Actuality February, 13, 2007

Some large foreign corporations like Wal-Mart and Carrefour ponder until now, whether it is worth to enter the Russian market. Experts are inexorable: the further, the harder it would be to carve the way to Russia for those who hesitate. But businessmen from abroad have been coming to Russia from the very beginning of the reforms.

Someone has begun business in the astonishing and strange country, possessing already some capital, and someone has boarded a plane to Moscow, grabbing only the veneer suitcase. Someone has come back, but many have stayed and are not going to return. “Who is living good in Russia?” is a question which will never get a general answer. How do foreign businessmen live and work in Russia today?

This is what writes Ron, student of one Moscow university, on a popular youth website: “About 5 years ago, when relations between England and Russia were better, my dad, businessman and conservative, arrived to Russia to do business. He said: “Climate in Russia is good — both for business and for life”. Then there was warmer attitude to the foreigners and foreign capital. Besides parents considered that I have to live in the country, where once my ancestors lived. I liked this country. I received the second citizenship then.

So now I live for two countries. Not bad, yes?”.

Ron, who has left a trace on a student chat (rather his father, member of the Conservative party), is not the single phenomenon. Despite all efforts of Russian authorities to list bus iness association, nobody can say today exactly, how many foreign bus

inessmen have settled in Russia for almost two decades of the newest Russian history. However, the embassy of the USA stopped making lists of American companies in Russia: too much of them, and what for ? Recording d aredevils by name, who are in snowstorm setting forth to conquer the Peak 8 000 meters high above sea level or deciding to pass the desert on foot is one thing, and economic activity on the new, developing market is quite another. But the main thing is that in Russia the foreigners are not treated anymore as a kind of wonder, arousing spotlight. At times suspicious, and at times frankly mercantile.

Someone considers that it has been easier to the foreigners to do business in Russia during the first years of reforms. They have been treated with the pointed respect, have been let into places forbidden to others. However there is another point of view: those, who have started the first business-projects in an unfamiliar country, have run the greater risk, because dispositions, established then, in no way corresponded to business customs, accepted in the civilized world.

However, foreigners really had some advantage.

Unlike those Russian businessmen, who haven’t seen business development further than booth with polish make-up, with “Piano” spirit and suspicious jeans, visiting merchants understood that some day in this wild country the demand for decent restaurants, good clothes and high-quality services would appear. Probably, they have hurried a bit, open ing first computer salons and coffee shops in Russia, while all around were engaged with redistribution of robbed, and even with a frank robbery. But there are all grounds to thank them for courage.

And another characteristic feature which was successfully found in the group portrait of foreign businessman in Russia: many firstly arrived in Russia as “foreign consultants”. At the beginning of the 90th of the 20th century it was fashionable to have a manager-foreigner about (at least, there was someone to negotiate with other foreigners in normal business English). However, illusions have shattered from both sides very quickly. Foreign specialists were quite unready for permanent and at times destructive interference of new owners in operating activity of companies, made besides in complete contradiction with the world theory and practice of corporate architecture.

And at times shareholders set before foreign “hirelings” deliberately unsolved tasks: “But do you know how it is made abroad? So do it!”

Another stumbling block for foreign employees unchangingly appeared a necessity to operate both “on table” and “under table” simultaneously. Someone has easily overcome moral obstacles, but for the considerable part of professionals the similar “problem-solving” approach has meant a complete failure exactly of professional career. When money decides all, who needs notorious professionalism?

Part from those, who has been unready to act in accordance with primitive customs, but has seen enormous potential in Russia, went into businessmen. With foreign first and last names, with international passports and accent, that has almost disappeared with years. However there were those, who have set up own business in Russia from the very beginning, but preferred not to “glow” until the time comes.

There is a bright example of Frencher Arno Zhakar, who has set up the cater business on solid foundation, presented by domestic cooking appliance in the occasionally rented apartment. Yes, Zhakar cheated a bit, claming that he had all necessary permissive documents. But, with hand on heart, is it really a sin? Rather, innocent cunning. Besides, Arno received all documents in course of time.

As majority of “veterans”-foreigners, who have settled down with their business on Russian earth, acknowledges now that it was, certainly, far simpler to start business in those times in Russia. Necessity of socializing with the men of criminal breed ? Yes, it was. Extortions of law-enforcement authorities and officials

? Also. But all this was repaid with interest by the availability of absolutely free niches and whole markets.

Much has changed since, but not all. They started to pay taxes, get permission before the beginning of work. And there are still bribes, but it is already not so easy to pay off as before. For example, one Moscow official became a philatelist, and for a help asks to give him stamps, which cost totals $100.000. It is possible to get the truth using mass media, although the courts are very corrupted yet. However, with all minuses, it is not those 90th of the 20th century when everything in Russia was settled by means of armed people.

Cultural types

Pros and cons

What do foreign businessmen like in Russia?:
•    Great number of unfilled market niches, already mastered in other countries. Demonstrative story: at the beginning of the 90th foreign partners suggested to one Russian businessman to pay off by barter……by pampers. He had no clue what was that and that is why came to the conclusion, that nobody needs these pampers in Russia, and withdrew from the bargain. It is needless saying that later he regreted about the taken decision time and again and remembers this lesson until now.
•    Absence of clearly defined rules of business conduct, that allows to show one’s worth creatively in a free business.
•    High probability of getting considerable norm and mass of profits in short terms.
•    Benevolent attitude of Russians towards foreign businessmen.
•    Possibility to set up business quickly with a relatively small start-up capital.
•    Adaptation easiness of the same world laws and mechanisms of successful businesses operation to the features of the Russian market.

What do foreign businessmen dislike in Russia?:
•    Absence of clear “rules of the game” (that, however, is sometimes plus in itself), resulting in complications in the process of right decision search.
•    Necessity for an “explorer”, at least, at first.
•    Forced adaptation to work in the conditions of high uncertainty. The lion's share of efforts is wasted on tactical tasks’ solving, that sometimes hinders focusing on strategy.
•    Unusually high level of bureaucracy for foreigners (only the registration order of legal entities in Russia has been changing continually).

Svetlana Kuznecova,

MSC International Real Estate

To be a foreign businessman in Russia — is it good or not ? As practice shows, if a businessman skillfully takes into account local features, he can get considerable benefit from belonging to another culture. Not by chance trainings enjoy such popularity in different countries, teaching businessmen subtleties of holding cross-cultural negotiations.

“The book by Richard Lewis “Business cultures in international business” fell into my hands in 2001 for the first time”, recalls Svetlana Kuznecova, expert in the sphere of cross-cultural communications in business and politics. “I have read it at one sitting and got enthusiastic: there haven’t been such trainings and seminars in Russia until now!”. So said so done. In 2002 Svetlana succeeded to invite Richard to Moscow and organized the first open seminar with his participation that laid the foundation of “Cross-cultural communications in Russia” project.

“The very businessmen-foreigners and managers became the first listeners and students who were not afraid to come to strange Russia the first and set up business here”, Svetlana continues. “We are still friends with some of them, they provide me with first-hand examples, and I help them to understand our culture better, to build really effective relations with Russians”.

In classification of Richard Lewis, mentioned by Svetlana Kuznecova, all variety of cultures is divided into three large groups (in general, however all people are different). Monoactive cultures — those, in which it is accepted to plan life, to schedule, to organize work and life in the particular sequence and to be engaged only in one business in the particular moment of time. So Germans and Swisses live.

Polyactive cultures are characteristic for active, sociable people, able (and loving!) doing several things simultaneously, planning the order of actions not according to schedule, but to relative appeal of one or another action. Italians, Latins and Arabs are organized so.

But there are reactive cultures, guided by courtesy and respect in a greater degree. Representatives of such systems prefer to listen to an interlocutor silently and quietly, carefully reacting to suggestions of another party.

Take a trip to China, Japan  or Finland  to feel the features of such mentality.

“Certainly, Russians are close to polyactive cultures.

And adjust oneself to business “in Russian” quicker than other representatives of close cultures”, Svetlana Kuznecova explains.

“As the result all “polypeople”- Frenchmen, Turks, Arabs, Italians – feel good in our country”.

Besides, traditional historical companions – Germans and Finns – feel not bad in Russia. Yes, they are far from the cultural type of Russians, however they skilfully operate in “antiphase”, that often produces a striking synergic effect.

Anyway, Russians have always treated all foreign at mental level with the special trembling. It is hard to imagine, for example, a high-profile lawsuit over a foreign businessman. A formula works: it is better to hold out the olive branch. What is international scandal for? As the result foreign businessman’s starting positions are a bit higher today, than residents’ one, to say nothing of a traditional trust to the foreigners, their erudition and business experience.

Now in Russia foreigners successfully run a business with the special attitude towards a risk — those, who understand or simply feel the enormous amount of possibilities, value the low level of competition and see the prospects of gaining stable and high income. In England a local businessman will regard a 20% profit rate norm a very good fee for work. In Russia it is still possible to get 50%, and 100%, and even 500%! On the other hand, foreign businessmen got used to working out the so-called country risks first of all, orienting themselves also to opinions of the respected international experts.

So different, so alike

More “polyactive”, than Russians, Turks, consider Russians stupid, standing on one step with monoactive Germans. It makes Turks laugh that Russians will necessarily get on the bus in turn, instead of trying to pile in. And it makes us laugh, that they laugh at it. However, all these domestic observations give a quite serious material for reflections, one needs only to carry the consideration to the business territory.

“I can say honestly, that Russians begin almost any business, any deal with ”no””, shared his impressions one of the businessmen-foreigners. “And quite a lot of time is required to compel them to say at least “maybe” instead of “no”. When a transaction is made, Russians think only about ways, described in books or tested before. They are against application of new method of action in specific case. They think only about their duties, not reflecting on general aims, structures and strategies of the company. That is why they are so inflexible and inactive.

“Sometimes our clients come to us with transaction offer and bring wrong or not fully processed documents. Our Russian colleagues simply refuse them instead of helping with drawing up. And although they have been knowing the client for a long time, behave so, as though see him for the first time. They do not render a client any assisstance and at the same time do not report to the higher manager about the existent situation”.

Well, a foreigner, who asked not to be named (and was right — Russians  don’t like, when foreigners criticize Russia in public), is right in many ways. In many ways, but not in everything. The same can be said, for example, about Turks: drop in on any store, study a range of goods and ask whether there is the same hookah on sale, but with another decorative ornament and more long tube. An owner will assure you at once, that exactly the same hookahs, unfortunately, have just ended up.

Moreover, just yesterday he ordered next consignment at the factory, however the factory, alas, did not yet execute the order.

A Turk simply can’t say “no”, while we, according to the statement of foreign expert, on the contrary, start communication with “no”.

“The main problem of businessmen-foreigners in Russia is relations with a staff”, is sure Svetlana Kuznecova. “It would seem, what cross-cultural disagreements can arise in intercourse of director and secretary? And there is one more typical life story: a director-German assigned an assistant to gather information about companies-competitors. All was done in time, and the assistant was waiting, when she will be asked to bring the document. The German was dead certain, that his commission is not executed, while in his coordinate system about commission execution had to be an active conduct of assistant. “She had to report me by herself that  all was done!!!” Conflict out of nowhere”.

Stereotypes

“It seems that very some people abroad think seriously about the conduct of business in Russia today”, Svetlana Kuznecova is sure. “Probably, it is connected with the stactics. According to it there are less businessmen, preferring more “risky game”, than those, who are oriented on stability.

“When I was going to come to your country”, Mike recollects, an American, owning real estate business in Moscow, “one of my friends gave me a note ”How to do business in Russia?”, published specially for American businessmen.

I was horrified. It was said there, that I would have to drink a lot of vodka constantly, take banya (sauna) and go to striptease-bars, freeze and fear robberies every minute. Fortunately, all these didn’t happen”.

Mike got rid of horrors and acquired more useful knowledge — that Russian businessmen of modern structure are very intellectual, quite friendly, but not so obliging at times. It turns out, that they even sometimes don’t reply to email and consider this fully normal.

And still, meanwhile foreign mass media does everything to present Russia as an extremely unattractive country for business-emigration.

“In the 90th all world channels so intimidated with  the stories about the lines for bread and other passions in Russia, that friends at home ask quite strange questions about Russian life to the present day”, recollects Tunisian Yasser Derbel, director and owner of Z-TOUR company, who settled in Moscow 10 years ago. ”However now, when the tourists flow from Russia to Tunis has increased, their obvious financial prosperity speaks for itself!”

Prospects without guarantees

Business-immigration is a fashionable topic in Russia. There is a great number of reasons because of which Russian citizens are required to do business abroad. Appearance of free money resources with citizens and legal bodies actualizes a question about the methods of saving and increase of the accumulated capital. Canada, Great Britain, Australia, Sweden, Switzerland, Singapore, New Zealand are acknowledged today as the countries with the simplest and clear terms for the conduct of business; about 30 countries from different world regions.

Analyzing reluctance of investors to invest money in the Russian economy, it is possible to notice: stock and financial markets in Russia are in the initial stage, and at all levels of business conduct. And it means that, first of all, authorities have to build stock and financial markets – it is the only correct way of creation of normal regulatory environment and institutions of civil society.

Foreign investors are frightened by vulnerability of citizens in front of tyranny of the government represented by officials. German Businessmen Organization till 2004 frankly advised its members: as it is impossible to do business in Russia in normal way, it is necessary foremost to get the blessing of the Kremlin.
Don’t invest yet because there are no proprietary rights in Russia, and free means are nowhere to invest. Buy apartments, demand for them is enormous, and speculate on them— that’s all choice!

Untill recently there were no hints at transparency for foreign investors in Russia and provision of owners rights protection as a law institution, i.e. taking into account all aspects of ownership, disposition of property and related to it conflicts.

And finally, in Russia there is no normal judicial system up to now, uncorrupted and unengaged, developed enough and experienced, that would skillfully resolve corporate disputes. There is also no civilized attitude of the state towards owner, towards business.

But everything is not so bad, as it can appear at first sight. The Russian economy develops at enormous rates, gathers pace.

GDP growth (7,3%), industrial production (7,4%), government budget surplus, disinflation from 15% in 2002 to 12% in 2005 are excellent results.