RS Main We present a consolidated position

We present a consolidated position

June 2012

The Chief Executive Officer of the Association of European Businesses - the largest organisation, which brings together over 650 European companies working in Russia, took the time to answer a few of Russian Survey’s questions.
Frank Sсhauff
Dr. Frank Sсhauff,
Chief Executive Officer, Association of European Businesses in Russia

For an inside look at the foreign investors’ perceptions with regard to Russia’s investment climate, working conditions inclusive, it is best to turn to the top representative of an organisation that has already spent 17 years promoting the interests of foreign businesses in Russia. Despite all the economic crises and political changes, foreign businesses are not losing interest in working in Russia. The Association for European Business (AEB) whose work is geared towards (but not limited to) attracting foreign investors can freely take most of the credit for this. Dr. Frank Schauff, the Association’s CEO, tells us more about the AEB, its day to day activities and challenges faced.
- The presidential election was recently held in Russia. Do you feel this event bodes well for foreign investors? What do you expect from Vladimir Putin’s new term?

- The AEB is not expecting any drastic changes. Economic bonds develop irrespective of short-term political issues. Mr. Vladimir Putin as President and Prime Minister has always had good relations with European investors. One can notice a positive trend that over the course of the last 10-12 years investments have increased significantly. This trend is not only seen within the energy sector: investments have increased within the pharmaceutical and automotive industries, to mention but a few, as well as in trade related activities. For example, projects in Kaluga and the Kaluga region are being implemented not only in automobile production, but in the pharmaceutical and construction materials industries. This process is in full-swing and will continue.

- How did AEB members react to the fact that Russia joined the World Trade Organisation (WTO)?

- That was an important development for foreign investors. By joining the WTO, Russia will increase its competitiveness on the world market. Additionally, Russian entrepreneurs will be able to invest more effectively in new technology. We believe that Russia’s membership in the WTO will lead to a stronger and more productive partnership between the Russian Federation and the European Union (EU), especially, given the fact that nearly 50% of trade and the majority of foreign investments come directly from EU.

Although the current investment flow is not at its optimum, to a large extent, due to the past financial crisis, from which Europe, like the rest of the world, is now recovering, we hope that the worst of it will soon pass, while long-term business interests between Russia and Europe will be preserved.

- You are probably tired of hearing this question, but nevertheless, do you believe that corruption is the main problem facing foreign businesses in the Russian Federation?

- Corruption is obviously a very important topic. Everyone is aware of the adverse impact this phenomenon has on economic development and foreign investment. Even key government leaders do not deny its existence; hence, their commitment to the development and implementation of anti-corruption measures. Naturally, corruption has a negative impact on Russia's image abroad. The process of getting connected to power lines, for example, is expensive, bureaucratised and very long. It is obvious that the more bureaucratised the process is the more chances there are for corruption.

Of course, sometimes, the bureaucratic machine works, like in the Kaluga region, where these issues are resolved quickly.

- How much easier is it for the AEB to work now, in comparison with when it was just formed?

- We witnessed the 'wild' 90's; therefore, one can say that the progress is evident. Of course not everything is problem-free. Legislation initiatives are one of the main problems today. Sometimes, the Duma passes some 'unrefined' laws that call for too short of a transition period. Of course a transition period is necessary (this is standard practice in Europe), but in Russia, this period is often too short. This is one of the issues that the AEB brings up during meetings held between top representatives of the Association and Russian ministries and parastatals.

- On that note, how can one assess the cooperation between the AEB and Russian governmental bodies - do they respond to your suggestions in a constructive manner?

- We present a consolidated position and that is very important. As a result, almost all the issues presented by us before the Russian government receive attention: their response may not always meet our exact expectation, but they do receive attention.

Interviewed by Sergei Slavin,
Russia Survey's Economic observer RS

Association of European Business (AEB)

(from 1995 to 2004—The European Business Club in Russia)

- was founded in 1995 due to the initiative of a few companies working on the Russian market, ambassadors from the EU and the head of the Representation of the European Commission in the Russian Federation;

- brings together more than 650 European companies and banks (from small and/or new to large multinational corporations from all across Europe) working in Russia. Numerous large Russian, American, Japanese and other companies are members of the Association;

- is a unique organisation that acts as a networking tool for Russian and European business circles. The main goal of AEB is to improve the trade and investment climate in Russia to benefit the company members and enhance the image of Russia aboard in an attempt to better the business environment within the country and attract foreign investors;

- holds about 100 conferences, seminars, briefings and round tables yearly dedicated to the most pressing issues facing businesses in Russia. Russian government ministers, members of the Duma (Russian parliament), leaders in key economic sectors and companies, heads of Russian regional administrations, official representatives of international foreign organisations, independent experts and successful European and Russian entrepreneurs regularly give presentations within the confines of the Association’s events called “Dialogue with European Business”. AEB always participates in the EC-Russia Industrialists’ Round Table and other international investment forums held in Saint Petersburg and Sochi.

Structure. The general assembly of the Association’s members is granted the ultimate authority. The assembly is elected by the Council of the national representation which is comprised of representatives (one each) from each business association or national business community of EU member states and the European association of free trade and also an Executive Committee with 9 people (one of which is selected to be the Executive Committee Chairman). Currently, the Chairman is Rainer Hartmann, the head of E.ON Ruhrgas representation in Moscow. The Executive Committee designates a General Director (currently Frank Shauff) to ensure that the organisation is functioning properly. The Association members follow through on their interests by participating in various committees. There are currently 40 committees and task forces that bring the companies together based on relations within and across industries.

Consulting. The Association utilises the skills of European and Russian experts for consulting Russian government officials and member companies regarding legal, financial and economic issues. In particular, the Association helps coordinate interaction between different firms to guarantee reliability and transparency in investment activities and discusses different issues regarding human resources and corporate management.

Lobbying. The Association acts in the interests of its members when establishing contacts and working closely with EU authorities and holds regular consultations with a wide range of government officials. In general, these actions are initiated by the Association’s Executive Committee or one of its committees. The European Commission consults with the Association on a regular basis about financial and trade/economic relations with the Russian Federation. The multi-leveled bi-lateral relations structure increases the European business community’s involvement in this process and opens up new opportunities. AEB is committed to complete transparency, a high level of professionalism and a finely-tuned response system to arising problems (that has been perfected over the years) when dealing with lobbying concerns.

Government and business partnership. In an effort to express the interests of its members, the Association is constantly interacting with European governmental bodies in Brussels and the Russian government to improve Russia’s investment climate, including all of the following: developing an institutional framework for conducting business, aligning and synchronising European and Russian standards and legislation, optimising customs control, simplifying the visa process and supporting efforts aimed at making economic reforms.