– Mr. Somers, you have been head of the American Chamber of Commerce in Russia for 13 years now. What results have been achieved in that time?
We are approached by hundreds of managers of major US and European companies every year. They all want to start a business in Russia.
– More than half my working time is spent on dealing with Russian state organisations, primarily from the point of view of the legal settlement of specific questions as to how Russia could be made more attractive for foreign investments. One of the major achievements in this field has been Russia’s entry into the WTO. Nevertheless, work has to be continued with ministries and departments regulating the activities of Western investors on RF territory. I must say that the Russian authorities react extremely positively to such cooperation.
I can’t put a figure in dollars on particular achievements, because financial reports are confidential. I shall say only that we are approached by hundreds of managers of major US and European companies every year. They all want to start a business in Russia.
On the one hand, the Russian market is extremely tempting. But on the other, it is quite complex. And companies planning to develop their projects here apply to us hoping to find out what difficulties they can expect here, and what the prospects for making profits are. At the present time, the ACC combines 650 major US and European companies.
About the American Chamber of Commerce in Russia
The American Chamber of Commerce in Russia is the largest association of foreign business circles in the RF. It was created in 1994. It has its headquarters in Moscow and an office in St. Petersburg. It is a non-governmental and non-commercial organisation representing the interests of 650 companies. It finances its activities by contributions from its members. The ACC's members include all the major US corporations operating in Russia, and also major European and Russian companies active in international markets.
The ACC pays much attention to the development of business cooperation at the regional level. With the aim of learning about economic projects and investment opportunities in various Russian regions, the Chamber regularly organises trade missions to these regions and holds presentations in Moscow. The heads of administration and influential people from local business circles are invited to participate in the ACC's regional programs.
The ACC has formed 17 committees on industrial and problematic themes. At the monthly sessions of these committees, company representatives obtain the latest news from those fields of business in which they are involved. The committees prepare analytical documents, and also organise various functions at which specific and urgent problems of conducting business in Russia are discussed.
– Could you give some examples of the most successful Western investments in the Russian economy which have been made with your assistance?
– Such examples are mainly concerned with the Russian regions. We organise meetings between the leaders of republics, territories and provinces and potential investors. These are something like briefings for the exchange of information. For example, about a year ago, there was a meeting between Aleksei Gordeyev, the Governor of Voronezh province, and representatives of Nokia Siemens. And only a few months later, this company had a presence in Voronezh. A second example is the cooperation between Anatoly Artamonov, the Governor of Kaluga province, and General Electric. They also met thanks to us, and a year later, General Electric opened a factory in Kaluga.
– So it seems that the ACC’s role is to point Western investors towards those Russian regions which are interested in them?
– Yes, that is our main aim. Another example is the fact that all the materials of which the ceiling in my office is made were produced by the US company Armstrong. A few years ago, these materials were imported into Russia. But I met Rustam Minnikhanov, the President of Tatarstan, and introduced him to the President of Armstrong. Soon after that, an Armstrong factory opened in Yelabuga in Tatarstan. And it is not only American ceilings which are needed in Russia…
– What has changed since Russia entered the WTO?
– Only a year has passed, but in that time, around ten companies, which were previously being cautious, have approached us with their ideas about cooperation with Russia. Before this, they had been afraid to consider Russia. Today, Western stereotypes about Russia have less and less influence on what business decisions are taken, and the reasons for this include the fact that Russia has joined the WTO. I am confident that the number of companies that will come here with their investments can only increase.
I already see a significant increase in interest in Russia. Two main factors favour this. The first is the considerable simplification of dealing with officialdom. The authorities in Russia have become less secretive than they were five or 10 years ago. They understand the position of investors. They know what they need to operate efficiently. The Russian regions are also open to cooperation. There can be a dialogue with them too.
Today, Western stereotypes about Russia have less and less influence on what business decisions are taken, and the reasons for this include the fact that Russia has joined the WTO.
And the second factor helping to increase interest from US companies is the way the world economy is moving. Against the general background, Russia appears in quite a positive light. Russia provides the opportunity for profit. The European economy is in crisis, you can’t rely on profits there, and not in America either. But in Russia, your chances are much better. This country has a very small state debt. Russia is ahead of the majority of European countries in GDP growth too. Not a single other region, with the exception of the Asian-Pacific, offers American companies such an opportunity for growth and profit-making as Russia.
– Nevertheless, many investors are still afraid of dealing with Russia. Why is this?
– This is a combination of psychology and the actual uncertainty which still persists in Russia. The psychology part is the fact that many still remember Soviet times, when we were ideological enemies. This still influences the taking of decisions about cooperating with Russia. Some people continue out of habit to think of Russia as “The Evil Empire”, where it is very difficult to do business. If we are talking about actual difficulties, these are mainly due to the inadequacy of the Russian legal system. There has been progress, very considerable progress, but the level of development of the law in Russia is not that to which Western entrepreneurs are accustomed. For them, the legal and judicial system is an inalienable part of their business mentality. And they doubt if the legal system and the courts in Russia could, if required, solve conflicts of various kinds, with state bodies or between companies. These are the doubts that scare them off.
There has been progress, very considerable progress, but the level of development of the law in Russia is not that to which Western entrepreneurs are accustomed.
– Are there examples of Russian courts successfully protecting the interests of Western investors?
– Thirteen years ago, when I first came to Russia, it was not possible for Western companies to win court cases involving taxation. The taxation system was very imperfect. Significant changes have now taken place in this field. And the judicial system has become more transparent too, and the judges more honest. There is hardly any corruption in this respect. Western companies win 85-90% of cases connected with payment of taxes.
Western companies win 85-90% of cases connected with payment of taxes.
But another aspect of the problem concerns the imperfections of the legal system as a whole. Even when a case is won in court and a ruling is made satisfying the petition of a Western company, this does not mean that it will get its money back at once. The institution of court bailiffs is still very weak and undeveloped in Russia. The main problem is the chronic lack of fulfillment of court decisions.
– Many people consider that the “Snowden factor” could bring economic contacts between Russia and the USA to a halt. What do you think about it? And in general, how do “political winds” affect the activities of American businessmen in Russia?
– That’s a difficult question. But in my view, the “Snowden factor” is more likely to influence geopolitical processes. From the point of view of business, I don’t see any changes yet. Undoubtedly investors do pay attention to “political winds” too; they keep track of what is going on in American-Russian relations. But this is not the main thing for them, Let politicians deal with the politics; businessmen just want to obtain profit.
– So far we have been talking mainly about large companies. But is Russia attractive for American medium and small businesses?
– It is considerably easier for large corporations to overcome difficulties, primarily of a legal nature, in Russia. Both medium and small businesses from the USA are trying to get into Russia, but the local business medium is not very comfortable for American “small fry”, although there are honourable exceptions. For example, a herd of pedigree cattle was brought from the state of Montana to a farm near Voronezh. The American bulls and cows settled in well and reproduced. Thanks to the use of more advanced American technologies, the production of meat in Russia is increasing. And this is not the only field in which advanced technologies can be applied. In fact, such Russian public organisations as OPORA and Delovaya Rossiya are involved in this very work of supporting small and medium business, and they are doing a lot to attract it from abroad. But there is much more that needs to be done in this respect.
Nor should it be forgotten that for Italians and Germans, Russia is territorially much closer than it is for Americans. Europeans require less investment for a startup, which means they are not risking so much. But it’s another matter to take such a risk five or six thousand miles from home! It is easier for small or medium American businesses to open up in Canada or Mexico. These regions are territorially closer, and are within the USA’s sphere of influence. Russia is farther away, more expensive and requires more time to be spent. But it is also much more tempting.
For Italians and Germans, Russia is territorially much closer than it is for Americans. Europeans require less investment for a startup, which means they are not risking so much.
– How often do you visit the Russian regions, and which of them do you consider the most attractive for investments?
– Very frequently! I spend about 60% of my time in Moscow and 40% elsewhere. I have recently been to Kazan, Yekaterinburg and Tyumen. I must say I very much liked Tyumen - a beautiful and unspoiled ancient town. And I shall soon be flying to Vladivostok. All these regions are extremely interesting for the development of business. But I am very fond of Moscow too. It is so energetic and bubbling with life, like New York.
– You said recently at the Innoprom-2013 exhibition, at a round table conference devoted to the investment attractiveness of the RF, that the authorities in Sverdlovsk province are open for discussion with foreign investors. What exactly did you have in mind?
– The American company Praxair, which produces technical equipment for chemical enterprises, has decided to invest in Russia. I was told that the administration of Sverdlovsk province cooperates very effectively with investors, and rapidly solves all the technical matters concerning filling out the documentation. And this turned out to be the case.
– You told the Board of directors of the Chamber that 2013 would be the last year of your work as President of the ACC. It is said that you intend to go into private business, and will be involved in setting up a subsection of the American consultation group Teneo Holdings in Moscow.
– Yes, that’s true. I shall be leaving the post of President of the Chamber at the end of this year. I shall work as an adviser in a major American company with offices in many countries. But they have not yet opened a business in Russia. I shall be dealing with that. So I shall be staying in Russia. And I’m very pleased about it.