A foreign investor has arrived in Russia with the aim of starting his own small or medium business here. What is the first step?
He should hold his first consultations in his country. The main question is, with whom? The best answer is: with his fellow countrymen who are conducting business in Russia right now. If he doesn’t have any such contacts, he must find some people who come from Russia and talk to them. Another well-tried way is through organizations of Russian compatriots abroad. The MHC maintains close contact with such organizations in 73 countries throughout the world. And there he can also find the required consultative assistance.
Where else to begin? The rules for opening a commercial enterprise in Russia must be studied in detail. In any case, a potential investor or businessman needs qualified legal support.
An investor has decided to take a leap in the dark. He has come to a major regional center, got as far as the local administration, has called the appropriate committee from the security desk, but… has not received a single answer that makes sense to him. What should he do?
I wouldn’t advise him to take the leap in the dark. Before doing anything, he should contact someone, even your magazine, to explain what he needs.
In working out an investment plan or starting a business in Russia, it is also necessary to choose which region. Let me remind you that the Russian Federation consists of 83 territories, regions and republics. And many of these administrative divisions of the Federation are currently paying serious attention to making themselves attractive to investors. Departments for this purpose operate in regional administrations, and their work is normally supervised by one of the vice-governors.
Consultations can also be obtained in various investment and consulting agencies. Naturally, you have to pay for their services. This shouldn’t scare you. Any investor thinking of doing business in Russia has a clear motivation: he plans to make more money in Russia than he could at home. Here he can occupy market niches, which are still empty. It’s difficult to do this without start-up capital and knowledgeable consultants.
In the course of registration, a potential investor has come up against some problems. For example, officials do not know that a foreigner can register a limited liability company in the same way as a Russian citizen, and refuse to accept the packet of documents he has compiled. What should a foreigner do in this situation?
He should go to a law firm, an attorney’s office. But I don’t think he will have problems of that kind. But if he does, the lawyers will very quickly explain the current laws to the officials.
The organizational difficulties have been overcome, the firm has been registered, but he finds there is a shortage of suitable personnel. He has not succeeded in recruiting specialists of the required level. Is this an insuperable problem?
He should look for companies in more or less the same line of activity and form partnerships with them. You can apply for specialists to any recruiting agencies, for example, on the website SuperJob.ru – this is more expensive, of course, but a specialist found through them will be worth a dozen amateurs. This will save you from many false steps at the stage of setting up your enterprise, and will ensure its success.
An investor has come up against a problem in choosing a reliable Russian partner. Those who have been suggested to him either seem untrustworthy, or are not competent to become such partners. How can he solve this problem?
This is the most difficult question. The selection of a partner has to be approached very scrupulously. You have to understand that just the same legal rules operate in Russia as in the rest of the world. I shall illustrate this by two diametrically opposite examples, which we are dealing with at the moment.
In the first case, businessmen from the Baltic States agreed to sell aircraft spare parts to one of the regional Russian firms. The delivery was made, but they did not receive the due payment of €80,000. We recommended them to use our lawyers, who are now helping to recover this debt. But it is a complicated case. According to the contract concluded by the Baltic businessmen, delivery was to be made to one firm but payment was supposed to be made by another. This means that the first firm bears no liability for the failure of the second organization to fulfil the terms of the contract. When the lawyers came to study this document, naturally a lot of questions arose. And the first one was: how could they have signed this contract?
If the Baltic businessmen had had consultations with our partner services from the very beginning, they would have signed a correct contract and would have made detailed checks on the firm with which they were intending to do business. After all, €80,000 is quite a considerable sum for a small business or even a medium one. Of course, after such a check they would have had to give up their dream of profit, because the delivery of the spare parts would certainly not have taken place. But they wouldn’t have lost money at least.
Another example. Some of our former fellow-countrymen in Eastern Europe decided to set up a chain of hotels in Russia. They at once turned to the MHC and sent their representative to us. We sent them to trusted specialists, who gave them proper consultations and they went to see actual prospective hotels. The contracts are now in the stage of preparation for signing.
A foreign investor has learned that Russian businessmen obtain aid from the state. Can he reckon on obtaining it too?
Yes, if he has decided to invest assets in a socially important project or in a manufacturing process, which will replace import. I can give another example from the experience of the Moscow House of Compatriots. British, Swiss and Italian equipment is currently being installed in a small factory near Chekhov, which will soon begin to produce cosmetic pads from bleached cotton. This is classed as a medium business; the total cost of the project is about 2,000,000 dollars. And the Moscow government is acting as a co-investor in this enterprise.
The idea of creating such an enterprise was born in the MHC in the course of a joint discussion with businessmen from the Baltic and Turkey on empty niches in the Russian market. It might seem than cotton wool pads, cotton buds and other such hygienic products are just a trifle… But this trifle is a necessity in every domestic medicine cabinet. And the import share of this segment of the market in Russia is very high. By the way, in developing the business plan, the opinion of state bodies was also taken into account. We asked the Moscow Health Department about this matter, and were told that even in social institutions, everything is bought abroad. Under tender, but always imported. We ask: “Would you buy Russian products?” They reply: “Offer a good price and you’ll win the tender. Of course it would be better to buy Russian products”. Anyway, a lot of preliminary work has been done, the question of allocating a plot of land for building the factory has been settled and “Medvata Ltd.” has been brought in as the managing company. The investment from the Moscow government amounts to 30 percent. Installation of the equipment is now well under way.
Again, this is not an isolated example. We have many years of experience and smoothly-running cooperation with various organizations both inside the country and abroad. We know our way round the realities of the Russian market. In turning to the MHC, a foreign organization will not be overwhelmed by going round all sorts of intermediaries. The foreign investor will be turning to a state institution, which will set him straight about contacts with regional administrations, contacts with organizations and associations of foreigners abroad, and our other partners. And he will also be able to obtain specific explanations about his type of business and the prospects of adapting it to Russian conditions.