Luring the Brits abroad
Founded in the final years of the Romanov dynasty, the Russo-British Chamber of Commerce (RBCC) is a non-governmental organization that has been cultivating Russian and British commercial relations for the past 86 years.
As Russia endeavors to come to terms with its newfound market-economy status, The Russia Journal spoke with the head of the RBCC's Moscow office, Richard Wallace, about the chamber's current activities and his interpretation of what it means to do business in Russia.
The Russia Journal: When the RBCC began its activities in Russia in 1916, Russia was on the threshold of perhaps the most tumultuous era of its history. During those 70-odd years, Russo-British relations were often stretched to the breaking point. How would you describe economic relations between the two countries today?
Richard Wallace: Russia is opening a great deal to direct foreign investment; there is much potential in Russia for Western and British companies and also much to be done. We always tell companies looking to invest in Russia to be aware of what is involved in doing business here – get to know your partner, understand the climate, seek good advice.
The Russian economy itself is very encouraging. With all the other world economies struggling, the RTS is one of the only stock markets which is looking positive and growing.
RJ: How do you sell the Russian marketplace to British companies? What attracts them to Russia?
RW: The fact that it is very unique. The natural resources and the Russians themselves – the work force is extremely intelligent; they are extremely committed, extremely eager to continue the good relationship. Many have been educated in the United Kingdom and speak better English than you and I. There is still a lot that needs to be done – the intellectual-property rights issues, WTO accession, adopting international accounting standards – but it's going in the right direction.
We encourage British companies. We are Russophiles; we encourage and promote Russia, Russia as a place you can do business with. Our executive council is split 50-50 between Russian and British companies.
RJ: The government says that it wishes to promote foreign investment in Russia, but do you feel that they are shooting themselves in the foot through unnecessary legislation and burdensome red tape?
RW: They do need to change a lot more. Despite the distance Russia has come, they need to do a lot more on the customs side of things, intellectual property and patent law.
A lot of that has come through lobbying from the Coalition for Intellectual Property Rights, which I sit on with the American Chamber of Commerce and the European Business Club. They are beginning to [align] themselves with a Western line of thinking, but there is a great deal more that needs to be done.
RJ: The RBCC organizes trips for delegations of Russian entrepreneurs and government representatives from different regions to the United Kingdom. What are the goals, and what have been the subsequent results of these visits?
RW: Something we are doing a lot of is getting involved in the regions and, more importantly, the federal districts, looking at the possibilities for British investments and giving the districts a platform to promote themselves in the United Kingdom. The aim of these delegations is two-fold.
First, it is a chance for the regions to promote themselves and to promote Russia in the West, the opportunity and the potential of the natural resources and the regions.
Second, for entrepreneurs, it is important to build relationships with the media, and to talk to them about their operations.
Last year in March, we organized a delegation from the Central Federal District, with Poltavchenko, [Moscow Mayor Yury] Luzkhov, [Agriculture Minister Alexei] Gordeyev, all 17 of the regional administrations and central governors and 200 businessmen. Something we encourage our committees to do, with the lobbying potential we have, is to associate with the sectors of industry that are most of interest to the membership.
RJ: Doing business in Russia, British firms may encounter business practices that are deemed unethical in Britain. How does the RBCC deal with this possibility, and what advice does it offer to its British clients?
RW: Use the chamber. The chamber has been doing business here for 86 years; it has seen many companies confronted by that problem. For our member companies, we can do the due diligence with a very large contact base. We understand what is involved in doing business here. But also we tell them to get to know your Russian partner.
The RBCC supports a corporate-governance code called "Pragmatic Corporate Governance Worldwide." This is being implemented in Russian companies and the big Russian organizations, and it has the support of the EBRD and the likes of Deloitte and Touche, Raiffeisen Bank and Clifford Chance. So, it has got weight, and it is making inroads for these companies.
There is a lot, hopefully, with the visits of Russians to the United Kingdom and with the good relationship between the United Kingdom and Russia, that can be done to bring down barriers and to build more trust.
What we really say is get to know your Russian partner – socialize and so on. It is important to understand the language; Russians respect that. It is about making the effort, but Russians have to make the effort as well. It is important for the big Russian companies to improve their corporate governance.
In addition, British companies looking to invest in Russia can seek excellent advice from the commercial section of the British Embassy.
RJ: In what way do you think Russia benefits from the RBCC's operations here?
RW: Our position is to facilitate. Facilitate trade and investment between the two countries. We are very proud of the fact that we are a bilateral organization. Which means that we do not only fulfill the functions of a British Chamber of Commerce in Russia, but we are also of a Russo-British nature. This means that we encourage not only the British companies looking to trade and invest in Russia, but also vice-versa.
RJ: The United Nations believes that Russia might be one of the few economies to experience a rise in foreign direct investment over the coming year. What is your prognosis with regards to the future of British investments?
RW: Investment is increasing. August export figures are 29 percent up on last year's, at 7.2 million pounds, while imports have dropped by 12.4 percent for the same period. Year-on-year, it has shown healthy growth.
British companies are investing in Russia, but there could be a lot more; there is great potential there, and I think slowly but surely U.K. industries will increase their involvement in Russia.