Moscow is not Russia. About ten percent of the population lives here (15 Mio people) and in the center you feel like living in any European city, if the streets weren’t full of Milizia (Police) and Ladas.
The Russian economy seems to be on the up rise. After the crash in 1998, almost all middle class was wiped out. People seem to become confident again and the middle class is growing mainly based in the service- and advertising-industry. Others will follow. Ad spending is enormous over here, but most of it is secured by branches of large foreign networks and publishers. Most of the ad budgets go into outdoor, followed by TV and print. In 80% of the cases foreign campaigns are just adapted to the Russian market. New media is still pretty small, but growing fast as well.
Its quite hard to find employment, if you don’t speak the language and it takes some time to learn Russian. Also finding projects as a consultant is not easy. Russians think of themselves as pretty smart and they don’t need any consulting services (for all of you coaches, consultants and trainers).
I think this results out of the wild times between 90 and 97. Lots of “professional” foreigners came into the country on something like a gold rush, but many of them were losers in their countries pretending to be more than they actually were. Who else would have come here, while our economies were thriving?! So now Russians are very cautious in business with foreigners. I could write another article just about business practices and what to watch out over here. Maybe I will do that later.
I had lots of negotiations for projects, but in 90% of the cases people talk (even say YES) and nothing happens after all. Or they just steal your ideas and concept in order to give it to a Russian, who is doing the job for much less than you can and you are willing to do the job. There is no way to show them you are competent and writing a proposal without giving them a minimum of information.
Needless to say that 95% of my business is in the US and Germany. We offer new media and multimedia projects in these markets for about half of the cost of local companies. Yes, I know that we destroy the prices, but we needed to find a way out of the economy crisis and our company wouldn’t exists anymore, if we would have not done that and new media is just perfect for off-shoring. After all we are entrepreneurs and capitalists.
Living in Moscow is quite interesting. I came here in October 2003 and it took some time to get used to the coldness and darkness of Russia in the winter. Now the weather is friendlier, but people still don’t smile on the streets. Only a few people speak English. One must learn Russian. As a foreigner you are constantly abused, especially if you don’t speak the language. Prices sky rocket for apartments, taxi rides (500-1000% more), theatre, DVD’s or anything you purchase. But its capitalism, you need to negotiate before and just go somewhere else if you can’t find an agreement.
This wild and total capitalism is depressing on one hand, but it gives you a lot of flexibility as well. Almost no one pays taxes and there are ways around all laws and rules. Its like in the US (but much more intense). If you have money, you can do anything. You don’t have money, you are stuck. Russia has a 40 Billion Dollar turnover in bribery money each year and alone 1 Billion (Milliarden in Deutsch) go to the traffic police (Source: Spiegel).
Talking of bribery and business. Every time I go back to the West I hear about the Russian Mafia. Indeed there is a Russian Mafia, but as an ordinary business man you hardly get in contact with them. In general there are two powers in Russia pulling the strings behind the scenes. One is the Mafia and the other one the FSB (former KGB, now turned its interest inside Russia). FSB is currently considered to be the stronger one. If you do substantial business, you need to decide for one of the two “roofs” as Russians call them. But usually you will never have to deal with it. Most of the foreign companies I know, leave this (apparently not knowing about it) up to their Russian distributors. In any case this “roof” is giving you protection (against more bribery), makes things work (e.g. customs & regulations) and gives you access to a network of business people. Of course you pay your share (% to be negotiated).
Russia is a very large country, a huge market and its moving closer to Europe. The development of the next 10-20 years will be very interesting. I hear different statistics of which country is the largest investor. Sometimes it’s the US, than its Germany, than they say the UK (because of petrol companies like BP, which I don’t believe).
In Moscow supermarkets you find 70% European products and many of them are from Germany. Plenty of foreign companies produce in Russia already. German Dr. Oetker is an example producing frozen Pizza’s here. On the streets I see more Mercedes, Volkswagen, Porsche, Audi and BMW than anywhere else (and no, not most of them are stolen). People here actually have lots of money and they spend it. They have lived through communism, two near revolutions and a fatal economy crash in 98. That’s why Russians tend not to save money. When they get it, they spend it. Live now, not later. This is the main reason of all decadence in Moscow. The rest of Russia, they call it the regions, is slowly following. This behavior is opening lots of opportunities for business with Russian individuals, especially in the luxury goods market.
If you want to come here to do business, prepare yourself. Get contact to foreigners who live here and know how to do business in Russia. Be very careful not to get ripped of. As a foreigner (tourist/business) you are considered wealthy and that means you can be taken advantage of. Even Russian businessmen and rich people think like this. Be very careful with investments. Don’t believe what people say, often its just hot air.
It’s a wild place, but that’s what makes it a challenge and an interesting place to be at. After all, there is lower profit with lower risk. There would be more to write about the culture, family and the fear of terror, but this article has gotten too long already. Another time.
Greetings from Moscow.
two-zero