Such forums often boil down to promotion of our country. I believe it is time to change the format of these meetings to establish a dialogue and exchange opinions.
I will dwell on aspects related to Russian investment abroad and the difficulties we, including our groups, encounter.
When the democratic reform in Russia began, we, entrepreneurs, looked for sources of capital abroad and tried to ensure the best conditions for foreign capital to flow into the country. Then we invited foreigners to manage Russian companies because we had no experience of our own.
Russian businesses at the time tried to secure a foothold on global markets, and sometimes our exporters traded with their rivals. For example, they sold primary metal to firms that also produced such metal. That way we limited the promotion of our goods, products and services on international markets.
But time has changed. Thanks to changes in our economy we have changed too. First, leading Russian companies, especially in the commodities sector, have almost caught up with Western firms for production efficiency and sometimes they even outrun their rivals.
Second, Russian companies have acquired an extensive experience of work on international markets in part related to marketing, attraction of financing and business management. Leading companies have opened their offices abroad and are entering global markets without mediators.
An important thing I want to say is that a new generation of managers has grown up in the past 10-15 years; they have Western education and experience of work with Western firms. This is a cohort of young and talented people, and they are the future of the Russian economy.
Next, Russian legislation and business regulations have also developed significantly.
Legalisation of currency regulation and almost full abolition of restrictions on capital flow have made it easier for Russian businesses to go abroad, and our government has done a lot to achieve it. Russian companies in their turn have learned the rules of using the so-called primary tools of Western business, notably, the principle of corporate governance. Overall, every respectable company now acts in line with the international market rules related to management, accounting, borrowing, etc.
Thanks to that, we have entered a new stage of existence that set us new tasks.
What are they? Turning national companies into multinational corporations. Importing high technologies and developing the production of commodities with a high added value in Russia. Aspiring access to new foreign markets and expanding presence in the old ones.
Put together, this means that leading Russian companies are now moving towards integration with the global economy. After all, moving where additional dividends can be earned is the main law of capital, and this is what Russian capital is doing.
Our first emergence on global markets was remindful of Ilya Repin's painting, “Unexpected.” We were not expected. So there were problems, difficulties, obstacles and failures. For example, lack of experience in purchasing large assets abroad. Judicial and cultural differences affected largescale mergers. The government's lack of experience in protectionism and support of national companies was another negative factor. Even today if the Russian state supports some companies, they are usually state-owned, while private businesses remain outside its scope of activity.
We must admit that the Western economic sectors where we want to come still fear Russian partners, and our companies have not earned a reputation with their Western partners. Similar fears are shown towards other emerging economies, As we are in Switzerland, I will share my observation about the attitudes towards Russians in this country. If you come to a bank to open an account and deposit $10 mln, you will find a very polite and amiable reception. If you want to take a loan under a high interest rate, you will also find a polite reception. But if you try to buy a 10% stake in a Swiss bank, the attitude will be different: they will express their lack of understanding and begin asking why you are doing it.
Despite all the difficulties, our company has decided to move further in directions we view as strategic. They include investment in new technologies that are so important for Russia. We are a commodities country, but the time and circumstances are forcing us to invest in diversifying the economy to produce goods with a high added value. Last year, for example, we invested in Swiss company Oerlikon, which manufactures high-tech products. Now we own a 13.79% stake in it.
Another area of our investment is energy.
We are one of the biggest investors in the energy sector in Russia. But the logic of business development predetermines movement abroad. So we have set up Avelar Energy in Switzerland, which specialises in alternative energy sources, first of all, wind and solar energy. We already have our major client, Italy. By the way, we signed several agreements with Italians during Russian President Vladimir Putin's recent visit to that country.
We have cooperation projects in the United States and South Africa, where we will take part in the development of a large manganese deposit.
Our company, Renova, which has an office in Zurich, has outlined clear criteria for its activities. This is, first, a clear understanding that the economy is globalising and Russia and its business will inevitably integrate with this economy. So our group has to be part of the process.
Second, investment is the key priority area for us. We are not engaged in stock market operations; our strategic sphere is direct long-term investment.
Third, all of our investment projects are based on the principle of energy effect from our Russian potential. All our projects are like bridges between territories where we invest and our Russian base.
Here is my recommendation to our Swiss colleagues: come to Russia, but first find the right partner who will be your guide, your spouse. Only healthy international alliances can give birth to beautiful and successful children.
A former Swiss diplomat reconverted into business advising, Thomas Borer is amember of the Board of Directors of Renova AG, Viktor Vekselberg’s company.
Having become a privileged interlocutor of the Russian billionaire, Mr. Borer answers a series of questions for Business Mir.
How did you get into contact with Viktor Vekselberg? We met via my company of strategic consulting in 2004 and I became amember of Renova AG’s Board of Directors in 2005.
What started Viktor Vekselberg’s interest for the Swiss industry? Several years ago, Mr. Vekselberg decided to internationalize his company Renova as he believed it was the only way for a company to remain competitive. Looking for investments abroad and in order to continue to make business, he created Renova AG in Zurich in 2004. Based in Switzerland, it is logically much easier for him to invest in the Swiss industry rather than in the Chilean industry for example.
Why choose Switzerland? His choice wasmotivated by the attractiveness of the services offered by Zurich and its area as well as by the quality of life in Switzerland. He also appreciates the new technologies developed in Switzerland, which is the reason he chose to invest in the Oerlikon Company.
What kind of welcome was Viktor Vekselberg given by the Swiss industrials? The welcome was rather warm and this was for three reasons. First of all, we introduced Viktor Vekselberg to the Swiss political and economical circles two years ago and presented them with his future investments.
Secondly, Renova carries out minority investments and therefore doesn’t provoke great changes in the companies in which it is a shareholder. Lastly, as our investments aremade over the long term, we do not expect a return on investment within a time limit that is inordinately short.
Are there any indications of an anti- Vekselberg economic patriotism? There are bound to be people critical of him, afraid of him. But Switzerland has a free market economy. In general, the population is rather proud when a Swiss company buys a foreign one. There is therefore no reason for the opposite not to happen.
Furthermore, Renova offers nice opportunities to Swiss companies and creates numerous jobs in the country. A market worth half a billion Swiss francs opened up for Oerlikon in Russia, the head office of United Rusal’s trading sector, the World’s largest aluminium company, is now located in Zug and one can foresee numerous profits for the Swiss economy coming out of the creation of Avelar Energy in December 2006. This latter company, created by Renova AG, concentrates on renewable and traditional energy forms. While it will be active in the whole of Europe, its head office will however remain in Zurich. One can therefore speak of a win-win situation for Switzerland as well as for Renova.
Do you have the feeling Viktor Vekselberg has been ill–treated by the press? No, the press has been fair to him. On the other hand, it has felt reticent about the Austrian company Victory, which is also a shareholder in Oerlikon.
Does Vekselberg live in Switzerland at the present time? Most of the time, he’s in the plane! He’s constantly somewhere between Russia, Switzerland, the United States and South Africa. One can however say that he shares his home between Zurich andMoscow.
