Moscow to Join the WTO

In about three weeks, on July 23rd, is the deadline for the Russian President, the government, and the parliament to ratify all required documents to become a full member of the World Trade Organization.

This is a significant event for the Russian economy as the WTO, who prides itself on giving their members confidence that there will be no sudden changes in policy. This provides members rules and laws that are transparent and predictable. When I talk to people about the Russian economy the subject of corruption and lack of free business standards is almost always certain to come up. Entering the WTO will reduce the sovereign risk for Russia and should jump-start what I hope to be a constant acceleration for Russia's move towards being a major world economy.

Opportunities in Russia are great. I traveled to Moscow in November and saw rather simple opportunities by just walking around the city. For example, they have public transportation that I would put above that of NYC, but traveling by car there is a nightmare, the parking there makes lower Manhattan look favorable (it is normal for people to park with half of their vehicle on the sidewalk). Putting in parking garages or even simple lots and charging for parking would be a goldmine.

I was speaking with my mom (who lives in Moscow) earlier today and she was telling me how she has issues talking with her friends because they are all concerned with paying for the minutes on their phones and never felt comfortable talking for a long time. This shouldn't even be an issue. With today's technology combined with a competitive market environment a cost effective solution should be able to be put in place to allow for worry free communication for consumers.

I know that I am biased here, but I feel that Russia has immense potential. Banking and Consulting firms are already there to help administer the economic growth (GS, CS, DB, Citi, McK, BCG, etc… all have offices in Moscow). However, their units are relatively small, GS has less than 200 there as of a couple months ago. I see a bright future for Russia and think that we should see productive economic development over the next few decades. Anyone share my optimism?

Comments (10)

Jul 3, 2012 - 5:48am

Spoken like a true outsider.

Joining the WTO is absolutely awful for Russian business and Russian people, as due to the corruption, our products aren't good enough to compete with European products. There have already been a number of closings of factories in anticipation of this change (many towns across russia, live solely of factory jobs and there is no economy for the town when that factory shuts down). I do not believe there will be a significant decrease in corruption though, as the WTO will not have enough influence on Putin.

Now, as for your genius entrepreneurial idea of creating parking spots or garages.
You have, yourself, already mentioned corruption; to start a business you need to know people and pay off people. There is noway anyone will allow you to start up a business, you will be denied access, warrants, funding etc.
Another reason for not being able to build underground car parks is the fact that Moscow's underground is a town of its own, partially left by the KGB as a secret city and their own wires and paths of communication/transportation lie underground. Everyone is scared to touch this, and no one will allow you to.

Now as for potential, indeed there is great potential; our capital markets are only 15 years old. However less than 10% of Russian households invest in capital markets, as they are so nontransparent. Most investors are foreigners, but even as a foreigner you have to be careful, because Russia has a different set of rules for business, and not knowing them, you will be stripped of your last penny.

Regarding phones, tell your mum to get an unlimited minutes phone tariff, they exist and are easily obtainable from all top providers.

All big banks and consulting firms are present in Russia, but it is still a problem for them to get any business from the biggest companies such as Gazprom and Rosneft, as they all have their own banks and sources of capital within their holding groups.

Also important to mention the top Russian banks: Troika Dialog, VTB and Renaissance Capital.

Not sure about VTB but Renaissance and Troika have been doing horribly, have been firing people and suffering big time.

This reply has messed up structure but I'm just writing what comes to thought.

Written from my office in central Moscow

Jul 3, 2012 - 11:28am

Thx both posters, that is really good input. Perhaps you can proved further advice here. I will be a graduating MBA in about a year and am looking at firms in Moscow to start a career. What do you think about Moscow as a place to spend the first five years or so as a finance professional?

Jul 3, 2012 - 11:59am

As much as I would love to view Russia in a positive light, considering I'm from there, I cannot discount the total corruption throughout the entire government system. Here, you may help your friend get a job or internship through a favor or recommendation. There, you can help your friend by threatening/killing competition and stifling growth and innovation. Russians therefore developed a significant distrust of government and approach situations with the mindset of "how will I be screwed this time?". We still need significant progress in combating corruption (have you seen our ranking on the corruption scale?) before it can be viewed as a viable investment.

"You stop being an asshole when it sucks to be you." - IlliniProgrammer
Jul 4, 2012 - 3:06am

yes @ 83carb350 if u compare the stats for russia and nigeria, theyre almost the same in a lot of aspects.

@ yuriy: dont start your career here. I am a russian with russian parents who live in russia but im finishing my graduate degree in london. why? russians love london. if you work there for 3-5 years u can come back to russia for a much higher salary and a better position. This is because no one wants to come to this shit hole, my dad told me a story about an american hedge fund mananger from a wealthy (billi) family who came to russia and lost all his shit. Different rules here. Still I love russia for the people, clubs and women and am planning to return to live here after i earn my stripes in london, but im more of an insider and know whats going on.

Jul 4, 2012 - 10:23am
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