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. Last Updated: 07/27/2016

For the Savvy, Moscow Still A Good Bargain

A recent Swiss report ranking Moscow as the world's third-most?costly city has made for some lively conversation in the foreign community. But as we all know, the report is so narrow in its scope that it is meaningless for most residents of Moscowville. Worse, it is misleading. To be sure, costs are skyrocketing in Russia's capital and prices for some goods seem to have lost touch with reality. But in terms of measuring the actual cost of doing business here in comparison to other capitals, a spokesman for the mayor was right when he dubbed the Swiss report "not a correct comparison." Take hotel room rates, for example, which top $300 a night at most of Western hotels. Outrageous, right? Yet most companies doing business here on a regular basis do not put up visiting executives at Western hotels. Instead, they keep an apartment somewhere near the headquarters, upgrade it and then use it for visitors. Most businesses here have at least one "company apartment." At about $600 per month in rent, the premises need only be used three nights per month to substantially reduce the company's hotel bill. And once these jet-setting Russia experts are interned at an apartment instead of a hotel, they can stop using hotel satellite communications at $12 a minute when it is a simple matter to dial direct for about $1-$3 per minute. Just push "8" and wait for the tone. Moscow offers hundreds of such cost cutting measures to those willing to learn about them. And how could it not? After all, this is a city where the average citizen earns less than $100 per month. This Swiss report is no doubt good news for consultants feeding at the USAID trough, paying $300 per night for hotel rooms and sipping $4 coffee at the Radisson Slavjanskaya Hotel lobby. But the Radisson lobby is not even part of the Moscow economy. It is an anomaly, a place for government employees to spend taxpayers' money and consultants to spend clients' money. Who would spend their own money in this way? In the warped logic of this microeconomy, it actually behooves a consultant to be located abroad rather than in Moscow so as to maximize his subsidiary profits from sky-high living allowances. If I were company bookkeeper or government auditor, a bill from the Radisson lobby bar would invite an immediate audit of an employee's expense report. A bill from the Baltschug-Kempinski Hotel -- the poshest and most expensive in town -- would be grounds for immediate dismissal. Which is not to say the Swiss report is wrong. It sought only to provide a basis for companies and governments to set per diem rates. An immature Russian market, with insufficient competition and oppressive government meddling has engenderedhigh costs and price gouging. Making matters worse, there is no economy class for services. In Moscow, it is five-star -- or the Belgrade. But that is a minuscule part of the story. For people willing to learn about how to live and work in today's Russia, the cost of a cup of coffee at the Radisson Hotel is irrelevant. For these entrepreneurs, Moscow is still a bargain.