After one week in Moscow, I’m now in St-Petersburg or Piter as the locals name it (yes, I do use local terms in order to sound more integrated). Summer solstice was just a few days ago, so we’re still in the White Nights festival over here(longest days, shortest nights) on the 60° North. I have to say, this trip is amazing so far, great people, great visits, and so much fun. Now, enough about fun and more about my extensive one week simmering of opinion of what I’ve experienced so far…
Coming to Russia, I began wondering about what are the current challenges of this emerging market. My perception of Russia from afar prior to this trip was of a giant emerging market sitting on a vast amount of money reserve and one of the biggest oil and gas reserve of the planet; Life was good.
After discussing with many of the business people I’ve met during my first week, I realized that life wasn’t as sweet as I perceived it (mainly due to my lack of research and naivete, but still I realized it) and most of its challenges came specifically from what Russia was known for Corruption and the Oil and Gas Industry.
CorruptionThere is a lot of money here in Moscow, a whole lot. We see it in the streets with its high concentration of luxury cars, and the insane amount of money spent by status seeking nouveau riches in the trendy clubs of Moscow. The problem is that most of that money resides in the hands of a few, mainly friends of the Party. As we often discussed the subject during our visits, corruption happens under multiple shapes and form like taxes, fines and fees, and they are a sad part of doing business here in Russia. Multinationals companies are often times at a disadvantage versus local business players since they are often times subject to stricter codes of ethics which makes them loose important contracts. This environment not only makes it difficult for foreign companies to enter the Russian market, but it also kills the spirit of entrepreneurship in the country’s own entrepreneurs, as business people are scared and don’t want to worry about dealing with bribes and corruption practices.
With the re-election of the ruling tandem Putin-Medvedev, Russia is in for more of the same crooks & thieves game for the next few years, so that is concerning for a lot of Russians who are seeking changes for their country’s business environment.
Oil and Gas
Another recurring discussion over here is that Russia’s economy is too dependent on its oil and gas industry. With the recent fluctuation of the price of those commodities, if Russia doesn’t develop properly its other sectors like telecom, aerospace, automobile and high-tech manufacturing, Russia could see it’s money reserves used for all the wrong reasons if the price of the oil barrel remains low and continues dropping. With the upcoming budget adjustment, many are curious as to how President Putin will tackle this crisis and stimulates Russia’s other sectors of the economy.
A Wind of ChangePresented that way, Russia’s future does look gloomy, so I wanted to look for the positives signs and trends that makes the Russians confident about the future of their country. In order to do so, I followed the Moskva, down to Gorky Park, listening to the Wind of Change. (Sorry, I HAD to do it, I love that Scorpion’s song)
While discussing with 5 young (and cool professionals) Moscovites at Bulka in Gorky Park, I have found confidence and hope in the future of Russia. Sure, their country is not perfect, but there are things to look forward to that can actually turn things around for their country and the challenge it’s facing.
WTOWith the entry of Russia into the WTO(accepted in January 2012) will subject the country and its companies to stricter business standards and will hopefully change the corruption practices that are plaguing its business community. We can expect the change to happen over a long period of time, but at least there is confidence from my friends that having the eyes of other developed countries will help Russia fix its corruption issues. Though we know in Canada that such initiative doesn’t necessarily mean no more corruption, but at least it’s a big step towards making it safer and more transparent for multinationals and entrepreneurs to do business in Russia.
Skolkovo Foundation (http://www.sk.ru/en.aspx)
This government backed initiative we visited last week is definitely something to get excited about. The Skolkovo Foundation is Russia’s desire to create its own innovation hub, based on what made Silicone Valley so successful for California. Resources under the form of money, material and brains are made available to any business people with ideas in the space, IT, energy, biotech or nuclear industry so they can start their own ventures. I find that encouraging the start-up of ambitious high-tech ventures is a great step towards making Russia’s economy less dependent on Oil and Gas, and will definitely bring a lot of pride for all of Russia.
As cheesy as this can sound, in the end, I did feel the wind of change blowing through Moscow… ;-)
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Did you know that the average inhabitant of St-Petersburg walks at 72.3% of the speed of the average Moscovite?
Of course you didn’t know it because it’s not even true, but it sure felt like it during my last 5 days in St-Petersburg. This city definitely has a more laid back feel to it (vs. Moscow) with all its canals, terrasses, and incredible cultural venues.
Known as the cultural capital of the country it’s one of the rare thing Moscow concedes to the rest of the country. In my point of view, St-Petersburg is definitely the cooler younger brother; for example, on Sunday, while I was doing my laundry, I got caught by a horde of cyclist biking together in a protest to have more biking infrastructure in St-Petersburg, just to say, I haven’t even seen a bike in 10 days in Moscow. (i.e. FACT: A city with cyclist is much cooler than a city without them)
On a more serious note, I’ve seen two cities so far, and honnestly, they’re amazing in their own way, and I do feel that their inhabitants are proud of them. I was surprised to learn during our visit at Deloitte in Moscow that the country is still facing an important brain drain issue. Because the inhabitants of this country are so proud and patriotic, I didn’t expect its best talent to go West in such alarming rate.
For a long time, Russia’s best scientists have gone to the West to pursue their scientific ambitions, and now the same phenomemon applies for their best business prospects. Multiple factors can be thought of, like corruption, quality of life, political environment, but in order to find out, I’ve decided to interview every single 18-24 years old in the city about why they would leave or stay in Russia. Due to lack of time and unrealistic expectations, I’ve decided to base my whole research on Artem, a young soon to graduate from business school kid that loves his city of St-Petersburg.
I’ve met Artem while practicing my Russian (priviot, minya zavoot Charly, caghdilla? Harabon) on the street when his group of friends laughed at me for about 15 minutes. Out of curiosity and slight pity, they invited a few of us to drink a few beverages and continue the night with them.
Artem will graduate from university in a few months and knows for sure he doesn’t want to move to Moscow for work. He wants to stay in St-Petersburg even if most of the business jobs are in Moscow, but deep inside he nurtures this dream of moving to New York City. It’s hard not to notice the important influence from the West in modern Russia: the brands, the clothing, the image of american lifestyle (hipters are everywhere man!) and Artem is drawn to it as well as I noticed from his NYC tatoo on his forearm and his love for skateboarding.
I think that this fascination for the west, and the opportunity it presents are actually good for Russia and they should leverage it. Having its best talent learning and working using best practices around the world can definitely benefit the country in the long run. The challenge is, will Russia be able to bring them back eventually. That should be the focus of the government, not necessarily trying to stop the drain, but to incentivise the gain back at a later time. The sentiment of patriotism and pride is strong here, I have no doubt that Russians abroad feel the same about their motherland, when the time comes and the right conditions are there, many will come back and build a stronger Russia. This influx of perspective will definitely help the country gain a worldly perspective as I notice that not much of its population are aware and even less in contact with what is going on in the rest of the planet. I’ve noticed few immigrants and learned that 82% of Russians only speak Russians, so I believe that the drain can benefit the country as the more of them return they can inspire and encourage their fellow Russians to open up to the world.
Given the political context with more of the same for the next few years, perhaps a next government backed by the Russian Diaspora could then make those who left for western opportunities come back for eastern promises at home.
With these closing words, I say thanks to the organizers of our Campus Abroad Russia trip, it was an incredible trip with an awesome group. I now leave you with a view of the pebble beaches of Sochi where I’m taking some rest before heading home!