— How hard is it for Indians to open a business in Russia?
— The first thing they have to understand is that Russia of the nineties and Russia of the new century are two different countries. When I was beginning my business towards the end of the 20th century, there were still elements of the Mafia gangster market here. They have been left behind in the distant past. Now it is a stable, profitable, civilized market. You can earn money here, but it requires considerable effort. No-one will hand you money on a plate. But if you do everything right – legally, intelligently – you could well reckon on being successful.
Sammy Kotwani, founder of the “Imperial Tailor” company, graduated from the Institute of Silk and Artistic Silkography, which is considered one of the best higher educational establishments in India. After gaining a diploma in the specialties of “Fabric Technologies” and “Weaving Technologies”, he continued his studies in one of London’s designer schools. In 1991 he set up the company Wintex Tailoring in Moscow. Its products, ready-made suits, began to be delivered to embassies, diplomats and foreign businessmen. Later the company changed its name and strategy, aiming for the Russian client who prefers top quality bespoke clothing. Sammy Kotwani has been taking orders from Moscow clients for more than 20 years. Measurements are taken in a salon in one of Moscow’s historic buildings, Gostiny Dvor, under arched ceilings of the 17th century. Its closeness to the Kremlin, the State Duma, the Federation Council, embassies and the prestigious offices of major companies is why he gets the sort of customers he does. Eduard Kokoyty, Nursultan Nazaybayev, Kirsan Ilyumzhinov, Leonid Kuchma, Vladimir Resin, Sergei Ivanov, Yevgeni Primakov, Iosif Kobzon, Nikas Safronov – these are just some of the names on the Imperial Tailor’s client list.
— Surely the Indians don’t still have memories connected to the wild nineties?
— Don’t forget that in India, most of the population can speak English fluently. They all read newspapers in English, which sometimes quote information from the Western press. Many in our country really have no idea of what is going on in Russia. Indian businessmen of the new generation hear much that is negative, so they are not willing to come to Russia. The leaders of our countries should think seriously about this and draw the appropriate conclusions. After all, friendship between India and Russia has deep roots. Your market is free, there are whole industries in which there is no strong competition, where Indians could find their niche.
— What niches are you talking about? How is Indian business represented in Russia?
— Traditionally, for many years, Indian business in Moscow has been represented by a wide variety of companies. In the pharmaceutical industry I would name such brands as MJ Biopharm, Ranbaxy Limited, Naprod Life Science Pvt., Glenmark Pharma, Sun Pharma, Panacea Biotec, Unique Pharmaceuticals and Lupin Limited. In the field of telecommunication, the project of Sistema Shyam Teleservises Ltd stands out. It is an Indian cellphone communications network, a joint venture of the Russian AFK Sistema (73.71% of the stock) and the Indian Shyam group of companies (23.79%). Thermax Ltd is a leading Indian company producing boiler equipment and chemicals. The company has been operating successfully in Russia and the other CIS countries for more than 30 years. The Russian firm “Shelkovy dom Suriyasilk” is the official representation of the holding Sabava Impex. This producer and supplier of India’s textile products has been known in the textiles market for more than 15 years. Tata Tea, one of India’s biggest foodstuffs companies, has set up a joint venture in Russia with the well-known Russian tea and coffee producer TD “Grand”. The Indian tea company West-Line, and Indian Spices, are operating stably in your market.
— Is the Russian market still attractive to Indian businessmen?
— The point is that the predicted and actual profits which the Russian market as a whole and Moscow in particular provide for entrepreneurs are considerably higher than could be reckoned on in Europe or the USA. The success of the Indian pharmaceutical industry is a case in point: the generics (analogues) niche is not yet full, and the original products from the market leaders such as Germany and the USA cost a lot more in Russia. Leading Indian companies: Cipla, Ranbaxy, Nicholas Piramal, Sun Pharma, Dr. Reddy's, Wokhardt, Torrent Pharma and Lupin, have subsidiary production facilities in 60 countries all round the world. For example, one of the lines most in demand in the world is medications for men (Viagra, Levitra, Sialis), and these goods are inexpensive generics from India.
— What can you say about the prospects for our relations?
— The question of increasing trade turnovers is a task for India and Russia which is fully achievable and only needs time. The reorientation of your country from Western markets to Eastern ones, which is being much talked about at present, will not take place in a day, in any case. But these processes are taking place before our eyes. And there can be no doubt that the dynamic of development of relations will be positive.
In connection with the sanctions on food, India is actively offering Russia its agricultural produce. This includes potatoes, onions, gherkins and much else besides. Here’s an interesting fact: India used to be supplied with dried milk from the USSR, but now it’s the other way round. Our country has become the worlds leading producer of dairy products. We are also breeding cattle, and have begun delivering buffalo meat to Russia.
The setting up of joint ventures has begun in Krasnodar and Stavropol Territories. The Indian company Labindia Consultants Pvt. Ltd is attracting investors to carry out a pilot project to create a special economic zone for tourism and relaxation, “Novaya Anapa”. That is also where a Russian-Indian joint venture is building a factory to produce biodegradable eco-ware. Investments in the project are predicted to be about 460,000,000 roubles.
The reconstruction of Astrakhan port will help increase trade turnover to deliver goods from India as the situation demands. This will make it possible to halve the travel time to Moscow and other regions of Russia. The development of the economies of both countries will also enable the transition to accounting in national currencies. “Rouble – rupee” is a mutually beneficial system, enabling the dollar to be cut out of accounting altogether. All parties will benefit from this: both the entrepreneurs and the national economies.
A not unimportant spur to the development of our relations is the ability of Indian entrepreneurs rapidly to assimilate the cultural specifics of the country where they live and work. They quickly adapt to the existing realities of conducting business.
— Are there any more examples of the setting up of joint ventures? Are Indians bringing production facilities into use on Russian territory?
— It is true that in the textiles industry, Indian companies have bought upold Soviet mills and have put efficient production facilities into use there. All this production goes onto your internal market, apart from some which goes to Europe. For example, the company Ecotex has been operating successfully for may years now, It has its own production facilities and is the official representative of several Indian textile mills in Russia.
Indians have built factories in your country. There are even companies extracting oil in Russia. Not everyone knows that the main investment project implemented with the participation of Indian partners on Russian territory is “Sakhalin-1”. On the basis of a production sharing agreement, ONGC Videsh Ltd. (OVL) has a participant share of 20% in it. Since 2006, OVL has been receiving its share of the extracted product (crude oil, and from 2009, liquefied natural gas).
— How should an Indian entrepreneur start opening his business in Russia?
— First of all he needs to hire an educated and experienced interpreter whom he trusts. Then a lawyer, with the same stipulations. It must be remembered that unlike the Western countries, Russia is a country with a young democratic economy. And the rules for conducting entrepreneurial activities and relations between business and the state are not set in stone. They change periodically. You have to be prepared for this, so that at the end of the financial year, you do not end up in the red.
The Indian business alliance provides assistance in solving key problems connected with the development of cooperation between Russian and Indian small and medium business companies. It works out and implements special measures for the exchange of experience with international partners. It takes part in international programmes concerned with educational activities and the development, adaptation, introduction and facilitation of public initiatives for Indian business in Russia. The IBA offers cooperation in various forms of activity, including in questions of the stable development of Russian-Indian ties in the political, economic, social and ecological spheres, and in culture and science.
— What advantages does an entrepreneur gain from membership of the Indian Business Alliance?
— The IBA is a non-commercial organization. Unfortunately, the abundance of bureaucratic procedures involved in registration is a serious barrier for small and medium entrepreneurs from India. Arranging permits to work can take up to three months, it happens not infrequently that an entrepreneur opens a firm here, of which he is the managing director, but he does not yet have the right to work in Russia. And sometimes this permission is required not only for him but for his Indian co-workers. He brings his trusted fellow-countrymen to work with him.
The Indian Business Alliance actively assists businessmen, if they ask, to resolve these matters as quickly as possible. And the Moscow authorities meet us halfway. Another aspect is representing Indian companies in front of the state authorities if tax problems arise. As in many other countries, the taxation service in Russia is often not very friendly to small and medium businesses, sometimes we are virtually their only protection.
— Comparing Russian and Indian bureaucracy, which is the worst?
— There is more bureaucracy in Russia, in India businessmen can live more freely. Here even the most petty officials like to make themselves out to be important leaders. That is your mentality: officials work not only for the state, but for themselves too.
Five Pieces of Advice from Sammy Kotwani for Those Who Want to Start a Business in Russia1. Be decisive.You need boldness and positive thinking to start a business in Russia. The Russian market does not tolerate pessimists.2. Seek out key people.From the very beginning, select the right people to deal with the paperwork. The most important in this process are a capable translator and an experienced lawyer.3. Be inventive and ingenious.Those businessmen who believe that the principles of doing business in Russia simply amount to buying cheap and selling dear are mistaken. The times of “the shuttle trade” have long been over.4. Respect the laws of this country.If you have come to Russia to work, obey the laws and try to get used to them.5. Conduct your business honestly.Do not try to build up “informal” relationships with officials and the monitoring bodies. Don’t offer bribes, for that you could end up in prison.
In my view, in Russia, not only the bureaucratic burden on small and medium businesses, but also the tax burden, should be reduced.Even to the extent of relieving them of some taxes altogether. The small family business, in which three or four people work unstintingly from morning till night, is just the sort which the state ought to help get on its feet. Let the real monopolies like Rosneft and Gazprom pay more taxes. Why help them? They can manage without.
— But for all that, Indian small and medium businesses are not leaving Russia. What is the reason for that?
— You can do business in Africa too, but in Russia there is the greatest purchasing power of all the BRICS countries. As I already said, the norm for profit in Russia is higher than in the developed Western countries. Indians find it comfortable to work here, we quickly find a common language with Russians. We get along fine with each other at the same festive table. I have been to quite a few countries, but I have never met such warm-heartedness and hospitality.
— Are your personal plans and those of your company connected with Russia?
— I don’t intend to leave Russia. My company’s business plan for tailoring covers four decades. Business is going well, in spite of the crisis. To turn to the most recent events, I have decided to open a branch of my company in the Crimea, in Simferopol. I reckon that the present minor recession will end next year, and I shall return to the usual norm of 30% profit.
Moscow is a splendid city, it is in the list of the 25 best mega-cities of the world. Many influential state officials know me, they are my clients. I can’t complain. I have every opportunity to develop my business successfully.