On 6 November a high-calibre panel faced a tremendously interested audience to discuss the question if 30 years after the collapse of the Soviet Union the joint Soviet legacy still continues to affect the successor states.
Eleonora Bachtiosina, managing director, Papenburg International Kazakhstan
Karina Breitwieser, business consultant and manager of a research project at TU Vienna
Viktoriya Zipper, managing director, Victory Cross Culture Consulting
Johannes Leitner, head, Competence Center for Black Sea Region Studies, UAS BFI Vienna
Hannes Meißner, senior researcher, Competence Center for Black Sea Region Studies, UAS BFI Vienna
Minutes of the Discussion
Introduction Hannes Meißner
30 years fall of the Berlin Wall, 30 years of transformation. In the former states of the Soviet Union a “concept of political risk” can still be observed. How do companies deal with these challenges?
Introductory round Johannes Leitner
What do the panel guests have in common: they are all managers and entrepreneurs with Soviet ties, two of them also grew up in former Soviet Union states.
Eleonora Bachtiosina (EB): has come here from Almaty especially for this event, first time in Vienna. Managing director of the German company Papenburg International Kazakhstan, also responsible for Uzbekistan and Central Asia.
Karina Breitwieser (KB): business consultant and manager of a research project at TU Vienna, worked as project manager for Waagner-Biro in Russia and Azerbaijan.
Viktoriya Zipper (VZ): managing director of Victory Cross Culture Consulting, repeatedly also guest lecturer at UAS BFI Vienna. Born in Ukraine.
Johannes Leitner: “What has changed in the former Soviet Union states in recent years? Which changes have you noticed?“
Eleonora Bachtiosina: came to Kazakhstan in 2007, at that time as a woman you weren’t taken note of at all in the construction industry. Actually not much has changed since 2007, the picture has already been there since childhood: only men in leading positions everywhere! In the meantime, this aspect has clearly changed in Uzbekistan and Kazakhstan.
On “planned economy”: this is a Soviet term which people want to get away from, but this hasn’t worked out so well. Efforts to get away from it are empty words rather. What still applies: if a certain good is brought from Germany to Uzbekistan for let’s say €300,000, then the same good must not be imported at a lower price any more. So even if you could get the same, equivalent good from a different supplier for €200,000, the €300,000 are established, and taxation is also calculated on this basis.
It can be said that the highest level of government wants to change something, but the lower echelons do not know how. It is uncertain if much will actually change, but for Western, European companies it should become easier to operate there.
Viktoriya Zipper: It it difficult to say that the entire union has changed. The Soviet Union consisted of many different countries, things have not developed the same way everywhere.
From a management and cultural perspective, Ukraine has definitely moved closer to the West. Probably this happened mostly because of the war – it is rather doubtful that the same developments would be occurring without the war. For before the Ukraine was on a similar path as Russia.
It is surprising how quickly Ukrainians’ interaction with the West was transformed after the conflict. In a way, Ukraine is forced to align itself with the West, you can feel that.
In the Baltic states, this alignment with Western values could be observed much earlier already, here Ukraine has only now found a good path.
Investors going to Ukraine in the 90s/2000s were very naive. There was much to gain, but nobody really knew the ropes. That is different today. From a business perspective, there are fewer opportunities now.
Altogether one has to say that for 30 years that have passed rather too little has happened.
Karina Breitwieser: Women still do not have it easy in the construction industry, so that has not changed. Overseeing a construction site in the center of St. Petersburg (Gazprom) for one year was a great experience for me – unbelievably bureaucratic, extreme masses of paperwork also surrounding the operative handling of the construction site itself. As an Austrian company, people thought at Waagner-Biro, we are used to bureaucracy. Then they went to England and already realized what bureaucracy really is. And then Russia was still a few levels more extreme. “Russia is bureaucracy squared!“
However, Russia might also turn this bureaucracy into an advantage; if this was digitally well organized, Russia would be far ahead of Central Europe. Concrete example: in a construction project, a building section must always bear precisely the same name from the first planning phase until completion. What is referred to as “Beam A” in the plan, must from then on always be referred to as “Beam A”. In the beginning, seeing this through was a learning experience of course; ultimately, however, it is highly consistent.
It is also important for foreign companies to know about the extremely strong on-site networks in Russia. You have to accept that they exist and that they are impossible to understand. On one hand, this strong network is quite impressive because it is actually lived; on the other hand, it also makes things very tedious for a foreign company (catchword “procurement”).
Eleonora Bachtiosina: Our company tries to counteract these networks. For there also is a strong network of corruption.
Viktoriya Zipper: You have to know that networks are part of the culture of these countries. If everyone was working separately, especially with foreign companies, they would feel completely lost. Nepotism and corruption are still rampant in Ukraine, but they are on the decline. Compared to Russia/Belarus, Ukraine is headed in the right direction; compared to Europe, on the other hand, nepotism and corruption are still noticeably present, so there is still much to do.
Johannes Leitner: “Which skills must a manager bring along to these countries?”
Eleonora Bachtiosina: In hindsight, studying in Germany was a godsend; that way it was possible to get to know “the other world”, to be familiar with both sides. As purely European manager, it would definitely also be more difficult. If you know both worlds, you can understand the local culture, you know the people and their mentality. Knowing the language is also vital. Mainly you work together with people, so it is essential to understand them.
It is very important to be patient. Things happen differently there from what you’re used to in the West. Some things simply take time.
Overall, therefore, younger people who, for instance, go to the West from Kazakhstan, study there and then return have it easier because they are familiar with both worlds.
Karina Breitwieser: What quite surprised us with Gazprom was the attitude along the lines of “We are Gazprom, we can request whatever we want. And you then just have to see to it that you fulfil that.“ Reasoning is pointless. You have to put up with it to a certain degree, and find a way around it. Respect for being different is very important.
Special difficulty: working for a Turkish construction company in Russia. The problem: attitude towards Turks was often really borderline, at the same time Turks are very proud. In combination, this quickly causes problems.
Eleonora Bachtiosina: Similar experience: “It’s going to be the president’s birthday soon, see to it that the road is finished by then.“ So that is more important than anything else then.
Karina Breitwieser: That’s the same in the Arab Emirates, though. In Russia it was always a huge event when Putin came to the construction site. Everything had to be perfect.
Viktoriya Zipper: This phenomenon can be observed in all countries with high power, with extreme hierarchies. I also remember it that way from my childhood days.
Eleonora Bachtiosina: I did not see anything like that in my childhood, but I remember a visit by Putin for which manholes along the road were specifically paved shut and then torn up again the day after the visit.
Or another experience on a construction site in Kazakhstan: waiting for the president, the entire day in extreme heat without water, without shade. But you assume that those in power do not even know this or also do not want it to be like that; it is the lower ranks that act so extremely here.
Viktoriya Zipper: Yes, they would like to have changes everywhere, but they don’t manage to accomplish this that fast. The new president of Ukraine had to discover that, too (riding the bicycle, flying economy class, etc.). The changes are not happening that fast.
Karina Breitwieser: As construction company you still have to be careful with being patient, there are completion deadlines after all, and these are important, very close attention is paid to complying with them.
Eleonora Bachtiosina: An important lesson learned was that you must not let go completely, that it is better to monitor right away. But also not everything, you cannot keep this up, that’s quickly becoming too much. That is also what happened to me, I ended up in hospital from exhaustion. I have flown here to Vienna with great serenity, even though I don’t know what’s going to await me when I return.
Viktoriya Zipper: Important advice for managers on site: without at least a local or a person who knows both worlds, things are still not going to work out for investors in Ukraine. If investors are open to support, if they understand that it’s a different world there, then they’ll manage.
Audience question: ”Is English sufficient on site in order to succeed?”
Eleonora Bachtiosina: More and more people in the former Soviet states speak English, also German is gaining in importance.
Karina Breitwieser: Traveling for pleasure yes, but as a company – also at the executive level – you absolutely need someone who understands the local language (for instance, this is also very important for negotiations with suppliers).
Audience question: “Do more young people from these countries return after having studied abroad?”
Eleonora Bachtiosina: Meanwhile, there is great potential among the locals because significantly more are returning after having studied in the West and are realizing that they can also achieve something at home. Companies benefit from this enormously, because this also brings much knowhow. In Kazakhstan, for instance, it has thus been possible to establish road building with concrete.
Viktoriya Zipper: Studying in the West and returning causes movement. And this movement in turn only became possible through the opening 30 years ago. This awareness, “we should learn something from the others, we have to send the children there”, at first only the oligarchs were able to do that, but by and by also the non-rich. So, very many are now returning after their studies and are thus changing something bit by bit.
Audience question: “What about competition between European and Chinese companies on site in the former Soviet Union?”
Eleonora Bachtiosina: Something is changing there, but only slowly. Local Uzbek companies are increasingly trying to reject Chinese goods, because they know that initially they may be cheap, but they also don’t last long. The problem, however, is that government corporations still tend to select the cheapest supplier, and that’s the Chinese companies.
Uzbekistan has the Ekspertiza, which is a body that is supposed to ensure that government contracts are awarded transparently and cost-effectively. In itself, that’s a good thing, but the Ekspertiza weighs in on everything and then typically says „No” to everything, so it doesn’t contribute to any transformation in this area.
There is an Ekspertiza in Kazakhstan, too, but there it has still been possible to establish road construction with concrete, so it’s easier there.
Audience question: “How is the situation in Georgia and Russia for European companies?“
Viktoriya Zipper: Georgia was very quick with the fresh start, it’s easier there. But it’s also much smaller, Russia is a huge country, for that reason alone changes take longer there.
Also after the Ukraine crisis the Russian market is very difficult for European investors. I actually thought that the positive changes would be coming faster, but that hasn’t happened. In fact, it is even worse, because all the rapprochement to the West from before the Ukraine crisis is now completely gone again.
Karina Breitwieser: The exchange rate of the ruble also was a big topic. After a certain point in time, going to Russia no longer paid off for many European companies.
Eleonora Bachtiosina: You can say, those who are staying – and that’s only few – are enjoying it. They’re even saying that it’s going great.
Viktoriya Zipper: Yes, but often that’s companies operating in niche sectors.
Eleonora Bachtiosina: We (Papenburg International) are currently deliberately not going to Russia, it would be too shaky a story.
Minutes: Tamara Schindler