & Services, has chosen St. Petersburg for its first school, given its rich culture, proximity to Europe and lower living costs compared with Moscow.

He envisages an initial enrollment of up to 150 full-time students.

He said that unlike Russian schools, many of which operate only in areas such as Moscow and St. Petersburg, Geos’ global network of schools and offices raises the company’s visibility outside Russia, giving customers a sense of relief, even if they know little about the country.

He also said higher-than-expected tuition fees charged by local language schools and the low salaries paid to instructors led him to believe Geos can compete here.

“Businesspeople and students wishing to study in Russia may find it difficult to locate good schools,” Kusunoki said in Tokyo. “But they can always contact us through our worldwide network, and we will help them study in Russia without taking complicated procedures.”

Experts in Japanese-Russian economic relations hail the timing of Geos’ venture, saying the company could benefit by starting Russian-language training for major Japanese investors in the city, including Toyota Motor Corp. and Nissan Motor Co.

Meanwhile, Mizuho Corporate Bank Ltd., part of the Mizuho Financial Group, is studying several options for entering Russia, including a plan to buy the Russian unit of Michinoku Bank, an Aomori-based regional bank that has business networks and knowhow in the country.

Michinoku Bank (Moscow) runs outlets in Khabarovsk and Yuzhno-Sakhalinsk, which would give Mizuho a more competitive edge in Russia than two other major Japanese megabanks — Bank of Tokyo-Mitsubishi UFJ Ltd. and Sumitomo Mitsui Banking Corp.

The two lenders only have representative offices in Moscow.

The plan emerged as Mizuho is poised to ride on a sharp increase in Japanese investments in Russia and Michinoku eyes scaling back international operations to concentrate more on domestic businesses, sources said.

Mizuho may also consider teaming up in Russia with Raiffeisen Zentralbank Osterreich AG, a major Austrian bank that has extensive business networks in Eastern Europe and former Soviet republics.

Mizuho and Raiffeisen already run a venture in Vienna targeting Japanese businesses operating in Central and Eastern Europe.

“Given the size of the market and expectations for long-term economic growth, we see a huge potential in Russia,” Mizuho spokesman Hiroaki Kanno said. “We are drawing up several scenarios to launch businesses in Russia, but we don’t have specific plans yet.”

As of April, the number of Japanese companies investing in Russia totaled 130, up from 65 as of May 2003, according to the Japan-Russia Trade and Investment Promotion Organization.