"There isn't one Russia, there are three," says Pavel Chinsky, director of the French Chamber of Commerce in Moscow. "The 'Russia of the dollar king', with a dozen or so cities of more than a million inhabitants served by airports, stocked with large foreign retailers and where expatriates mainly live. Then there is 'Ruble Russia', with its medium-sized towns of around 500,000 inhabitants, living according to the codes of a market economy, but accompanied by an administration still strongly imbued with the customs of the old regime. Finally, there is "barter Russia", cut off from the rest of the world by infrastructure problems, with no rail links or tarmac roads. "The government's current aim is to give unity to these three Russias", continues Pavel Chinsky.
At the head of dollar Russia, Moscow holds the record for the concentration of headquarters and offices belonging to the largest Russian and foreign companies, with service companies accounting for more than 60 % of gross regional product (GRP), while production accounts for only 12 %. In 2006, Moscow's GRP amounted to 5,145.9 billion roubles, or around 23 % of Russian GDP. It is in Moscow and its region, the richest in the Federation, that incomes are the highest in the country, with an average of 31878 roubles per month compared with a national average of 13024 roubles.
Admittedly, almost one and a half million Muscovites - out of around 15 million - still earn less than the subsistence minimum, but despite the huge disparities in living standards, a middle class has emerged over the last ten years. You could say that French companies like Auchan and Leroy Merlin, whose success in Russia is emblematic, have contributed to this change by reshaping Russian society and solidifying the middle class thanks to a new type of consumption and unrivalled prices," explains the director of the Chamber of Commerce. It's a bit the same with Renault and Logan, which offer quality at affordable prices".
Trust and personalised relationships
In 2007, Moscow traded with 200 countries, and its foreign trade reached 83.4 billion dollars, 39.7 % more than in 2006. France, with a market share of around 4 %, is still a long way behind China (20.5 %) and Germany (14.8 %). But French exports to Russia have fallen relatively less than total Russian imports, and France has become the tenth-largest investor in Russia, focusing primarily on financial intermediation, manufacturing, the automotive industry, food processing and retailing. In all, nearly 400 subsidiaries have been set up by French nationals, while 6,000 French companies trade with Russia, mainly in the construction, transport, environment and electronics, energy saving and finance sectors. Most of the major French banks are represented in Moscow, and Société Générale Vostok is now one of Russia's top ten banks.
Yet succeeding on Russian soil requires a little more than real business acumen. "Here, the keys to business are knowing that the return on investment is long-term and understanding the extreme importance attached to trust and personal relationships", explains Pavel Chinsky. If Russia generally provokes strong reactions, it is undoubtedly because the private and public spheres are so closely intertwined. People like to do business in a more personal setting, at the baths, for example, or at their dacha, where they invite their colleagues or foreign counterparts... "It's obvious that in Russia, jovial people have a better chance of succeeding than reserved ones," notes the director of the chamber of commerce. Another essential element is the importance of diminutives and nicknames, which indicate the degree of intimacy between people. From the more impersonal "Mr" or "Mrs" followed by the family name and then, as in Dostoyevsky's novels, the formula first name and surname, to the series of increasingly intimate and complicated diminutives, regulating the distance or closeness between individuals is an art that requires a certain amount of mastery, but which greatly facilitates business relations. "For a Russian, the company where you work is secondary to the scale of your personal relationships", Pavel Chinsky concludes.
The world's eleventh-largest economy
For a long time, the French were wary of setting up in Russia, mainly because of the weight of bureaucracy, corruption and the absolute necessity of finding a local partner, but things are beginning to change. "After all, Russia is the world's eleventh largest economy. It's a huge market with very strong growth potential that is attracting more and more French investment", explains Thomas Buffin, spokesman for the French embassy. Especially as Russia is making efforts to modernise, particularly in the agri-food sector, where it would like to become self-sufficient and even export its products. "What's important is the 'Russia Forward' economic reform programme launched by the Russian authorities, which should enable the country to diversify an economy that is still heavily dependent on hydrocarbon exports, by focusing on the development of the pharmaceutical industry, nanotechnologies, energy and improving energy efficiency, and information and communication technologies", adds Thomas Buffin.
The emblematic project of these reforms is Inograd, a megatechnopolis located 60 km from Skolkovo, where a business school was inaugurated in 2006. "It's an ambitious project for a city that is innovative in every way, with the aim of becoming a centre of excellence in new technologies," says Thomas Buffin. Modernising the economy, in particular by creating clusters (sites that bring together companies and partners, research and teaching bodies, in a particular field of expertise, encouraging exchanges and stimulation) and development centres, is also what is happening in Siberia, in Tomsk, a city where a quarter of the workforce has a university education and where a large technopark has opened, with which the Lorraine Region has signed an agreement. This is a crucial aspect of the country's modernisation, as foreign and local investment remains too low and still only represented 22 % of GDP in 2008, compared with 40 % for China, for example. Yet the Russian economy is much more open than most people like to admit. "To see this for yourself, just consider that a quarter of Russian oil production is provided by foreign companies", continues Thomas Buffin, adding that "in a world where demand for oil is structurally increasing, Russia offers numerous investment opportunities in this field". The country, which has the world's largest reserves of natural gas, the second largest coal reserves and the seventh largest oil reserves, has also managed to safeguard its banking sector during the crisis thanks to the accumulation of its energy surpluses and the maintenance of a very low level of public debt, at around 5 % of GDP. "The global crisis has had the advantage of revealing a mature economy, unlike what happened during the internal crisis of 1998", explains the spokesman.
Indeed, while Russia achieved annual growth of 7 % between 2000 and 2008, a recovery to between 3 % and 5 % is expected for 2010. All good reasons for business travellers to be interested... Especially as Moscow, which receives an average of 4 million visitors a year, including 1.5 million foreigners, still has a lot to do to stimulate its tourist industry. In 2008, hotels and restaurants accounted for just over 1 % of the capital's GDP. A sector full of promise.
