The city and business are open to cooperation
“I think that you can’t do business in a country if you don’t know that country’s culture,” said Suren VARDANYAN, Vice President of the Moscow Chamber of Commerce and Industry, in an exclusive interview with Capital Ideas.
Suren Vardanyan, Vice President of the Moscow Chamber of Commerce and Industry (MCCI), has a world map hanging in his office. When you take a closer look at it, you notice that there are pins of different colors all over it. Countries from nearly every continent are marked off. What is this? “These are our plans for the near future, places where the chamber plans to send our delegations to establish contact with business communities,” Mr. Vardanyan explains.
Mr. Vardanyan, political analysts have been talking about a “second Cold War” between Moscow and the West. But it looks like this hasn’t affected the MCCI…
I don’t think we should be expecting any kind of “Cold War.” Let’s not forget that the Cold War that we’re referring to was a political phenomenon. Back then, two diametrically opposed social structures were at odds with each other. In what ways are the politics of Moscow and the West so different? We both have market-driven models of development. So what’s happening right now is definitely not a Cold War. But what is it? That’s another issue.
You know, for the most part there is no such thing as a friendship between countries. This is an axiom of international life. Every government has its own interests – short-term, medium-term, long-term – that it is guided by. It’s no secret that there has been a war for markets going on for a long time. As soon as Russia started doing well and getting dividends from external markets, Washington and Brussels started seriously worrying about their money, profits from the energy sector, pharmaceuticals, arms sales… So as soon as the West understood that the Russian economy was moving way too quickly, they decided to slow it down. This is how I perceive the current conflict between Moscow and the West. And we’re trying to play by the rules in this conflict, which can’t be said about our Western partners.
That’s an interesting point of view. Ok, suppose this isn’t a second “Cold War.” But are today’s tensions and the economic sanctions from the West having an impact on Moscow, or has the city adapted to the situation at hand?
Let’s be objective: of course they’ve had and effect. Why kid yourself? I’m against building castles in the sky.
It’s no secret that a number of European companies who would like to enter the Russian market today are quite cautious. This includes companies from Germany, France, Austria, Poland, Spain, Italy… they have to take into account the risk of being limited by certain sanctions. It’s tough for them, because they don’t fully understand what industries they can enter so that they’re not burdened by the sanctions. Because they’re not judges. This is actually a sad story.
And I can’t say that people are running over here with investments. That wouldn’t be true either. First they want to trade, to revive trade relations. But there are companies that already understand trade by itself is not enough. Localization is key. Some are ready to localize partially. Others are ready to partner up with Russian companies. Others still are ready for full-fledged localization. All the corresponding models exist. The Moscow government has developed unique support structures for these purposes. The city protects against non-commercial risks, for example, provides all sorts of compensations, refunds of cadastral payments. There are also offset agreements, which is when the company receives a guaranteed state order for their products. Moscow has a lot of ways to attract business people, which we could only dream about a few years ago!
To sum it up, I’ll say this: yes, sanctions have an impact, but thanks to competent city government policies that are supported by business from both the real sector and the service sector, the losses from the sanctions have been significantly mitigated.
When we talk about attracting foreign investment to the city, there is another aspect to keep in mind. It has nothing to do with the economy or politics. It’s about ignorance. In both Western and Eastern countries, many people still perceive Russia and Moscow as a sort of terra incognita. Would you agree with this?
Absolutely. We runs into this during all of our meetings with foreign business people. They either don’t know anything at all about us, or they know things that don’t fall in line with reality. They’re very misinformed. They seriously don’t know how we live, or anything about the state of our economy. They come to Moscow and see an entirely different picture than what they’ve hear or read about in their newspapers. They’re completely shocked by what they see, especially in the Russian capital. Of course, Moscow is different from other regions, and even from many European cities, in terms of opportunities and the speed of development. For example, a lot of guests are surprised at how developed the IT sector is here. One of my acquaintances was so shocked when he learned that I can easily transfer money right from my phone. Another colleague, who lives in a European capital, said the following over the phone to his wife before leaving: “Darling, after coming to Moscow, I see that we live in a big village!”
In which ways is Moscow ahead of European capitals?
0We’re definitely ahead of them in terms of IT, in terms of city infrastructure development. First of all, this is about transport and construction. The techniques and timelines for our construction projects shock everyone. Our renovations program alone leaves our foreign colleagues completely baffled: how is this possible? In Europe, taking down just one building is a big issue. Though to be fair, we have completely different management models.
Which investors are the most active in Moscow right now?
The first thing that comes to mind is the French, the company Reno. They’re doing a great job, they’ve localized and even started to enter foreign markets. Powerful companies like Siemens and Schneider Electric also have a presence on our market. They’re working with vocational schools. The Germans were first to do this, they’ve been training our specialists since the 90s. Back then, they calculated that each German mark invested into education yields 50 marks in profit! The idea here is simple: they pay to train specialists that continue on to work at German enterprises, using German equipment and adhering to German standards. Effective, right? A lot of companies are doing this now.
Have Asian companies shown more initiative after the sanctions were introduced?
Yes, Asian companies have been active. This includes South Korea, Japan, Singapore, Vietnam, and even Pakistan. Of course, the degree of presence on the market varies from one country to the next.
What about India?
I’ll say that India and Russia have a long history of working together, and the good thing is that this history is positive. However, India doesn’t have a big impact on our trade and economic relations. Why? We don’t actually know each other well, we don’t know much about each other’s cultures. This creates breakdowns. We live in different systems, and lose partners because of this. For example, we still can’t agree to work in our national currencies. But we’re colossal markets for each other. It’s tough to list all of the areas where both sides should be putting in more effort: energy, space, IT, pharmaceuticals.
Yes, it’s tough when you don’t know the culture…
I think that you can’t do business with a country if you don’t know that country’s culture. Even if I come to do business in Germany (a country that has a lot of similarities with us in terms of how we approach the economy), it’s important to find a person that will help me adapt to their lifestyle, way of doing business, their mentality even.
The Moscow Chamber of Commerce and Industry is exactly this kind of guide…
Right, this is the point of our activities – to support trade and economic ties between countries, between business people. It’s what you might call national business diplomacy. The main task of the MCCI is to communicate the real situation at hand and our business community’s real attitudes to cooperation to foreign business. At the MCCI, we have a system where we have committees on foreign economic cooperation for different countries. Experienced people who know a lot about specific countries do this work. They both try to promote our business abroad and to help foreign companies that want to come here.
Tell us more about this system. For example, say an entrepreneur from the Netherlands wants to do business in Moscow…
They can go on the MCCI website and one of our staff members will contact them. After clarifying the question, they will give the foreign entrepreneur a basic consultation to address their concerns. By the way, business people come to Moscow themselves. The sometimes come to the city with support from their chambers of commerce and industry who are our partners. We have over 100 partnership agreements. They call us and ask us to meet this person. So we meet them, we explain how things work. After we go over all the basics and there is an interest, commercial activities can begin. Here they have to sign a contract with us or a chamber member who has professional experience in the industry they’re interested in. The MCCI’s goal is to have people want to come back to us after getting our recommendations, and to recommend us to others.
In general, does Moscow need foreign investors?
Moscow needs all investors, but there are a number of areas where we need a foreign investor who comes here with the latest ideas, the latest equipment, the latest technologies.
What are foreign business people who are contemplating bringing their money to Moscow most afraid of?
The big thing is the sanctions atmosphere, which creates anxiety. But the main reason, and I’ll repeat this again, is misinformation. This is the key problem. People abroad still can’t understand that we’re the same as everyone else. We want to work like everyone else, to live like everyone else. But it’s also important to understand that we can only communicate this to foreigners if we learn to respect ourselves. And of course, we must also be respectful of the world around us as well.
What advice would you give to foreign investors who want to come to Moscow?
Think about what you can do. Consult with our partners. Do your own market research and come! We’ll always help. Believe me, Moscow is interested in business. Both the government and our entrepreneurs are doing everything to ensure that Russia’s capital is a place that’s comfortable to work and live in.