Cold but Profitable

Imagine a huge and diverse country bordering the European Union yet spanning 11 time zones -- one with a developing and dynamic market, an annual growth rate of about 7 percent over the last eight years and a growing and increasingly affluent middle class. If the country didn't happen to be called Russia, British businesses would already be climbing over each other to gain access.

Nonetheless, the balance of business calculations over the past few years has shifted in the country. If the main question used to be, "What risks are we taking by being in Russia?" it is increasingly being replaced by, "What risks are we taking by not being in Russia?"

Given the well-publicized vicissitudes in British-Russian relations, Moscow might be surprised by my bullish view on doing business here. But despite all of the negative publicity about Russia in the British and other foreign media -- TNK-BP's recent visa difficulties being the latest example -- exports of goods from Britain to Russia went up by 37 percent last year. In particular, business for British firms involved in the financial services sector is booming. The largest global accountancy and law firms don't know how to recruit enough qualified staff into big enough offices. This is hardly surprising given that in 2007, in value terms, about one-quarter all the IPOs in London were from Russia.

Russian growth is being driven not only by high oil prices but by the growing number of entrepreneurs who have decided to leave their Rust Belt factories and set up small businesses. Decisions like those are transforming Moscow into one of the most dynamic cities on the European landmass. If British companies are not impressed with where Russia is now, think about where many economists expect the country to be in 20 years. After all, there is plenty of inefficiency and excess capacity still left to be squeezed out of the remnants of the Soviet economy.

Most foreign companies don't need to be convinced that if they want to grow, they have to be active in India and China. All too often, however, when I mention Russia to these companies, brows furrow. The country somehow seems colder and more, dare I say, "foreign." As far as cold is concerned, I can understand, but foreign? Take a look at a map. For all of its historical uniqueness, Russia is still a variant on a European theme.

In all fairness, some recent Russian actions almost seem as if they are designed to generate bad press. Improving PR starts with improving behavior, but undoubtedly Russia is open for business.

Of course, is not all good news coming out of the country. Inflation is a big worry, for example. Like all rapidly developing emerging markets, there are likely to be bottlenecks and uneven sector performance. And it is not always the easiest place for foreign companies to do business. There are still important issues, such as gaining access to markets, but developing the long-term relationships necessary to do business in the country requires time, effort and patience. Most in the British business community will be able to tell a story or two about the complexities of dealing with Russian bureaucracy, but in the next breath they will often tell of high profit margins and hard-working, capable and well-educated Russian colleagues.

Perhaps it would be better to pay less attention to the front pages and more attention to the business sections of leading newspapers. Companies should explore the market and develop business relationships. Yes, bureaucracy and corruption remain problematic, but the country is going through one of the most exciting and vibrant periods of its history. This is an excellent opportunity to get into Russia. If you don't do it now, you'll probably have to do it in the next decade or two anyway.

Andrew Cahn is CEO of UK Trade and Investment, a British government organization.