Archive for May, 2010
It’s been the second event from Horasis (“The Global Visions Company”) that I attended, this time the Global Russia Business Meeting in Slovenia’s capital Ljubljana. As usual, the organizer Frank-Jürgen Richter was able to bring an amazing high-calibre crowd together. This platform provided a perfect global context in which Russia’s opportunities and challenges could appropriately be discussed.
Besides, me being half-Croatian, I passed through the ring-road of Ljubljana many times, but never found the time to have a look at the City itself. So this event gave me a good opportunity to make up for it and found the home-town of 280,000 inhabitants picturesque and lovely, exuding still some charm of the former Austrian K&K-monarchy from a time when it carried the name “Laibach”. (All the pictures here on this Flick-set.)
The event itself began with a reception, a “virtual ribbon cutting” (there was none :-) …
… , followed by a gala-dinner in the Union Hotel where among others the Prime Minister of Slovenia, Borut Pahur, spoke about Slovenia’s current challenges in the crisis, it’s firm integration in the European Union (yes, including its financial help for Greece, too) and naturally its relationship with Russia.
The conference itself was held the next day in Brdo Casle near Kranj which boasts the historic memories of the first encounter between then US-president George W. Bush and his Russian counterpart Vladimir Putin in 2001.
The day started with a welcome address by the Slovenia Head of State, Danilo Türk, a former law professor and moreover accomplished top-diplomat which one could easily tell by his intelligent and rhetorically polished 20-minutes speech in English without the help of a single piece of paper.
The president set the stage for the issues which we discussed throughout the day:
- Russia has has come out of the crisis significantly better than the EU, with growth rates again in the range of 5 % compared to some 3 % in the Euro-zone.
- Europe and Russia should actively strive for a closer integration on the levels:
- Free trade: Russia is still to join the Word Trade Organization (WTO), yet easier flow of goods should be facilitated
- Security: Building a joint defense-architecture both for nuclear and conventional weapons
- Visa: Easing the mutual access to visa or even letting go with the visa-regime altogether and deal with misuse on a robust case-by-case basis
- Russia’s strength being the energy-supplier for the rest of Europe is also its curse as the country’s welfare depends too much on the oil-price, whereas its economy lacks diversification into other sectors.
- The country is sitting on a demographic bomb with an even faster falling population that in western Europe. The programme for a women to receive EUR 8,000 from the state for the second child is not really bearing fruit.
- Lack of talent seems to be the biggest issue for companies. High unemployment, especially among young people, on the other hand is calling for a more effective education system which is supposed to teach modern management methods. So far corporate governance overall is stuck in archaic-hierarchic command & control-structures.
- Bureaucracy and extremely rigid labour laws are severe impediments for much needed flexibility.
- Summary: In spite of all the challenges, Europe and Russia should move closer together. Given the current state of the EU this is no longer an act of mercy. Rather, Europe should understand that it might even need Russia more than Russia needs Europe.
I was invited to speak on a panel about “Which strategies work best when trying to
break into foreign markets” and was sort of taking the perspective of the “I” in BRIC – which stands for the block of emerging economies of Brazil, Russia, India and China.
So far Russia’s foreign direct investment (FDI) has understandably been directed more towards its own strategic industries in energy and natural resources, predominantly Europe. India as a target for e.g. company acquisitions hasn’t been to much on the radar. But if Russia takes its quest for more diversification seriously, India would definitely become an opportunity. Either as an attractive market for consumers which has to be addressed in quite a segmented way or of part of an integrated global process chain capitalizing on its vast talent pool at relatively low cost.
With plenty of remarks about the current state of the world economy the mood was almost something of fatalistic. “After the banking crisis we believed to be out of the worst; but now we have Greece and the ash-spitting volcano. Things have somehow become unpredictable”, said Cvetka Selšek, Chief Executive Officer from SKB (Slovenia). Or from another participant: “Everybody in the room listen: Be afraid of China. They know how to fix problems.” Or: “The western countries are the debtors, whereas the BRIC-countries are the creditors.” So much for the new world order.
My view of the current crisis of the Euro, the European Union as an institution and the highly indebted west in general is relatively sober. We should finally leave our old notions behind that every investment in Europe or the U.S. is a AAA-gold-nugget whereas the same into an emerging markets is systematically exposed to higher risk. Until recently I would have seconded this little insight: We are living in a world with lots of capital and no opportunities (west) and no capital and plenty of opportunities (emerging markets). However, looking at the growth dynamics of BRIC, today it’s more: Those combine capital with opportunities.
The west, by contrast, has successfully managed to get stuck in the worst intersection of this matrix.