Corruption, Taxes Part Of Difficulty
Editor’s note: Jane Applegate recently visited Russia to speak at a conference, and report on the economy and entrepreneurial market.
If you want to understand the challenges of doing business in Russia, consider this:
Although new ATM machines adorn major boulevards in Moscow, people seem reluctant to use them. Fear of being robbed is one reason, but until 1997, it was legal to drive your car on the sidewalk during rush hour. So, what person in his right mind would risk getting run over while lined up in front of an ATM machine?
Impossible traffic jams, corrupt politicians, high taxes and lack of infrastructure pose challenges to anyone trying to do business here. For instance, in mid-November, Russia stopped doing business with 11 major banks, including Chase Manhattan and J.P. Morgan.
No matter how tough it is, doing business in Russia still has tremendous appeal to Western entrepreneurs. But wanting to do a deal in Russia and actually doing it are two different stories. For example, while standing in line waiting to board the flight home, I overheard an engineer from a major Midwestern utility saying how much the Russians wanted his company to finish building a desperately needed nuclear power plant. At the site he visited, after 10 years of construction, only one cooling tower and a section of one building were complete. The Russians really wanted to do business with the utility but had no money and were hoping for a barter deal.
If you have lots of patience and money and believe your product or service will appeal to Russians, start doing your homework. Call the U.S. Commerce Department and ask to speak to a Russian trade specialist. The Export-Import Bank and U.S. Agency for International Development also operate assistance programs for people wanting to do business in Russia.
To obtain a business travel visa, you officially need an invitation from a Russian firm. However, several U.S.-based companies sell visas. The Russia House, in Washington, DC, for example, charges $195 for a one-trip visa. They need 8 days to 10 days notice, a copy of the first two pages of your U.S. passport and three passport photos. If you plan to go back and forth, a three-month visa is $245.
Try to arrange for a colleague or the hotel driver to meet you at the airport. If not, you’ll be greeted by a scary group of taxi drivers who charge $100 for what should be a $45 to $50 trip downtown. Once in Moscow, the trolleys and Metro are great - if you can read Russian. If not, you can hail a renegade taxi by standing on the curb with your hand pointed down. These unofficial taxis are plentiful, and if you ask someone to write down the address you need in Russian, they’ll take you there for a few dollars.
Forget what you’ve heard about bringing your own toilet paper. You should bring bottled water, but if you check into the new Marriott Grand Hotel, you’ll feel right at home. It’s expensive - about $250 a night, but you can watch CNN, pay-per-view movies and a Russian version of MTV in your room.
Expecting a drab and dreary scene, I was surprised to see the boulevards teeming with fashionably dressed men and women. The bustling shops in Red Square are piled with goods from Benetton and cosmetics by Estee Lauder. Steep income and payroll taxes may discourage free enterprise, but American and Russian entrepreneurs say they keep two sets of books, paying their employees a small sum on the books and the rest in cash.
A U.S. business consultant who runs an incubator in a remote part of the country said Americans have a tough time getting used to the quirks of doing business here. For example, she asked the baker in her incubator if he would bake black bread because she loved it. She assumed he would just order the ingredients, and fire up the ovens. Not quite. It took more than a year and hundreds of dollars in “fees” to obtain a permit to bake black bread. “This story is very typical of trying to do business here,” she said.
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