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The
disintegration of the Soviet Union began in 1990 as it was the Minsk
Agreement of December 8 1991 which dissolved the Union and created
the Commonwealth of Independent States (the CIS), including the
Turkic Republics.
Since this
transformation began, several reliable sources like the EBRD and
western professional firms have emerged for information on issues of
macro-economics, business and trade developments and legal and other
regulatory frameworks.
This
information article will therefore focus on suggesting main criteria
for success in light of ground realities based upon the experience
of the writer in the region.
Knowledge
Vision and attitude Strategy
Investment in infrastructure Financial power
Risk consciousness not recklessness
Strategic partners Intelligence gathering
Return to a Promising Outlook
In conclusion,
the key criteria for success in doing business in the Turkic
Republics are an in-depth understanding of the background and
culture of Turkic Republics; vision and commitment with a supporting
strategy: financial power with decision-making flexibility;
cooperation with strategic partners; a little bit of luck and sheer
determination to succeed over a long term!
DEGERE
ENTERPRISES GROUP A.S.
Click to return to"Doing business in the Turkish
Republics"
Firstly, knowledge. It is critical that a sincere
effort be made to understand, before embarking on a plan to do
business in the Turkic Republics, the background to the former
Soviet Union's (FSU) disintegration and its implications. How
conditions in the Turkic Republics differ from the "western
approach" in commercial practices which we take for granted, and
why.
In the command
economy of the FSU, centrally planned, state owned and controlled
trading and production enterprises and "combines" conducted business
according to State laws and governmental orders, edicts and decrees.
The individual, the motivation of "profit" and the freedom to
contract were completely subordinated to the common interest,
effectively the State. This resulted in a backward commercial and
legal system and inexperienced former Soviet institutions
responsible for "commercial" activities and relations.
A poor
comprehension of this backdrop to the Turkic Republics is a mistake
that invites failure.
Click for second criteria
Secondly, vision and attitude. In general, legal
banking and financial frame-works and other adjuncts to
international trade and commerce are infant and still evolving.
Things can not change overnight. The relative nonimportance attached
to the value of certainty and timeliness in the performance of
commercial and contractual obligations and the multiplicity of laws
and regulations can be severely frustrating.
Experienced patience and earnest commitment to success in the long
term are therefore critical factors.
Thirdly, strategy. There must be a plan in order to
decide the level of time and material resources to be allocated. A
long term strategy which involves investment projects, involving
technology, finance, and the participation of both local an western
industrial and financial partners is of significant potential as a
success factor.
In
the years to come, resourceful potential competitors with financial
muscle are likely to become less risk-averse to trading in the
Turkic Republics. A longer term approach will therefore help you
consolidate your position.
Work out your plan early enough. Are you willing to accept trade and
financial risks associated with performance and uncertain legal and
political environment but with potentially higher rewards? This may
mean involving in problems of FSU logistics, transportation
especially in land, production stoppages and the severe financial
problems of local producers and enterprises.
Assess your organizational strengths and limitations realistically;
if you spread yourself too thin you invite magnified risks which are
likely to overwhelm you. Dabble in everything, probably lose all!
Fourthly, investment in infrastructure.
Even high level political connections are often not sufficient
substitutes for committing yourself in terms of time, people and
minimal infrastructure. A business strategy must take into account
the break-up of the command economy and the devolution of control
away from Moscow to the newly independent Republics and regional
authorities. Ultimately, the emergent independent identities of
producers and enterprises require an ability to reach and deal with
them.
Abundance of goods and materials is no good if these cannot be
shifted within a reasonable time and to the designated points.
Cultural, language--especially accurate translations into
Russian--and other local barriers can be addressed by recruiting and
training for your special needs local nationals, e.g., Russians,
Kazakhs, Uzbeks, etc. A genuine effort to assimilate them into your
organization only adds precious value in the field. Understand and
respect the customs and habits of proud Russian-Turkic people. Never
turndown vodka or fail to carefully reciprocate good-will toasts of
your hosts with equal vigour. In fact, including a seasoned drinker
in your "delegation" is probably a strategic decision!
Your managers, both traders and support staff, must spend time in
the field acquiring local skills, knowledge and negotiating styles.
This builds precious 'know-how' within your company which must be
nurtured carefully. A local office is a logical and a critical
support factor and a mark of your determination in earning the
confidence of the local people.
All the opportunities for trading oil, metal or chemicals, etc., in
the Turkic Republics are of little use if your management, operating
organs, local offices and field staff in the ports and factories
cannot communicate and coordinate. Linkage through voice and data
communications systems, possibly through private satellite networks
or portable satellite phones will give you that critical edge.
Fifthly, financial power. To establish
infrastructure and to achieve financial flexibility and quick
decision-making for financing trade.
The financial crisis and currency turmoil in the Republics means a
huge need for investment. Both equipment and technology and working
capital for factories and enterprises of the Soviet era, though
inefficient, was a concern-free way of life for producers. Its
disappearance has precipitated chronic production stoppages and
failures on account of deficient investment and working capital for
financing raw materials, energy and wage bills. For a western
company this can mean uncertainty in its own performance of
contractual obligations to third parties. This risk cannot be passed
on to third parties on a 'back-to back' basis.
Inherent financial power, ie, quickly deployable reserves, access to
sources, short-term and medium-term finance and the ability to
pre-finance producers, both capital goods and working capital, plus
some long-term investment ability is a key factor.
Sixthly, risk consciousness not recklessness.
Despite the difficulties in the Turkic Republics, efforts must be
made to follow trading, financial and legal risks. Costs accounting
systems and decision-making procedures can be tailor-made. Another
tool for accumulating unique "know-how": Credit control committees
should include people with some experience of field conditions.
Legal risks can be influenced by participation of international
business oriented legal staff into the actual conduct of
negotiations in the field alongside the traders.
Lengthy decision making in the field should be avoided at any cost
by establishing in advance acceptable internal parameters for the
scope of authority of personnel and the financial and transactional
limits, in addition to permitting flexibility.
Seventhly, strategic partners can secure a long-term
future and be a risk control measure. A strategic alliance between a
western financial institution with little or no FSU experience, a
technology oriented engineering or production partner and a trading
company with a field presence and experienced opens up new
possibilities for cash flow, debt servicing and profit!
Lastly, careful updating of your knowledge of
political, economic and other developments affecting a Republic. The
establishment of new bilateral or multilateral co-operation,
investment or tax protocols or treaties with foreign governments.
Promulgation of new legal and trade regulations and laws.
A
company's own "intelligence gathering" network of local staff,
offices and field personnel are often the competitive edge. Access
to critical information even before its publication provides the
means for adapting in changing or volatile circumstances, including
pulling out of a specific Republic or a product or business line. |
