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Monday, 12.09.2011
How to do good and legal business in Russia
Moscow. Only one of the many Russian stereotypes is true: Russia offers huge potential and that also for European Middle Class businesses and investors. But one has to know the ups and downs of the Russian economy.
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R-A: Modernization and improvement of the investment climate in Russia - buzz words that are repeated over and over again. Has there been a lot of improvement in the last years?
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Schneider: The country has changed considerably in the last 10 years, since I have been working in Russia. In the years between 2001 and 2005 I witnessed amazing reforms, such as the introduction of a flat rate of 13% personal income tax and 24% (now 20%) for companies. Unfortunately, over the last 5 years the enthusiasm for reform has waned off. The modernization drive of President Medvedev might bring a new push forward. So far, however, I only see words and no action.
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R-A: The need for advice on the attractive but difficult subject of the Russian economy has not ebbed away, hasn't it?
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Schneider: The need for advice has not been diminished but changed over the last ten years. Ten years ago, many foreign prejudices on corruption in Russia were true. From my point of view there has been much positive development for middle class business. The power of the authorities has decreased. Financial management as an example, we offer advice for Western companies that explains how to conduct honest, legal business - and one should.
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R.-A: What should a Western contractor know when coming to Russia today?
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Schneider: Who wants to be successful in Russia has to have time and patience. Being under time pressure is already a lost cause. Processes do not only take longer, but are handled differently. A contract with a customer, ready to be signed does not mean anything. If a Western businessman does not invest time in Russian culture and history the customer will not accept him.
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R.-A: Does that mean that you have to be good at drinking?
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Schneider: No, of course not, it is about Russian culture and traditions as a whole. Deals are not necessarily sealed with Vodka. A more sober approach has prevailed in major cities. A further misconception is the costs that are involved. Russia is not a low wage country. Net earnings for Muscovites are higher than for their Western counterparts in a similar position.
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A third, important point: A detailed plan on the legal and financial set up of the business in Russia is necessary, whether as a representative office, branch or subsidiary. The setting up of a business takes time and a change from representation to subsidiary if virtually impossible.
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R.-A: Often the problems start right after set up of the business...
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Schneider: The Accounts and Tax department are our largest business units. Each quarter we have to supply 15 financial reports and tax returns to various authorities which is an enormous administrative effort. Additionally we offer comprehensive IT solutions for international acounting, rent fully furnished offices and assist with corporate registrations, employment law and interim management.
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R.-A: In addition to Russia Consulting you operate Ukraine Consulting and are working in Belarus and Kazakhstan. Are these just different branch names or is there a significant difference between the countries?
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Schneider: There are similarities and differences. We operate in these countries as there are many areas of common roots from the Soviet era, i.e. taxation and labor law. In terms of bureaucracy and law, Belarus, Ukraine and Kazakhstan are years behind Russia. The Ukraine is more corrupt in comparison to Russia, Belarus has a terribly complex bureaucracy and Kazakhstan's economy is more reliant on oil and gas than Russia's.
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R.-A: ... are you also an active consultancy in Germany, Austria and Switzerland?
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Schneider: Austria, Germany and Switzerland are becoming increasingly more the focus of Russian interest. Russian businesses are getting more and more engaged in these countries. The commitment is however quite different to the Western businesses in the CIS. It is all about equity investment and the hope to transfer the know-how. It is an interesting topic for Middle Class family businesses in German speaking countries which are looking for successors to the business. This is where we are able to assist with our consultants based in Hamburg, Vienna and Zurich.
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To the person of Ulf Schneider, he is the founder, director and shareholder of the consultancy firm RUSSIA CONSULTING. 250 employees work in Moscow, St. Petersburg, Minsk, Kiev, Almaty and Hamburg. There are representative offices in Zurich, Vienna, Paris, London, Warsaw, Beijing and Tokyo. Prior to the founding of RUSSIA CONSULTING, Ulf Schneider worked as CFO at Allianz Insurance in Moscow. Irina Zaremba spoke with him for Russia-Aktuell.
Original German text can be found here >>>
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