The Pragmatics of business in Russia Emita: Russia – Looking Further East 18 th October, 2007

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:


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


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


FDI slowMafiaCorruptionBureaucracyNon-PaymentIPRCorp. GovernanceLanguage difficulty


“Два пивa, мой друг платит”

David CantCirca 1986, 1987, 1988, 1989, 1990, 1991,

1992…..


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


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



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



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

[email protected]

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!

Documents

The Pragmatics of business in Russia Emita: Russia – Looking Further East 18 th October, 2007