Transcript The Practicalities of doing business in Russia

The Pragmatics of business in
Russia
Emita: Russia – Looking Further East
18th October, 2007
“Darling, they’re sending me to
Russia…”
Overview of Russia
• Largest country in the world
• A dynamic process of change
in every sphere
• Politically sensitive
• Economically resurgent
• Unpredictable
• Former superpower,
struggling to assert its
position
• Autocratic, not traditionally
democratic
Albion: (Overseas) Ltd
FDI slow
FDI in Russia (2006)
2006 FDI nearly $14 bn; 82.3% from:
► Luxembourg ► Cyprus
► UK
► Netherlands ► France
► USA
► Germany
► Switzerland ► India
Main trade partners (54.1% of trade
turnover)
70
►Germany
60
►Netherlands
50
►Italy
40
►Turkey
30
20
►Poland
10
►UK
0
►Finland
Russia
China
$ BN
The trend of FDI into Russia:
14
12
10
8
$ Bn
6
4
2
0
2000 2001 2002 2003 2004 2005 2006
Albion: (Overseas) Ltd
Russia’s Meteoric Rise
350
300
250
200
2.5
150
100
2
50
0
1998 1999 2000 2001 2002 2003 2004 2005 2006
1.5
Foreign Exchange Reserves (US$bn.)
£ Bn
1
900000
0.5
800000
700000
600000
£
0
500000
400000
300000
200000
100000
0
1998
1998
2000
2002
2004
2006
2000
2002
2004
2006
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
Doing Business in Russia
Devaluation: August 1998
“It was like the american dream in
reverse: we woke up poor”.
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
IPR
Corp. Governance
Language difficulty
Albion: (Overseas) Ltd
“Два пивa, мой друг платит”
David Cant
Circa 1986, 1987, 1988, 1989, 1990, 1991,
1992…..
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
IPR
Corp. Governance
Language difficulty
Entrepreunership
Security issues
Legislative and political
issues
Cultural barriers
“The only country with an
unpredictable past”
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Genghis Khan
Repressive Czarist Regime (Ivan
the Terrible)
1861 Emancipation of Serfs
1905 Russo-Japanese War
1905 Failed Revolution
1906-1910 Black Hundreds’
Revenge
1910-1913 Largest army on
earth
1914-1918 (1916) World War I
1917 Bolshevik Revolution
1918 Romanov Family shot
1918-1920 Civil War
1921-1928 USSR is born; Lenin
dies, Stalin takes over
1929-1940 Confiscations,
Show Trials “Industrialisation”
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1939 (1942) -1945 World War II
1946-1952 Zhdanovshina, Cold
War, Atomic Test
1953-1963 Warsaw Pact,Berlin
Wall
1964-1975 Oil Crisis,
centralisation
1976-1985 Stagnation,
Afghanistan
1986-1988 Glasnost,
Perestroika, oil
1989-1991 Wall falls, USSR ends
1992-1999 BNY, chaos, oligarchs
2000-2003 VVP, Centralisation,
Autocracy
2004-2008 Oil Enrichment,
Economic Growth
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
IPR
Corp. Governance
Language difficulty
Entrepreunership
Security issues
Legislative and political
issues
Cultural barriers
Economic instability
Remote Location
Weak Banks
Partner difficulties
Doing Business in Russia
Phlegmatic
Stubborn
Direct
Unresponsive
Bureaucratic
Hierarchical
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Loyal
Dependable
Thorough
Resourceful
Pragmatic
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
IPR
Corp. Governance
Language difficulty
Entrepreunership
Security issues
Legislative and political
issues
Cultural barriers
Economic instability
Remote Location
Weak Banks
Partner difficulties
Inflation
Demographic Crisis
Weak Military
Brain Drain
Alien Business Environment
Meetings
• The meeting room
• Purpose and agenda
• Hierarchy: Delegation
Head
• Them/Us: seating
• Decision fakers, Global
Industrialists…
• Leading and managing
• Interpreting
• Silence & cigarette
lighters
• Presenting of gifts
• Concluding a meeting
Albion: (Overseas) Ltd
FDI slow
Mafia
Corruption
Bureaucracy
Non-Payment
IPR
Corp. Governance
Language difficulty
Entrepreunership
Security issues
Legislative and political
issues
Cultural barriers
Economic instability
Remote Location
Weak Banks
Partner difficulties
Inflation
Demographic Crisis
Weak Military
Brain Drain
Alien Business Environment
Capital Flight
Climate/Size
Lack of infrastructure
Accountancy Stds
High cost of entering the
market– time and money
Albion: (Overseas) Ltd
Short-term “leg-up” into the market
Market Introduction
Finding Distributors
Troubleshooting
Cost-savings
Long-term “Footprint”
Your Office in Russia
Local “Ivan”
Consignee Address, Legal entity
Business support by another business
Can be shared between companies
Training people doing business in Russia
Albion: (Overseas) Ltd
• Increasing number
of companies
• friendly tax regime
• Appetite for
business with UK
• Geographical
Proximity
• Large pockets of
wealth
• Less expensive than
you think
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•
•
Growing economy
political stability
99% literacy
skilled low-cost
labour
• 11 time zones from
east to west
• High margins
• Customs,
certification, no
problem!
Albion: (Overseas) Ltd
01732 373020
[email protected]
Size doesn’t matter
Understand Russia
Be patient
Use specialist help
Make no Assumptions
Be Positive
Mind your Language!
Get above the Power Line
Get past the Relationship
line
Consider your product or
service. Need for
adaptation?
Visit the Market
Visit the Market again!
And again….
No Stock? Don’t
advertise!
Spend your money wisely
Sell in $ or €, not £
Literature and cards
into Russian
Don’t expect answers to
emails or faxes
Don’t assume they’re out
to get you!