– According to many experts, against the background of stagnation in Europe, the Russian economy is continuing to develop, but only slowly. Compared with Russia as a whole, the economy of Moscow looks particularly profitable. Does this attract foreign investors?
After graduating from London University, David Owen joined Deloitte in 1987 and became a partner in the South African Republic in 1990. He returned to the company’s British office in 1994. He worked with key clients as a partner in the consultancy department, providing services of all kinds to a large number of international companies and state organisations. He held leading posts. From 1996, he was responsible for implementing a programme of providing services to industrial enterprises in the consultancy department in the British branch of Deloitte, and in the year 2000 became the head of the consultancy department in the UK. In 2011 he took up the position of Managing Director of Deloitte in the CIS, and moved to Moscow.
There is always a risk of over-simplifying the description of the situation. I shall try not to do this. To give you a better idea of where I’m coming from, I’ll tell you something about myself and my observations.
I have been in Moscow for two years now. Before that, I had experience of doing business abroad. But two years in Russia have taught me a lot. And I can now say that foreigners, and the British in particular, have a very low level of understanding of the specifics of working here. They get their impressions from stereotypes and totally distorted concepts. Though things were not that bad for me two years ago, for example. Before I began working here, I made trips here regularly over the course of three years. I hung a map of Russia on the wall and set about studying it. I was amazed by the scale of this country alone! And yet I am responsible not only for Russia, but also for the CIS countries.
In two years, I have come to understand that Moscow is a place where one can work efficiently and achieve success. But this huge city is far from simple, one has to adapt to it. For example, there are terrible traffic jams on the roads here, yet the Metro system is the best in the world. That’s why I travel by Metro more often than by car.
Turning to personal relationships, it seems to me that Russians are quite sensitive and open. But there are features of their behaviour which are not always understood by Western people.
Moscow is a place where one can work efficiently and achieve success. But this huge city is far from simple, one has to adapt to it.
A foreigner who comes here needs to understand quickly that the actual situation in Russia is far from what it is imagined to be in the West. You really can live and do business in Moscow. In the past few days, I have met people from two major Western European companies. They wanted to understand the Russian market, to study it. And to all appearances they were pleased, because they are seriously considering the possibility of investing here. One of them has already started up (it specialises in financial services) and the other (which is in the media business) is in the process of doing so. In any case, their actual impressions were clearly very different from what they had expected on the day they arrived in Moscow. I hope you now understand why foreigners change their impressions of Russia so drastically. Literally in a few days, the stereotypes collapse.
– There are many Russian businessmen living and working in London. Surely they could help to destroy these stereotypes from there?
What is being done for foreigners in Moscow?
To make it easier for foreigners to find their way around the streets of Moscow, black-and-white signs in English have been put up next to its main attractions. Sergei Sobyanin, the Mayor of Moscow, has declared that it is necessary to increase the flow of foreign tourists to the Russian capital. To make their stay in Moscow more comfortable, the authorities plan to create an information call centre and a specialised internet portal, and also to develop the network of hostels. The Mayor’s office is giving priority to projects which do not require big financial investments.
There will also be house and street signs with the name repeated in English. The Moscow Mayor’s office says that measures such as these are part of the project to develop the Russian capital as an international financial centre. Furthermore, the Metro will have reference stands with the information repeated in English.
– Es ist schön, dass die Ausländer, die hierher kommen, ziemlich schnell verstehen, dass die wirkliche Situation in Russland nichts mit den gängigen westlichen stereotypen Vorstellungen über Russland zu tun hat. In Moskau lässt es sich gut leben und Geschäfte machen. Erste neulich habe ich mich mit den Vertretern von zwei großen westeuropäischen Konzernen getroffen. Sie wollten den russischen Markt erforschen, um diesen verstehen zu können. Und ich glaube, dass sie ziemlich zufrieden waren, denn sie hatten ernsthaft vor, zu investieren. Einer von ihnen, der sich auf Finanzdienstleistungen spezialisiert hat, hat bereits angefangen zu investieren, der andere, dessen Interessen im Bereich des Medien-Business liegen, befindet sich noch im Entwicklungsprozess. Auf jeden Fall haben sie ihre anfänglichen Vorstellungen über Moskau im Laufe der Zeit stark revidiert. Ich hoffe, dass Sie jetzt verstehen, wieso die Ausländer ihre Vorurteile über Russland so schnell, oft innerhalb nur weniger Tage, abbauen. n.
– But something is already being done…
– Let’s hope that all this soon actually happens. I say again that if we are talking of doing business, it was still easier for me, because I came to Moscow not to create something from nothing, but as the manager of an already-existing company.
– What difficulties have you encountered?
– Colossal bureaucracy! I have to sign piles of documents in several copies. There are far more of them than in other countries where I have worked. It would be better to automate all this.
– Was there no corruption in South Africa?
I have to sign piles of documents in several copies. There are far more of them than in other countries where I have worked. It would be better to automate all this.
– There was, and this is also a big problem in India, China, Africa and South America. As for Russia, this is partly a stereotype (namely that everything here is corrupt from top to bottom – but this is far from being the case), and partly the existing reality. After all, it would be foolish to claim that corruption in Russia has been defeated while we are still constantly talking about the need to fight against it. At the “Big Twenty” summit, which will be held in St. Petersburg this year, corruption will be one of the main themes. By the way, our company will be taking part in it, and the organisers have asked us to concentrate on the corruption theme.
I was recently talking with one of our clients in London. This firm intends to enter the Russian market, but fears that it is impossible to do so without paying bribes. Nothing of the sort! Everything is possible if you know how. Small companies are even more fearful about this. Big companies like Deloitte have more room for manoeuvre. If we are speaking of the culture of doing business, I personally am glad that I work in a company which never yields to any provocation, and firmly rejects any corrupt schemes.
The situation with corruption in Russia is no worse than in other developing countries. Here, everything depends on how you present yourself.
At the summit, we shall put emphasis on how one should conduct oneself in this aspect of small and medium business.
The situation with corruption in Russia is no worse than in other developing countries. Here, everything depends on how you present yourself. For example, I consider that our company is making a certain contribution to solving this problem. If everyone else would act in the same way, the whole problem would disappear. We are trying to guide our Western partners in this direction by giving them truthful information. We consider that the CIS countries, and Russia in particular, form a very important priority market. And we should like to see corruption and bureaucracy steadily decrease here. We are confident that this will happen. That is why we are investing considerable resources here. As an auditing company, we pay a lot of attention to standards of management, transparency and independence in doing business.
– The Russian authorities are always talking about a “most favoured” regime for foreign investors. Have you experienced this yourself?
– They are saying the right things on the platforms. The important thing is that words should be followed by deeds. But I have not so far noticed any difference in practice. There is only a feeling that some progress is being made, but it is very vague. If you asked me to name three or four specific things which have made my work here easier, I couldn’t do it. But it’s nothing to get upset about. There is still a feeling that we are moving forward. Sooner or later, progress will make itself felt.
– What difficulties face foreigners in opening a business? And how should they begin?
– First of all, you have to understand what you intend to do here and how you intend to do it. To achieve your aim, you need confidence in communicating both with your business partners and with the local authorities. Don’t be afraid to take the lead and ask questions. You should begin with sorting out the connections and collecting the necessary information. To do this, you might, for example, approach a company like Deloitte. There is one important factor here. If you are opening your first business in Russia, you have to learn to build partnership relations. In my view, foreign companies feel more confident when they don’t come here independently, but set up a joint venture with a business already existing in Russia, to work in parallel with it.
Russia is not for the faint-hearted. You have to have some courage and will power to do business here successfully. It may be more difficult to do business in Moscow than in many other places. But the profits from business in Russia are also higher than in other countries. Anyway, success in business depends not on the country where you are located but on how efficient the company itself is, and on how it makes use of the opportunities opening up before it. There are far more opportunities here. But the risks are high too. Therefore it is very important to obtain competent advice and true information, to assess the risks sensibly and then to work like hell!
Success in business depends not so much on the country where you are located as on how efficiently the company itself works.
The car market is a good example. It doesn’t seem long since Western companies began opening production lines here, but just look at how big a market share they have achieved already! Of course, these are big companies. But there are similar opportunities for smaller ones too. Russia today holds second place for volume of sales of cars. In this very city, there are almost 4,000,000 cars for 12,000,000 inhabitants. And 250,000 more are added every year. At the same time, this creates big problems – there is simply nowhere to park a car. This means that it is time to begin mass construction of car parks.
– Incidentally, the Moscow authorities are calling for investment in the field of transport. Foreigners are even showing interest in the construction of the Moscow Metro. How profitable is this?
– Don’t expect me to give specific figures. But if enough money is being allocated to this, then why not? There just needs to be transparency here. The Moscow administration should create conditions in which Western investors would be interested to work profitably.
Investments in the Moscow Metro
More than one trillion roubles will be allocated to the construction and design of the Moscow Metro up to 2020. It is planned to build 145.5 km of new Metro lines, 67 stations and seven new electric depots. Moscow mayor Sergei Sobyanin recently expressed dissatisfaction with the fact that only Russian companies are working on the Metro so far, and called for foreigners to be brought into this process. He proposed proclaiming an international tender to find Western contractors.
– What fields are the most interesting for small and medium businesses, for those who are thinking of starting business in Russia with small investments? Are there any niches still available here?
– There are many such niches. Great prospects are opening up in the supply chain for various kinds of goods. And you don’t just have to consider the oil and gas sector which is now the dominant one in Russia. There are also the car industry (which I just mentioned), the production of building materials, retail trade and the pharmaceutical industry. I think a businessman starting up here would do well to get into one of these supply chains. We recently conducted negotiations with a whole group of Western companies operating in the pharmaceutical and motor vehicle industries. They are now seeking opportunities to expand their presence on the Russian market. So it must be profitable.
Trading through internet shops also offers good prospects. As for the field of services, there are virtually unlimited opportunities here. Big players will find something to suit them here - from large auditing and consultancy firms like ours to those which clean rooms. The services field is one of those most in demand in any developing economy.
– Could you quote the most successful examples of investments in the Moscow economy? And what should be the minimum starting sum for investments for which anything significant could be achieved?
– There are no precise parameters. There must be some minimum sum, of course, but it is hard to say what it is. I repeat, if you are starting your first business in Russia, it would be logical to think of setting up a joint venture.
I stress that there are opportunities in all sectors of the economy – from simple trade to high-tech services. You can enter this market and be competitive here.
– In Moscow there are more opportunities, but more competition too.
– Therefore you have to assess your chances realistically, and choose a field where there is room for competition and you won’t be squeezed out by the monopolists. In Moscow, for example, there is a lack of shopping floor space. This means that any shop or supermarket will make a profit. It is important to imbue Western investors with confidence that it is possible to work here. And at the same time, to make them realise how successful competition can be in any particular market.
– You advise starting a business by opening a joint venture. How can you avoid making a mistake in selecting your Russian partner?
– Listen to advice and consultations, both from state agencies and from firms like ours. Secondly, you have to study the market thoroughly. During the war, the famous Field Marshal Montgomery, after good preparation, was able to lead the British Army through the desert and foil the Nazis’ plans. Time spent in preparation is never spent in vain.
Field Marshal Montgomery, after good preparation, was able to lead the British Army through the desert and foil the Nazis’ plans. Time spent in preparation is never spent in vain.
– It is generally considered that French and Italian businessmen find it easier to adapt to Russia because in character and mentality, they are more like the devil-may-care Russians. They say that the conservative British find it more difficult in this respect. Is this also a stereotype?
– The first thing the French and Italians do when they arrive in Moscow is to go to the best restaurant they can find, and if they like it there, they are left with good impressions. That’s a joke, of course. Actually it all depends on the individual. I, for example, feel perfectly at ease here in all respects. I travel on the Metro. I can move easily round the city at any time of the day or night. For me, Moscow is as safe as New York or London. There’s plenty to do in your leisure time too. I like strolling round Gorky Park. I went to a hockey match recently. I regularly spend time in a Moscow golf club. I visit museums. So I don’t get bored.
– What do you think, will the Moscow authorities ever achieve the quality of lawns you have in England?
– Oh, that’s yet another field of activity for foreign investors!