SITRA report: Finns too diffident in attempting to get into Russian market

Harping on about investment protection seen as ultimately harmful

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 Many Finnish companies have overstated the risks involved in doing business in and with Russia, and at the same time they have thrown away an opportunity for success.
      This is one of the points raised by business journalist Tapani Mäkinen in a report published on Monday by SITRA, the Finnish National Fund for Research and Development, an independent public foundation under the supervision of the Finnish Parliament. It contains interviews with representatives of Finnish-owned companies operating in Russia.
      Mäkinen was surprised at how positive the experiences had been of those Finnish companies that had dared enter the Russian market. On the basis of his interviews, companies can expect to get justice in Russia, the stereotypes of Russian workers are something of a myth, and legislative matters have developed favourably. Mäkinen observes that the Finns have not met with any major setbacks in Russia.
     
This is not to say there are no problems. The greatest headaches come in the form of corruption and bureaucracy.
      Corruption appears to Mäkinen to be increasing rather than decreasing, and it stems from President Vladimir Putin’s line of advocating more centralised authority.
     
The report notes that in addition to exhibiting an unnecessary degree of diffidence about moving into the Russian market, Finns have wasted opportunities to get ahead by clinging to the subject of investment protection agreements, which have been under discussion for five years or more.
      Finland wants a bilateral treaty, because this would guarantee companies equal treatment relative to local operators and would ease currency transfers and repatriation of offshore profits.
      Christian Ramm-Schmidt, President of the Swedish-Finnish Baltic Beverages Holding, now a major player in the Russian brewing market and the 9th largest brewer in the world, reported at the SITRA launch that his company has invested nearly EUR 2,000 million in Russia, and the lack of a formal investment protection accord has not been an obstacle. The company has repatriated profits without difficulty since 1994.
      Ramm-Schmidt pointed to perseverance and meticulous attention to the letter of the law as the key factors in success in the Russian market. He also observed that the old saying about Russia still holds true: "Nothing works, but everything can be arranged".


Previously in HS International Edition:
  Russia to pay some of its debt to Finland ahead of schedule (23.2.2005)
  Finnish companies more interested in investing in Russia (12.5.2004)

Links:
  Sitra press release, 28.2.2005
  Baltic Beverages Holding

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