The problems and promise of investing in Russia
Having spent several years in the late 80s and early 90s campaigning for Soviet Jewry, it was somewhat remarkable to find myself recently chairing a panel discussion on investing in Russia. As one of the leading emerging markets, Russia has attracted a substantial amount of foreign investment and, with the recently announced US$500billion government infrastructure programme, the upward surge in the price of oil, the Sochi 2014 Winter Olympics and the World Cup in 2018, this is likely to continue for the foreseeable future.
For investors with the right attitude, the opportunities offered by Russia are significant but, like all new markets, there are challenges. For the smart investor, the following points should be borne in mind:
● It is critical to understand the country. This means getting to know the rules, learning how the system works and complying with the law. l There are excellent opportunities for both large and medium-sized companies in Russia, but the potential for small organisations remains limited as capital and resources are essential.
● Dealing with bureaucratic matters can be very time-consuming and so it is important not to underestimate this.
● You need to select the correct region for your operations, as differences can be marked. Engaging the right professional is essential as dealing with issues in one part of the country may be of little use in another.
● The local workforce is bright, engaging, talented and very hard-working and so finding a suitable team should be achievable.
● Transparency risks can be overstated, and also mitigated by choosing the right region. It is better to do things correctly than put your business at risk.
● You should always 'expect the unexpected' and factor this into your management decisions. Employing an experienced Russian project manager can be particularly helpful in saving you money in the long run.
● It is important not to be discouraged by negative media images. The reality is often quite different and, as mentioned before, one needs to look at the country on a regional basis.
● Managing expectations at home can sometimes be an issue so it may be prudent to get decision makers to see things for themselves, rather than to try and handle projects remotely.
Whilst there are challenges when investing in Russia, these should not be overstated - it is not the UK, but it isn't the Moon either.
Jonathan Morris is a partner at the international law firm, Berwin Leighton Paisner LLP