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. Last Updated: 07/27/2016

AmCham's Somers Gives Putin 'A' for Efforts

ST. PETERSBURG — When Andrew Somers took over as president of the American Chamber of Commerce in Russia last year, he brought with him extensive experience in dealing with business issues in Russia. Having already worked as chief international lawyer and special adviser on Russia for American Express, and then as a consultant to Russian firms looking to attract foreign investment, he was already well acquainted with the difficulties faced by foreign and Russian companies.

Prior to accepting your present position with AmCham in Russia, you ran a consulting firm in Moscow that worked with Russian firms looking to attract foreign investment. How has that experience affected your approach to your work now?
It taught me that issues of transparency and the conversion to international accounting standards are major obstacles to funding for small and medium-sized businesses.

That's for two reasons. First of all, they don't have the resources in personnel or money to transform their accounting systems in a manner consistent with the timing of their financing needs. This is also an issue with major companies, but at least they have the resources — if they have the will — to do it.

Secondly, I think there's a lack of understanding by these companies as to exactly why they should become more transparent in their financial accounting and why they should transform their books, or at least create a second set of books to comply with international accounting standards.

I think part of that has to do with Russian tradition, concern about the tax authorities and various methods that companies use to reduce their exposure to Russian tax authorities.

Speaking of Russian authorities, President Vladimir Putin recently celebrated his first year in office. How would you evaluate the performance of his administration so far?
Given the enormous obstacles that the Russian government has to overcome in terms of attracting investment and regularizing the business climate, as well as the political challenges any new president faces, I would give him an A.

First, he's brought back political stability, which is a key to attracting potential investment as well as to normalizing business conditions.

Second, he has shown a very strong commitment to economic restructuring, ranging from the implementation of Tax Code Part II to a number of efforts in the legislature, in the State Duma, to amend key laws that are inhibiting development.

And I would add his very firm commitment to having Russia accede to the World Trade Organization as soon as practically possible.

Looking forward there are a couple of initiatives afoot dealing with corporate governance issues in Russia. What do we know of their content?
Russia's Federal Securities Commission intends to release the first draft of a multiple-chapter code in the next couple of months, so we don't actually have the substance of the code yet, but I do agree with the tactics.

The draft will be subject to comments, which will have a twofold purpose. It will gain further insights, but it will also begin familiarizing Russian companies that will be subject to this code with its content before it becomes effective.

The Duma is discussing the issue of corporate governance and the appropriate legislation that is required. I haven't seen a draft document yet — I don't know if one is available — but there is vigorous debate in the Duma over issues that affect corporate governance, such as minority shareholder rights, independent directors, the transparency of accounting records, the right of shareholders to have access to material information and the right of shareholders to vote on issues of major importance to the company — these are all issues being discussed in the Duma by the Federal Commission for the Securities Market. I think they're covering the issues pretty well.

One of the special issues for Russia in this area arises from the fact that the government has significant ownership in a number of large enterprises and that the government, regardless of whatever financial interests it has, also often has certain social responsibilities tied to enterprises where it has significant ownership. So, the question of determining the right approach to corporate governance may be somewhat difficult in those companies where the government is a significant shareholder, as it perhaps has different interests than solely financial investors.

How sensitive is U.S. support to the climate of U.S.-Russian relations, especially given the new presidential administration in the United States and incidents such as recent charges of spying and expulsion of diplomats?
First, to the extent that funding is cut for the agencies that sponsor business support programs, that will have a negative effect. I know there have been proposals to cut funding in some of these areas that aren't directed directly at Russia, but are part of an overall budgetary analysis.

In terms of the political situation, I believe the U.S. government is still formulating its Russia policy. I don't think they have one yet. They certainly have not articulated one. I would hope that the final articulation of the policy would recognize that Russia has a market, that American companies here are doing well, for the most part, and that they are working not only to make money, but also to help develop the Russian business environment in a way that's consistent with attracting further investment. Given the business background of many of the high-level Cabinet appointments made by President George W. Bush and their pragmatic approach to problems, I would say that once a period of adjustment passes relations between the two countries would normalize and that business will not be significantly affected.

I also think that, notwithstanding political disputes and differences, business will continue to function and that the programs I spoke of before will continue to receive support from the U.S. government. I think that the government recognizes that these small and medium-sized businesses are vital to economic growth and that from a political- or defense-oriented perspective, these companies are probably the least likely to engender a negative attitude from the U.S. government. I think you might even find more emphasis on these support programs.