Foreign Companies in Russia for the Long Term

Philippe Pegorier heads French power company and train maker Alstom's operations in Russia, Ukraine and Belarus. And since May, he has chaired the Association of European Businesses, or AEB, a Moscow-based lobby group with over 600 member companies.

AEB

Philippe Pegorier

Do you think the†crisis has shaken European companies' faith in†the Russian economy?

We had a survey by†market research company GfK, which showed in†its most recent report in†May that European companies are very confident in†the long term. Thanks to†the growth of†the middle class, modernization of†infrastructure and†so on, it is clear that Russia is developing. Maybe not as fast as western businesspeople, western politicians and†western journalists would like, but you should not forget that Russians have never in†their history lived so free and†in such good conditions as now.

Short-term, of†course, there could be difficulties, but at†companies that have been here for†a long time, such as Alstom and†Siemens, we know there have already been many crises, and†we survived.

So there is a†crisis. There will be other crises in†the future. But we stay here because we know that between the†crises we will rise with the†country, as the†market rises.

What do sanctions against Russia mean for†the EU?

Economic sanctions will have a†very bad influence on†European economies, raising unemployment and†causing bankruptcies.

There is a†choice: Do they [European governments] want to†prioritize the†quality of†life of†their own citizens, or of†people abroad, Ukrainians? I think with elections inside the†EU, in†France, Denmark, Italy and†so on, the†message of†voters is: We want the†EU to†look to†us, not to†look abroad.

No election was ever won on†external policy. Always, everywhere, elections are won on†domestic policy. The†problem of†Russia, and†sanctions on†Russia, is one of†domestic policy. The†problem of†Ukraine is one of†external policy.

This is a†question that politicians have to†answer, but we have to†raise it.

Do you think Russia's much-discussed "pivot east" threatens Europe's role in†the Russian economy?

Russia is a†very big country, and†China, like Europe, is its neighbor. It is normal that Russia has ties with both. Even in†the Soviet era there were ties with China. I think there is space for†everybody.

At†the same time, the†EU accounts for†75 per cent of†foreign investment in†Russia. The†Chinese are still not at†this level and†will need a†long time to†get there. The†EU's presence in†Russia is historical, centuries-old and†important.

What is the†role of†the Association of†European Businesses, especially in†this current crisis?

The†association's role is to†promote the†activities of†our 650 members with European and†Russian authorities.

We are here to†advocate economic growth and†create value. In†this situation, that means being clearly against economic sanctions against Russia and†also promoting de-escalation everywhere. Because escalation is bad for†business†in†Russia of†course, but first and†foremost in†Ukraine. We will, of†course, comply with any economic sanctions, but we look a†priori to†avoid them.

We are also working toward the†establishment of†new long-term ties between the†EU and†Russia and†the negotiation of†a free-trade agreement between Europe and†Eurasian Union [a bloc that unites Russia, Belarus and†Kazakhstan].

How do you lobby the†Russian government? Who are you in†contact with?

We are in†contact with everybody. With the†economic ministries, with the†Foreign Ministry†— Foreign Minister Sergei Lavrov regularly accepts our invitations to†speak to†the association†— and†with the†State Duma and†the Federation Council.

It is always better to†lobby before laws are written than after they are adopted. So we try to†influence laws during their creation, in†the interest of†our members or European business or to†say: attention, this law may have a†bad influence on†our relations.

Russian lawmakers are very open to†discussion. I will not say we always agree, but at†least we discuss. Just as we also now†— especially now†— do not always agree with the†European Commission or different European governments.

How has Russia's economic slowdown affected Alstom's operations and†your sector in†general?

Alstom is between two phases of†investment. The†market is flat. Investment around the†winter 2014 Olympic Games in†Sochi is over, and†a new phase of†investment to†modernize infrastructure for†the 2018 Football World Championship is set to†start. We are confident that Russia will have to†modernize the†host cities. They will need new public transportation and†metro systems, and†new electricity networks. How would you describe your relations with state companies?

Our clients are mainly state companies. We produce locomotives for†Russian Railways and†metro and†tram cars for†cities and†municipalities. We also work with energy companies Inter RAO, Rosatom and†RusHydro. We have very good relations with state firms, even partnering with them. We have a†joint venture in†nuclear with Rosatom, for†example. Nuclear is very touchy, and†we are dealing perfectly with them.

How do you handle staffing with expats and†Russian workers?

The†most difficult thing is to†find good high-level Russian employees who speak English. With expats, attracting them is a†question of†what we pay. But the†problem with expats is that usually†— at†least in†our company†— they do not speak Russian, so you do not use these two resources for†the same thing.

When, for†example, we are at†the design concept stage of†a new type of†locomotive, it is better to†have expats. These transfer their know-how to†Russians†— after all, we need Russian people for†production and†so on. Expats are not here for†life, they come for†a couple of†years.

How do you manage staff in†Russia?

The†traditional way to†rule a†Russian company is pyramidal: It all goes to†the general director, who signs everything. That is the†Russian way.

Western companies, especially big companies like Alstom, are organized in†a matrix structure. So what I need to†do in†my position is to†mix both, to†straddle the†pyramid and†the matrix. It is a†bit complicated. I would not say it is impossible, because we are managing it, but it is a†challenge.

What advice would you give to†a foreign company that wants to†come to†Russia?

First you need to†establish confidence with your clients. Russians only do business with their friends. You need to†know them, you need to†spend time with them and†only then can you do business. †


Doing Business in Russia 2014
Doing Business in Russia 2014
The СCEO of the Year Russia 2014Т awards come at just the right time. They celebrate the achievements of the best CEOs. They are a lesson in the possible, a benchmark to aspire to and something to be proud of.
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