broaching artsy live from moscow we've breaking news at this half hour a rally gets out of control in moscow and st petersburg as demonstrations demonstrators take to the streets in honor of a killed football fans protesters clashed with riot police you go through your though was beaten up and sunk that on tuesday during the night spall. also today break practice what you preach human rights activists are challenging washington to its own to own up to its own to its violations before making any more

promises. and ethnic tension looms over the first parliamentary elections of the self-proclaimed republic of kosovo the third minority says this vote is pointless as long as people live divided. peter the bell and his gas discuss what it takes to do business in russia. hungry for the full story we've got it's. the biggest issues get a human voice face to face with the news makers on. welcome to the money where the business of russia is business is business in russia reaching its potential what are the strengths weaknesses opportunities and threats in short what holds back businesses in russia today. to discuss administrative barriers to growth i'm joined by alex feld the coffee he

is the general manager of leverage cement and also with me is on the way down that's he's president of alcoa russia ok first alex i'd like to go to you've been in russia since nineteen ninety two and of us so are you seeing it all really different calculated all right so given your global perspective here that's happened in russia in your experience in business what is the biggest single administrative barrier for your company to be a success here and i want you i want to talk about this in your successes in the past and what you want in the future but you've given your time here what is the biggest thing has gotten in the way i think the biggest thing we have in russia always is this huge amount of paper that we have to produce for everything for anything and it just just is enormous and you have to understand how it works would you would it takes two to to make it. so i would say that the tickets is extremely expensive because first of entry because very high yes because you have to learn

all those things all those are very difficult areas but they do actually make sense when you when you want i mean because there's always been a question when people look at bureaucracy is it serves the interest of bureaucrats it saves their job to make you fill out this extra form but you say there is a logic. there is a logic to it the logic is may not may not always be the logic of business you have to be true about it i mean if you think about russian accounting standards which have actually evolved lots in the past seven years they were originally designed coming from the soviet time and be an awful lot about business so it was all about checking that the little people were stealing and this is why you have all this very well it has just about evil to keep stealing today we hear about i don't know but this was this was a way of focusing on that and the system was milt's having any concern about the big picture about the balance of things from an economy called point of view and it's why all companies have moved to a move to a gap or

a phrase unparalleled right but on the other hand now if you look at the way the system has evolved it's very demanding in terms of paperwork it's very sophisticated but in the other hand you can route from it a lot of information you can easily build any r.p. which is functioning you have a and inflow information once you've made the effort of understanding all that it's actually a very sophisticated service you can get it when he got here so just get used to it and this is what alex is saying you know if you can get used to it. you can succeed these mountains and mountains of paperwork you have to go yeah actually they agree there is a problem with paperwork in fact situation is changing. for the better i would for the air for the better for sure and just small example for. tax administration they usually require a lot of papers corpuscle documents. two years ago for example during the

year we had to make almost fifty thousand different pages of corpus. to deliver to this is just for taxes is just for texas generally the problem is that. well it's changing first the wall and now we see that they said mr ration is writing to us we shall know turning documents but the process is slow that's the problem and it's always about execution again even when we have and you bear the legislation would you say the intent is good though on the side of like say the tax i mean nobody likes to tax people on the well nobody does i don't care where you are but i mean it is the intent on the tax officials that if they simplify it they'll get their money maybe get more money but certainly get it on time more transparency everybody is more happy even though everyone hates taxes exactly and the leadership in texas mr ration has changed and they're really fully supporting the business with a simplification for this process so that is the state friend of business

because you know i've i haven't been here as long as you have i came here in one thousand nine hundred seventy but i have heard repeatedly that the state wants to be a friend of business and i look in a lot of people in same business that's not enough ok is the intent to make it easier for you so they can get their get their value added in the end i think we have we are dealing with different parts of the state right and there are multiple states which are definitely favorable to. and i would say that the general economy call environment very surprising probably for people outside is that the way the russian economy is is led is rather liberal we have a very minimum physical system or fiscal sorry raids for individuals or for companies etc so it's actually quite liberal from this point of view of the social position it's about russia people think that everything's tightly controlled well yeah it's a myth the reality is that from from an economic comical perspective the government's

really trying very hard to make this country competitive compared to other ones the trouble is that you have other state bodies which have nothing to do about business and don't understand anything about business and that make life very difficult and there are certain not everybody's on the same page that's what alex is saying not everybody's on the same page absolutely in fact. there are some. slow movements. depending on the level so i mean in the higher shalom they want quicker changes so and in the bottom line actually you have some resistance people in regions as we call it they are resistant because probably there may be kind of internal conflict of interests right where they have a dusk targets monetary targets but in fact when business i quite transparent and show good results but there are some areas where it's not very transparent so

they're struggling to make it efficient to collect all the taxes and they actually have the if you were talking about taxes management russia is quite attractive country not only for individuals because we have a little always personal competitors in all thirteen thirty years and also for big corporation is quite friendly environment from. taxation point so if you. there are some issues about small. so as a business ok but also i would say contra leadership is focusing on this how to support the development of this area of the business because. i mean board president and the prime minister they want. to create. a good platform for development mirek be gentlemen let's take a look at a report about what it means for russia to be competitive in an international environment. discussion on russia's capital outflow issues and

lackluster foreign direct investment performance really brings the conversation to russia's risk profile the largest part of that profile is administrative barry's a general expression covering everything from consumers about the judiciary to the number of regulatory inspections and leads ultimately to corruption but for most companies it starts with the sheer volume of the ministry but they need to make in general the paperwork you have here in russia is much bigger then you have it in other european countries for example you cannot evade the atmosphere of burden and so it does means you have suddenly two or go through the administrative processes it takes you more time the federal government is pushing that legal overhaul with a view to encouraging senior legal figures so that it also needs to work on explaining the laws and communicating something where as thing the government

should spend more time probably to explain how things work in russia in particular about the war because in my experience this thread do exist and this myth exists outside of russia when you talk to potential investors. you have invested to russia about three of the thinking about the question they ask or corruption about law enforcement judicial system i want to try to explain and then they get in better understand how things work. the ongoing legislative change in campuses market in trading laws customs laws taxation and government attempts to ease regulatory inspections but the latter is still seen as a major issue they lead directly to the consume most often voice about russian business corruption. in most always associated with russia's business environment lawyers note it doesn't just reflect bureaucratic and legal repasts of the but also businesses seeking a competitive advantage but what i'm telling my clients is the following is that corruption does exist but it's not only government or particular bureaucrat who

is stored in you that's a business where you behave a certain way tried to get a competitive advantage or so and those businesses who are the gentleman that triggered the law or as a defense mechanism against corruption but the field is changing business figures note that even when corruption is met there are legal means to address it and that moves to eliminate legal corruption making progress. so your dish and system has much improved over the past few years compliments of judges has improved. corruption might play a role once in a while still but when you go into revision into the higher instances it's not so easy to corrupt the duchesse any more global perception of the changes taking place is slow to catch on the ticket only in the international media when it comes to investing in russia or doing business with russia the media coverage is that you

are not very positive certainly dogs who have operations here in russia much more positive about russia then those who are still at least considering doing this in the future so on the whole the practical experience is better in spite of problems certainly which exist then one would obviously expect from the outside the speed with which russia can overhaul both its image in the business world improvements in its substance will determine the success of the government's plans to drive major changes for the russian economy it realizes russia's risk profile needs to be proved and the various which make up a key part of that are addressed. on the money. all right gentlemen that report mentioned a lot of things and we probably could chew on them for a while but the word corruption was mentioned and i think we had all agree that this is that word that always pops up when people discuss it specially in west in the in western business circles and in media circles the c word corruption is

mentioned all the time but is this report pointed out it's very complicated when the word corruption is used we have bureaucrats that are on the take inspections that are you know you have to you know the very simple things are running a small business which under you pointed out earlier they get hit hard on these things here. in your experience or how has it changed and and can we get new ones to i mean if we look at some of this coming into the. market now as you said it's high cost of entry but if you've been here for a while you know the rules you know who to avoid what to do what not to do and what corruption means in your particular sector because it may be different for different people i think it's he has to be simpler actually then then then what you're saying what i mean is that first of all something very true were said by this gentleman which is that for corruption need someone to receive but you need someone to give rate so the first thing you have to take is a priori is that

a business here in russia to be long term as in any kind of country anywhere we never we cannot ever take shortcuts this is a no right so a business should never try to help itself by having people paying for something right this is the first a priori the second thing next before we go i go before you and you would like to go to a short break and we'll continue our discussion on the how foreign companies come here in discover russia stay with on the money. wealthy british style. markets why now. find out what's really happening to the global economy is a report on our. welcome

back to on the money we're talking about the administrative barriers to doing business in russia. all right alex you were talking about how people look at corruption here in the ne and you replied to my rather long questions i think it's a lot more it's a lot simpler than that go ahead continue yeah so my first one was never give yeah the second thing is there are barriers regulatory barriers that create the ground for corruption when i was a plant manager of maybe talk twelve years ago i counted fifty seven organizations that could stop the work from one day write fifty seven from the find of brigades to whoever etc right this number is shrinking people are the in this treaty of areas from this point of view are less and less and this is really helping business and the third point i think is that the government has been very very persuasive in trying to avoid these mattress shoes measures of cash which was existing in this

country all these fight. against small money laundering this is also helping and all together this is i think the general between corruption i'm not saying it doesn't exist and we still have competitors who do things in a way they believe he's frustrated it's interesting you bring that up because you know and the thing that you know i mean this is what i hear more and more often i mean again it's very similar it's simplified to a bureaucrat where a greedy bureaucrat you know the hands extended out but more and more often the longer i stay here it's about companies doing illegal things corrupt things against their competitors is this shoe moving on to the other foot. now i mean where the administration is in government administrations are cleaning themselves up i know that the courts now it's harder and harder to bribe a judge when it comes to business affairs still happens but it's getting harder and harder because the law is beginning to really work and it's beginning to work for business yes i agree that situation is changing in corruption so.

it is always very clear we we deliver the message when there were no circumstances give people money to facilitate anything or to have compared to from the vantage but the other side of corruption a look at what what happens and i mean everybody one thing no i mean what if you say someone someone in some kind of administration that has power you know they have one of those badges and they say you know we're from this place you know and you say no we don't pay bribes i mean i'm not asking you for your personal experiences but i mean what does companies explain when they do the the person that wants the right what is their reaction like you'll regret this or will come back or they give up their reliant what happens i mean my person experience that they know they never propose because they know that we don't give that's good ok so simple as that again. something absolutely.

i would like to say that there is a problem was bureaucrats like that because we should have the right people on the bus so i mean in a ministration well the right people sitting there who really create opportunities for businesses to invest to do well it's one thing if they have something wrong in in their head it's bad but what is good you mentioned the pressure on corruption is growing which is positive side. and this source for corruption is not only about various and the system how we manage things it's also about the mentality of people it's historical legacy if young i would say from communism era and even before well also for lation ship in the rush or. build web based on the kind of let's say facilitation payments there we go so that's a nice euphemism yeah absolutely and this is a problem is when people just from households goal to solve the same small problem

ways or cold small bureaucrats to repair something can be so what they were so there are always some expectations and till that moment when people stop doing things like that not to encourage behavior like that it will stay in it but that that goes through all all parts of life you're getting into these very city kids getting out of the army but what if i go to you i mean what is business done because even when i was spruce they moved here in one thousand nine hundred seventy business it was something dirty in the minds of so many people to make specially specially and gentlemen if you lost your job you lost your pension through devaluation you see criminals right now are driving around in mercedes benz or except or except people they are that's with businessmen who twenty years on well you know it's the perception now you're actually touching a very very good point. i think that russia has to work on it because there is not a i would see

a professional perception of what business is about even if you look at i mean this weekend i was watching right because i was wanted to have some rest so i watched the movie a russian movie on t.v. and what it was about was about these big business guys who are only corrupting other guys and the good cops are being corrupted by by the business and the business is now is only about trying to find ways to make things cheaper or you know behind the screens of that and there is a lack of general understanding indication that business actually if you again if you are long term oriented if you want to think about building something for the future then you have to do it professionally and this is very different if you think one of the problems is gentlemen that when in the west you have people when you look at lawmakers and that i'm an american so i know the american example because a lot of them are lawmakers or former business people and lawyers and being particularly for naturally are friendly towards business because that's their backgrounds even if you're not someone from business you're probably a lawyer for someone in business ok so there's

a greater knowledge of is that slowly changing here because we still look at you know decision makers in the administrative part of things they're not they may have some kind of legal orientation but it's not necessarily or very rarely it's business is that something that this country has to overcome and that's obviously about time and that had it's a generational project absolutely i mean russia was a communist country right not so long ago and and these these part of the of the education process has to has to grow and what i can testimonies that you are saying and really at a federal level we have full understanding of people and they're really trying to get the best possible input from all our businesses in different fields and trying to buy it to build a policy when you go dom to other levels then you have a problem of understanding and i'd like to take a look at some of the issues that that face is country and it would face the state some of the issues that they have to deal. and to make better market conditions here are these are some of the issues that the state has to mine here state needs

better market conditions thirty billion dollars privatization program planned for two thousand and eleven through two thousand and thirteen and fifty billion over the next five years importantly f.b.i. is far to negligible outside the extractive industries and around tripping russia cash. and i'd like to take a look at russia on a on a global scale here with its peers why is it. foreign direct investment is because you both work with global companies or a company that companies that are around the world what makes russia less attractive in let's say a brick pier. how there is an image problem is it is it imagery it's not reality it's in its image and i mean. all people in charge of foreign businesses here in russia we have to fight against other countries right so we actually how we're living through this problem all the time because when when investment is scarce in

a group which is working eighty countries you have to defend your own project right and you realize that the biggest problem is a question of understanding of the image particularly for a french company the french press is totally negative about russia unfortunately so we just have to prove by demonstration that things are actually moving and things are actually and then you find very good arguments which are the fact that the returns from investments in russia are usually higher than in most of the other countries and when people are seeing them all and then you are also it is that because the perception of risk is higher on the day is it because of risk is higher . probably risk is higher it's reflected in the interest rate here so still it's also about produce serotypes and look of knowledge about russia that's exactly what alex mann that it's about image of the country with those companies who has a parishioner's here answered a lot of global company presented here and they're very successful and it's not only about commodity business it's also about. and consumer markets if you look for

example the beer industry i mean the whole global players are presented on the market very successful growth its success story for everyone consumption very now already in beer segments you know example grow up to european level they're hippy about this and this evolved to build it as well so with high risk you have higher profitability so i want to ask both of you ok what i want three things. a company that equal to your sizes for a company not your competitor ok once they come to russia. what are the three things you could tell that person when they want to come here. first thing be professional which means learn the rules of the game learn how it works learn learn learn. patients believe in local people and good luck. good that's one in one way. i mean it was only part i like it was the

third one is energy because there are some lots of problems that may around you know if you don't give up don't give up just be full of energy and dismiss what this works what about having a partner. local local partners. actually it depends on the industry. sometimes it's reasonable because for some industries which is very corrupt on dance if it's good to have ministry of different sources i don't mean in a negative sense i mean in the positive sounds which makes they're all shorter so. for all in this right i don't know for example for many others. you should use all walk for us and local people now there are enough good managers here with western education with experience working for western companies so there is a network you can source appropriate people so but it's important. having partner well it depends it depends i have

a different view from your view if you make i think for a capital intensive industry which we are if we if we take a local partner it has to be for the good reasons not for only firstly digging and mistreated because we learned the russian word krishi this you do not explain to our viewers krishna means your protection it means literally roof in russian so you don't have a partner for accretion no but you have a partner for making good business for having maybe i don't know competitors that you don't have that you need for complementarity having the good human resources that he can bring with you to your to you i mean this kind of very good reasons but not the creation as you are saying going forward here i mean the industrialized west is still going through the great recession in there's still a lot of question marks out there. what would be with the extra thing the russian government and local authorities can do to say look the west isn't going to recover very quickly come to russia if that if you can make a television commercial on the day alex p.

could make a television commercial for russia to bring business to russia what would it have in it besides a beautiful russian girl and alex from that i would have a very good argument already but the. seconding ok. russia was hit by a crisis stronger than many other countries but ok i'm a seven guy so minus forty percent and some in consumption but that's the same as the new in the u.k. for instance so ok but we are plus twelve percent this year and we're expecting plus twelve percent next year none of the european markets hardly saw major markets much this kind of growth so the wealth is back again here in russia all right gentlemen we've run out of time that's all the time we have for this program i want to thank my guests here in the studio till next time this is on the money.

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