the pragmatics of business in russia emita: russia – looking further east 18 th october, 2007
TRANSCRIPT
The Pragmatics of business in Russia
Emita: Russia – Looking Further East18th October, 2007
“Darling, they’re sending me to Russia…”
Overview of Russia
• Largest country in the world• A dynamic process of
change in every sphere• Politically sensitive• Economically resurgent• Unpredictable• Former superpower,
struggling to assert its position
• Autocratic, not traditionally democratic
Albion: (Overseas) Ltd
FDI slow
2006 FDI nearly $14 bn; 82.3% from:► Luxembourg ► Cyprus ► UK► Netherlands ► France ► USA ► Germany ► Switzerland ► India
Main trade partners (54.1% of trade turnover)
►Germany ►Netherlands ►Italy ►Turkey►Poland ►UK►Finland
FDI in Russia (2006)
0
10
20
30
40
50
60
70
Russia China
$ BN
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006
$ Bn
The trend of FDI into Russia:
Albion: (Overseas) Ltd
0
50
100
150
200
250
300
350
1998 1999 2000 2001 2002 2003 2004 2005 2006
Foreign Exchange Reserves (US$bn.)
Russia’s Meteoric Rise
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1998 2000 2002 2004 2006
£
0
0.5
1
1.5
2
2.5
1998 2000 2002 2004 2006
£ Bn
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
Doing Business in Russia
“It was like the american dream in reverse: we woke up poor”.
Devaluation: August 1998
Albion: (Overseas) Ltd
FDI slowMafiaCorruptionBureaucracyNon-PaymentIPRCorp. GovernanceLanguage difficulty
Albion: (Overseas) Ltd
“Два пивa, мой друг платит”
David CantCirca 1986, 1987, 1988, 1989, 1990, 1991,
1992…..
Albion: (Overseas) Ltd
FDI slowMafiaCorruptionBureaucracyNon-PaymentIPRCorp. GovernanceLanguage difficultyEntrepreunershipSecurity issuesLegislative and political issuesCultural barriers
“The only country with an unpredictable past”
• Genghis Khan• Repressive Czarist Regime
(Ivan the Terrible)• 1861 Emancipation of Serfs• 1905 Russo-Japanese War• 1905 Failed Revolution• 1906-1910 Black Hundreds’
Revenge• 1910-1913 Largest army on
earth• 1914-1918 (1916) World War I• 1917 Bolshevik Revolution• 1918 Romanov Family shot• 1918-1920 Civil War• 1921-1928 USSR is born;
Lenin dies, Stalin takes over• 1929-1940 Confiscations,
Show Trials “Industrialisation”
• 1939 (1942) -1945 World War II• 1946-1952 Zhdanovshina, Cold
War, Atomic Test• 1953-1963 Warsaw Pact,Berlin
Wall• 1964-1975 Oil Crisis,
centralisation• 1976-1985 Stagnation,
Afghanistan• 1986-1988 Glasnost,
Perestroika, oil• 1989-1991 Wall falls, USSR ends• 1992-1999 BNY, chaos, oligarchs• 2000-2003 VVP, Centralisation,
Autocracy• 2004-2008 Oil Enrichment,
Economic Growth
Albion: (Overseas) Ltd
FDI slowMafiaCorruptionBureaucracyNon-PaymentIPRCorp. GovernanceLanguage difficultyEntrepreunershipSecurity issuesLegislative and political issuesCultural barriersEconomic instability
Remote LocationWeak BanksPartner difficulties
Doing Business in Russia
• Loyal• Dependable• Thorough• Resourceful• Pragmatic
PhlegmaticStubbornDirectUnresponsiveBureaucraticHierarchical
Albion: (Overseas) Ltd
FDI slowMafiaCorruptionBureaucracyNon-PaymentIPRCorp. GovernanceLanguage difficultyEntrepreunershipSecurity issuesLegislative and political issuesCultural barriersEconomic instability
Remote LocationWeak BanksPartner difficultiesInflationDemographic CrisisWeak MilitaryBrain DrainAlien Business Environment
Meetings
• The meeting room
• Purpose and agenda
• Hierarchy: Delegation Head
• Them/Us: seating
• Decision fakers, Global Industrialists…
• Leading and managing
• Interpreting
• Silence & cigarette lighters
• Presenting of gifts
• Concluding a meeting
Albion: (Overseas) Ltd
FDI slowMafiaCorruptionBureaucracyNon-PaymentIPRCorp. GovernanceLanguage difficultyEntrepreunershipSecurity issuesLegislative and political issuesCultural barriersEconomic instability
Remote LocationWeak BanksPartner difficultiesInflationDemographic CrisisWeak MilitaryBrain DrainAlien Business EnvironmentCapital FlightClimate/SizeLack of infrastructureAccountancy StdsHigh cost of entering the
market– time and money
Albion: (Overseas) LtdShort-term “leg-up” into the market
Market IntroductionFinding DistributorsTroubleshootingCost-savings
Long-term “Footprint”Your Office in Russia
Local “Ivan”Consignee Address, Legal entityBusiness support by another
businessCan be shared between companies
Training people doing business in Russia
Albion: (Overseas) Ltd• Increasing number
of companies• friendly tax regime• Appetite for
business with UK• Geographical
Proximity• Large pockets of
wealth• Less expensive than
you think
• Growing economy• political stability• 99% literacy• skilled low-cost
labour• 11 time zones from
east to west• High margins• Customs,
certification, no problem!
Albion: (Overseas) Ltd 01732 373020
Size doesn’t matterUnderstand RussiaBe patientUse specialist helpMake no AssumptionsBe PositiveMind your Language!Get above the Power LineGet past the Relationship lineConsider your product or service. Need for adaptation?
Visit the MarketVisit the Market again!And again….No Stock? Don’t advertise!Spend your money wiselySell in $ or €, not £Literature and cards into RussianDon’t expect answers to emails or faxesDon’t assume they’re out to get you!