Alexander Kondakov, Centre for Independent Social Research (St. Petersburg, Russia) WHAT PEOPLE WHO DO BUSINESS IN RUSSIA SEE PROBLEMATIC 4th workshop on "Flexibility in Business Contracting“ March 2013, Regensburg, Germany

THE PROJECT International Cooperation and Contracting: Legal, Social and Institutional Aspects of Investment Climate in Russia Project Team: Soili Nysten-Haarala (Luleå University of Technology, Sweden), Elena Bogdanova, Alexander Kondakov (Centre for Independent Social Research, Russia), Fredrik Jørgensen (Stockholm University School of Business, Sweden) Term: – Funded by: Valday Discussion Club, Foundation for Development and Support (Russia) More information: otnosheniya-pravovye-sotsialnye-i-institutsionalnye-aspekty-investitsionnogo-klimata-v- rossii/ otnosheniya-pravovye-sotsialnye-i-institutsionalnye-aspekty-investitsionnogo-klimata-v- rossii/

METHODOLOGY Grounded-theory: build theoretical solutions from below Case-studies: Finnish, German and US business in Russia In-depth interviews: right now 10 (3-5 more to come) – accounts Court decisions (companies interviewed) Problematisation (issues discussed in interviews)

WHAT’S THE PROBLEM? “Russia is very attractive and lucrative as well but it is always a very significant challenge to handle” (top-manager, US, engineering)

RUSSIAN EXAGGERATIVE BUREAUCRACY AND ACCESS TO JUSTICE “Bureaucracy is more or less scary” (top-manager, Finland, resort and retail); “sure, the first reaction of any international client is, ‘it’s a nightmare ’” (lawyer, Finland, retail) “when we pass papers to financial control office, we rent a van, and when we close quarterly accountant reports, there are huge mountains of paper appear in the office” (finance manager, Germany, transportation); “a stamp is amazing thing, I’ve never seen one before Russia” (top-manager, US, engineering); “we had to get from 45 to 50 different papers to have a terrace opened” (lawyer, Finland, resort and retail)

RUSSIAN EXAGGERATIVE BUREAUCRACY AND ACCESS TO JUSTICE “for international partners it is a novelty to sign and handle in originals of different acts that do not exist in their countries” (lawyer, Finland, resort and retail); “Bureaucracy makes it hard to be successful, it takes a lot of time” (top-manager, US, engineering); “it makes business useless” (manager, Finland, resort and retail); “participation in the process took one a half of a year only to be freed from a small sum of money” (lawyer, Finland, resort and retail)

LAW AND THE RULES OF THE GAME “to be successful in this market you really need to know Russian law hundred percent” (manager, Finland, resort and retail); “in Russia, there are its own legal standards and patterns that are set by taxation inspection and other official bodies” (lawyer, Finland, resort and retail); “money transfers go through the Russian banks and they require this kind of agreement in this particular form and with this exact information” (lawyer, Finland, retail) “state law is not stable and creates bribes” (top-manager, US, engineering); “the rules of the game to be more open and on-the-table: the government greatly affects our ability to do business, and we are hoping that this is stabilizing with WTO” (top-manager, US, engineering)

TRUST AND TRANSPARENT BUSINESS “it is possible for a company to be transparent in Russia, but it’s not easy to be simultaneously transparent and successful in Russia” (top-manager, US, engineering); “a letter of credit at the end of the day is just a piece of paper” (top-manager, Finland, resort and retail); “some years ago we decided to take prepayments” (finance manager, Germany, transportation); “there is a black list on the Internet, all bad companies are listed there” (lawyer, Finland, retail); “we try to ‘educate’ our partners” (top-manager, US, engineering)

BUSINESS CULTURE AND RUSSIAN ‘ MENTALITET ’ “Russian mentality includes carelessness and irresponsibility” (manager, Finland, resort and retail); “the expectations of people when they are doing business, is to be very restrictive” (top-manager, US, engineering)

“So rather than not come, we’ve chosen to come, to invest but participate in deals that we can be proud of, and so we follow our guidance and keep our goals low” (top-manager, US, engineering)