03.03.2015 - Russian economic developments Feb 2015
Experts of Gaidar Institute for Economic Policy present a survey "Russian Economic Developments" №3, 2015.
In this issue: Political and economic results of February 2015 - Inflation and monetary policy in January 2015 - The Russian banking sector in January 2015 - Financial markets in February 2015- Russia's state budget in January 2015 - Russia's real sector of the economy in January 2015: actors and trends - The russian industry in January 2015 - Russia's foreign trade in December 2014 - Housing mortgage in the Russian Federation in January 2015 - The living standards of the population of the Russian Federation in January 2015 - The review of the meetings of the Government of the Russian Federation in February 2015 - The review of Russia's economic legislation in February 2015 - An overview of normative documents on taxation issues for January February 2015 - Changes in the regulatory base of Russia's budgetary process in February 2015 - The competitive power of Russia's light industry value chains and development prospects - Input of economic growth factors into the value added index in the industrial sector in 2014.
12.01.2015 - Guidelines for doing business in Russia
Despite sanctions and a difficult political situation, it is always good to have some knowledge of how to operate on the Russian market. Barentsnova has created eight guidelines foreign companies would benefit from following if they want to succeed with their business in Russia.
It is no secret that the current political situation has reduced Russia’s attractiveness towards the majority of western investors. Nevertheless, we must not undermine the fact that most difficult political situations have both beginnings and ends. Therefore, it is important for those who already are in Russia, and future investors, to be aware of the aspects that are important to achieve success in the Russian market.
A master’s study conducted by Maria Varteressian looks at what it takes for Norwegian companies to succeed with their internationalisation to Russia. Varteressian collected data from experienced Norwegian facilitators and companies that have had a positive experience with the Russian market.
The data for her thesis was collected in spring 2014. However, even if politics might change in a few months, changing the business culture will take longer. Therefore, these findings are still relevant for everyone with an interest for doing business in Russia.
Based on Varteressian’s work, Barentsnova has created eight guidelines for doing business in Russia. The following guidelines represent what, in their view, tends to be the main characteristics of companies that succeed on the Russian market.
1. Scandinavian companies going to Russia should preferably have a sufficient resource base and a healthy economy. Establishment of business, networks and name on the market might take longer than what the companies are used to from the home market. Companies should, therefore, be thrifty and account for a period without any profits. Russia is not a country for those with a short time perspective seeking fast profit. You must also have the courage and willingness to fight for market position and assets. Russia is a tough market, and the competition can be fierce. Due to substantially different business cultures, Scandinavian companies have tended to be overly soft, and somewhat naïve, when doing business in Russia.
2. Even though the market for your product is good in Scandinavia, it doesn’t mean it will be equally successful on the Russian market. The Russian customers have, due to a culture that is dissimilar to the Scandinavian, a different mentality. In turn, this affects both characters of product demand and marketing strategies. Naturally, there is no point in offering a product for which there is no market demand.
3. Business in Russia is relationship based. Thus, relations tend to weight more than contracts. Investors must, therefore, create solid networks and spend time on building trust to actors within their surroundings. Additionally, by seeking information in networks of experienced investors prior to investing, the company might gain valuable insight into how it should operate in Russia.
4. It is important to have full attention on the Russia activity. Therefore, your business in Russia should not only be managed from Scandianvia. The Scandinavian management must be in place at the Russian entity, at least by frequent visits from employees with decision-making authority. It is also important to have close and frequent interaction between headquarter and the foreign entity.
5. Navigating through the Russian bureaucracy and legal system might be challenging. Acquiring the right documents, with the right types of stamps on them can be time-consuming. Based on this, the legal and bureaucratic system in Russia might feel overwhelming for foreign investors. However, it is fully possible to handle it. Companies need to calculate for having to hire consultants and skilled advisors to help them navigate through the jungle of unfamiliar laws and regulations.
6. Not a hard drinker? No problem. You don’t have to get drunk on vodka to be accepted and respected by your Russian business partners. Russians are very proud of their culture and history. Knowledge of Russian history and culture can, therefore, make it easier for foreign companies to understand the rationale behind decisions made by Russian businesspeople. Also, knowledge of Russian culture and history is appreciated higher than drinking abilities.
7. Knowing Russian is not essential for doing business. However, being able to understand and speak the language will help you to gain an easier insight into the culture and history. It also makes informal networking easier.
8. Don’t always do it your way. It is important to adapt to the local surroundings and culture. Scandinavian companies are used to a relatively organic culture, with a network-shaped authority and a rather low power distance. Since Russian business culture has a bureaucratic character, with hierarchy and power distance, Scandianvian companies in Russia will experience the need to operate differently than they do in their country. However, this does not mean getting involved in shady forms of doing business, as this will not take you far in the sense of stable business development. If you stay away from it, you will gain respect in your surroundings. Corruption is equally illegal in Russia as everywhere else. A good advice is, therefore, to keep the activity close to the local and always on the right side of the law.
20.12.2014 - Business in Norway expands ties with Russia
According to Barentsnova, the business of Norway is committed to expand economic ties with Russia, in both bilateral and international projects. Too much politics around these relations is mutually harmful, believe representatives of the two countries' business communities.
The 4th Russian-Norwegian business forum organized by the Chamber of Commerce and Industry of the Russian Federation (RCCI) and the Norwegian Russian Chamber of Commerce (NRCC) completed its work in Moscow. The participants discussed the issues of cooperation in shipbuilding, transport infrastructure, resource and energy saving, telecommunication, power generation, agriculture, fisheries, and tourism, which were identified as the main areas of interest for the Norwegian business in Russia.
A special attention at the plenary and panel sessions of the Forum was paid to the results and prospects in the sector of exploration and development of oil and gas deposits on the shelves of Russia and Norway in the Barents Sea, and also to the collaboration in the Arctic zone of the Russian Federation, as well as in the Far East and the Sea of Okhotsk.
The accumulated volume of the Norwegian direct investment in Russia exceeds $ 600 million. At that, the total losses from Norway's joining the anti-Russian sanctions and from the reciprocal sanctions of the Russian Federation are estimated by the Norwegian business in the sum not less that $ 700 million a year. But it is characteristic that the volume of bilateral trade after these restrictions did not reduce.
Opening the event in question, the Vice President of RCCI Alexandr Rybak said that the Forum was an opportunity for businessmen of both countries to establish closer relations in sectors that were not affected by the sanctions. The Chairman of NRCC Liv Monica Bargem Stubholt supported the position of her Russian colleague noting that the temporary difficulties should not affect the cooperation, and that despite the sanctions it is necessary to look for ways to maintain and develop the long standing relations between the countries, reports Rossiyskaya Gazeta.
For example, Norway can make better use of the transit system of the Russian Federation. According to the Port Narvik Director Rune Arnøy, it would be advisable to create an international corridor Beijing - Moscow – Narvik, following the dynamics of freight traffic between Europe and Asia.
In addition, Norway along with other countries of the European Free Trade Association is interested to resume the negotiations with the Customs Union on the issue of a free trade zone. "This project is mutually beneficial, and negotiations on it were successful," explained Ms. Stubholt, "but the present political climate affects their continuation and the timing of creating such a zone. There must be taken certain governmental and intergovernmental political decisions."
Speaking about the sanctions that have affected the fishing industry, the representatives of the Norwegian producers acknowledged that they indeed encountered some difficulties, but managed to find new markets for their fish products. In particular that applies to fresh and chilled salmon and trout. The entrepreneurs were able to quickly reorient the sales and to direct the suddenly unclaimed volumes to other countries bypassing Russia. However, the Norwegians do not lose hope to return on the Russian market with their products when mutual sanctions are lifted.
Vyacheslav Zilanov, the Chairman of the Coordinating Council "Sevryba" believes that the cooperation between Russia and Norway is developing dynamically and has good prospects. The sanctions and counter-sanctions lead only to losses for Russian and Norwegian fishermen. The introduction of such measures in the field of fisheries can cause negative impact in the long term, and therefore it is desirable to cancel them as soon as possible. It is up to diplomats and heads of states and governments on both sides to do so, the expert said.
The forum participants also voiced the necessity to work out the conditions under which Russian and Norwegian companies would be able to continue their common work on the sea shelves of the two countries. "Both countries have great potential for joint development of hydrocarbon subsoil of the Arctic, and the low oil prices should not suspend the operation started," said Mr. Rybak. "On the whole, the sanctions against Russia are quite counterproductive, as state support of business and free trade is always the key to economic security, and it gives opportunities for the global development."