International, Russia - Written by on Wednesday, November 23, 2011 11:33 - 0 Comments

No red flags here – FACT: A refusal to bribe builds sustainable business in Russia

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In our view Russia gets a bad rap [declaration of interest we’re fans].

OK, it’s bottom (or close to the bottom) of the Transparency International indices.

And let’s face it – corruption here is a massive problem.

But. Look how far it has come in the last 20 years.  Wind the clock back to almost 100 years ago to the day 1880 to 1900 in the US and it wasn’t so different with the so called ‘robber barons’.

You can’t make an omelette without breaking a few eggs (or windows). But this is a vast country. There are nine time zones according to Wikipedia and there were more until October when Putin got out his magic pen & eliminated two.

The result the Moscow/London time difference is now four hours. As the last time we were here was July our timetable is shot…

Acknowledged wisdom would have you believe that it is impossible to do business here without bribing.  And yet.  There are beacons.

Alcoa, which ironically has problems elsewhere, adopted a no bribe policy and succeeded.  We wrote about it in July.

Now you may be thinking “So what” Alcoa is massive has huge market leverage and can dictate the terms on which it does business in Russia.  And to be fair you’d be correct.

But there are other stories.

Take this one of David Simons which appeared in the Moscow Times recently.  David Simons is an entrepreneur who has worked in Russia since the early nineties.

His secret of success share somes strikingly common features with those deployed by Alcoa. Among them building sustainable relationships with people.

Here’s an extract from the David Simons interview:

“You can submit your documents and wait. But if you want to really get through the process as expeditiously as possible, you have to be on top of the process. So we’re constantly visiting the authorities. We maintain relations with all the building authorities, and we have a good working relationship with the local administrations where we invest. We effectively shepherd our documentation from window to window, from desk to desk. We also consult with the authorities, keeping them informed of what we’re doing and getting their opinion — there’s no point in submitting documents that are not going to be understood. So when our documents officially arrive, the construction authority or the chief architect is not surprised by what he’s looking at because it actually reflects his input.

I have a very strong opinion on corruption. Most of the corruption in Russia is actually a myth, and no one really knows the level of what is termed as corruption. Russian bureaucracy is such a giant beast that what is sometimes termed as corruption is just a misconception that actually has more to do with the heavy bureaucratic structure where there is an unwillingness to accept responsibility.”

There are others we know about.

Another example: this morning we spoke with someone else who has also been doing business in Russia since the early nineties. Not a big business but the same strategy.

Not a penny in bribes.

“Yes” he told me – from time to time opportunities are missed and things take longer. But, on the flip side, because people trust him he gets other opportunities he might not otherwise.

As he left the meeting he underscored his point that bribery is no way to build a sustainable business:

“You see the thing is no-one trusts a briber. Neither the person taking the bribe nor the person employing him.”

Russia ditched the red flags years ago.  Thinking of doing business in Russia? Give us a call.


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