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. Last Updated: 07/27/2016

And It Was Good: Pioneer's Farewell to Russia

I am a member of that small, but I suppose visionary, group of businesspeople who were the first wave of Westerners that came out six years ago to contribute to the development of modern Russia. Who could honestly say six years ago that they believed their careers and their lives would be dedicated to building the market economy in the former Soviet Union?


At that time there were only a handful of people from the United States or the European Community who had ever lived in Moscow. These were diplomats, journalists and accredited representatives of a few selected, large international companies. Life was astonishingly predictable in that business was carried out through official Foreign Trade Organizations with fearsome general directors built like T-34 tanks who could place orders worth millions. Small wonder if you were on the inside track then, you regretted that their influence later diminished.


When Western businesses looked to develop in the Soviet Union it was hardly surprising that they turned to the small pool of people with experience in the country. Thus, former Irish ambassador Michael O'Neill heads up Coca-Cola. I had been on the British Embassy staff prior to my work at Ernst and Young. Although it is fair to say the French, Germans and Italians had long had a presence in the Soviet Union owing to big export credit projects and close links to the foreign trade organizations, it was the arrival of the Americans that galvanized the reform process.


The "arrival of the Americans" is always a two-edged sword, depending on whether you are a cowboy or an indian. For the older Russians it was, and still is, utterly bewildering. After all, for 70 years they had been taught that the American way of life was anathema, capitalism was the enemy of the masses and Khrushchev had boasted of overtaking the United States in standard of living through superior Soviet-style planning.


Without question the United States, through its companies and aid programs, has done an impressive job in promoting its style of management and technology and the cause of democracy. However, there is a price to pay. Americans do not come to anyone's country quietly. They sweep in with a drive and enthusiasm often awesome to behold, even for Europeans, and for Russians long accustomed to the quiet life, they could very well be from another planet. This insensitivity and lack of cultural awareness has caused an enormous backlash.


Russian pride demands that their contribution in fields where they are competent, such as space, oil extraction or computer software, is recognized. I have found that many Russian oil and gas ventures say "give us the money" rather than accept that top-level U.S. energy companies have often superior technology to offer. The Russians say if we had the cash we could do without you. The U.S. companies reply: It is because of our technological competence that we can raise money in the market, not because we wish to act as banks. Small wonder joint ventures founder.


One of the major features of the Western involvement in Russia has been the huge technical assistance programs put in place by USAID and the European Union through TACIS. I was the first to involve Ernst and Young in this sector. Today, all leading consulting firms are active in implementing privatization and restructuring programs.


There has been criticism that too much goes to the consultants, but I think that is misdirected. How can the Western taxpayers' money be used properly, other than through properly monitored projects carried out by well-qualified experts? The alternative is simply to hand it over to a parasitical agency which one suspects would soon find uses far removed from the original purpose. A more valid criticism is that too many of the projects are business-school case studies done by young Ivy-leaguers with no real experience of Russian industry. After all, the vast plants that need restructuring are also often the main providers of work, food, housing and all the social infrastructure that goes with a community.


The faith in reform that was demonstrated by the first Russian elections has not been sustained, and the last election showed that the failure of government to address the social dimension of reform led to the resurgence of the Communists. By implication, the West is also at fault and I think much more needs to be done to design projects that cover the social implications of restructuring. Quite simply, people need to see some benefit from reform, and we do ourselves no good if in the name of efficiency we create a backlash of conservatism.


I have been fortunate to travel all over Russia and the other states of the CIS. An Aeroflot "frequent flyer" award may not be everyone's ambition, but it does enable you to gauge the business mood of the country more accurately than from Moscow. The further east you go, the more you feel the sense of economic -- as opposed to political -- independence. In fact once you are in Sakhalin, they will happily tell you that they voted for Vladimir Zhirinovsky just to "tweak Moscow's nose."


My own belief is that Moscow is important as the capital and center of power, but that the real opportunities for Western investment are in the regions. Not just oil and gas but timber, telecommunications and minerals. The additional key is a progressive, or these days perhaps, an "efficient" administration. Of those I have met, I give high ratings to the administrations of Khabarovsk, Krasnoyarsk and Chelyabinsk, all of whom have actively encouraged investors with either local concessions or serious inward investment promotional effort. In the south, I see Rostov-on-Don as one of the more dynamic and self-sufficient regions.


Am I sorry to be leaving Russia? Yes. Personally there is enormous satisfaction in being part of a business where there was just myself and a partner helping to create a professional services firm that now has a staff of over 500. Russia is now one of the most dynamic market places in the world. It is also one of the most demanding in terms of commitment. Those that survived five years have lived through two coups and had friends mugged and in some cases murdered. But it is not just the Westerners who have had to show courage.


The retiring managing partner of Deloitte Touche, Bill Potvin, pointed out in his farewell letter that the young Russian staff who had joined the Western firm were at risk when the first coup took place, as they had committed themselves to the capitalist route. By the evening they, together with young Russians from many of our firms, had gone to the White House to stand up for the new Russia. That required real courage in those dark days.


It has been a privilege to have played a small part in the transformation of modern Russia. Of course, I wish all my colleagues and friends well, but above all, I wish the recipients of our efforts, the Russians, all good luck.





Stuart Thom has been Business Development Director of Ernst and Young for the CIS for 5 1/2 years. He contributed this essay to The Moscow Times.