Investing in Russia? Better hire body guards and hunker down | Hacker News Reader

Investing in Russia? Better hire body guards and hunker down

venturebeat.com

77 pointsdwynings21 comments

Heh, Skolkovo is on Hacker News now. The author paints quite a grim picture there; the reality is probably even worse, though.

Just to give you some idea about it: one of the main selling points for Skolkovo, for potential russian players, is the official statement that Skolkovo will have "its own legal and tax regime, and even its own police". Why? Because the situation with legal and tax regime here in Russia is obviously too bad for whatever they want to do in Skolkovo, and because the police [and other law and regulations enforcement institutes] are way too corrupted to provide the necessary business climate.

Basically, it's now officially acknowledged that the general situation with these things in Russia is broken beyond repair, there is neither hope nor effort to fix it, and now they are going to try to build something less ugly specifically for Skolkovo.

Needless to say, I can't imagine it working out as planned.

Isn't this basically an attempt at Hong Kong/SEZ/Charter City type development. Not necessarily doomed to failure?

It's definitely not Hong Kong and not a charter city -- whatever they mean by "their own something something", it definitely doesn't imply any comparable levels of autonomy.

So yes, it's basically a SEZ, I suppose. It could as well work if the main problem was the tax burden -- which, unfortunately, it's not. Taxes didn't kill e.g. Magnitsky or make e.g. Chichvarkin lose his business and flee the country.

You could not pay me enough to invest in Russia as she is situated today. I would need to see irrefutable, verifiable proof that things are changing for the better before I would consider sending even one of my hard earned dollars there.

As far as I'm concerned, when it comes to Russia: The King is dead. Long live the King.

There are better things to invest in than Russia, but where does the "could not pay me enough" attitude come from? There's nothing wrong with Russia right now that hasn't been as wrong or more wrong in the 90s, when there was much less meanness in the West toward Russia.

The full quote is "could not pay me enough to invest in Russia as she is situated today". For what it's worth at no time would I have invested in Russia. Now, a decade ago, 50 years ago or 100 years ago.

It's not about meanness towards Russia. It's about understanding how things function, or don't function, in Russia and actively choosing not to be a part of it. Russia has vast resources both materially and in it's people. I would very much like to invest in Russia but not the Russia that exists today.

I'm not a fan of the "foreign investment will help change Russia for the better" theory. As we've seen so many times this past decade, change comes from within and can not be forced by outsiders.

I can go on about the insanity that is Russia but the article does a good job at that. The bottom line is that profits are not so hard to find that one should be looking towards Russia to find them. Not only is the risk far too great but voluntarily supporting the state of things in Russia is too high a price for me to pay.

See "Drug dealers shouldn't make iPhone apps" from yesterday, http://news.ycombinator.com/item?id=1408445.

There was more hope back then that Russia would improve, because it then was in transition from USSR, broken economics, low oil prices, budget deficits, you know.

Since then oil price rose from $20 to $150, and... nothing changed. Those who were gangsters in the 90-s are now the government. They do their business accordingly.

Well, quality of life for the average Russian changed, not that anyone cares about that. And those who were gangsters in the the 90s are not just "now" in government. I'll repeat myself: nothing is wrong now that wasn't wrong before. Why all this emphasis on the "now", except that The Economist likes this kind of talk?

You are a flawed individual now. How does that sound? I mean it's technically true that you are flawed in some way, as we all are, in the present moment. But clearly the sentence carries an attitude beyond the literal meaning. I am disappointed to see this kind of insidious rhetoric get support on HN.

> nothing is wrong now that wasn't wrong before

Only technically true, if at all. Ultimate corruption, political monopoly, no security of any kind for 20 years and no signs of improvement give me no hope whatsoever that the next 20 years will be any better.

I'm pretty sure we will be sliding down the Nigeria way sooner or later, and it's really sad.

Late last year, Browder’s attorney in Russia died after apparently being tortured while being held in jail by Russian authorities.

For more on this story and on how doing business in Russia can be hazardous to your health:

http://www.foreignpolicy.com/articles/2009/12/22/they_killed...

Some more links on Bill Browder:

Bill Browder at Stanford GSB (2009) http://www.youtube.com/watch?v=84MsRuC-1l8

An investment gets trapped in Kremlin’s vise (2008) http://www.nytimes.com/2008/07/24/world/europe/24kremlin.htm

The savage irony of William Browder (2007) http://www.robertamsterdam.com/2007/06/the_savage_irony_of_w...

Bill Browder's Russian Odyssey (2006) http://www.gsb.stanford.edu/news/bmag/sbsm0611/feature_browd...

IANAE, but I get the distinct impression that the Russian mob has a hand in everything in Russia, and completely controls some things.

Any foreign venture that succeeds there will inevitably end up, at best, paying the mob protection money, and at worst having their company stolen as Bill Broward discovered (see link in article).

On the risk management scale, the probably of losses to the mob is P(A) = 1.0. The only question left is, how much.

The mob was replaced by the FSB - formerly the KGB. Which is now the mob, but also the Kremlin. So yeah.

The mob wasn't replaced by FSB, it was the FSB from the start, after Soviet Union collapsed.

ex-KGB agents were in the most favorable position to participate in the power and asset grab after the collapse. They knew how things were run, they had the connections, they also were most educated and most trained. They sort of represented an elite class of individuals selected, educated and trained better than the rest.

When things fell apart a lot of them scattered looking to grab whatever as available. Political and patriotic allegiance to the party has become a running joke since after the 60s. Most of them had absolutely no problem switching practically overnight from staunch supporters of communism to brutal capitalists.

> The mob wasn't replaced by FSB, it was the FSB from the start

Back in late 80s and early 90s there was a mod and there was a FSB, with former comprised predominantly of criminals and former athletes. I am sure you are well aware of that if you lived in Russia at that time.

Yes. But we are talking about the high level mobsters. Those that grabbed whole enterprises and were running multi-million dollar racket jobs, not local street gangs.

Some people think of local street gangs because they are just more visible, I am thinking of mobsters who were running the whole country. There were often connections between the two but both were operating at different scales and in different domains.

I know people who's krysha was not the FSB, then it became the FSB in the late 90s. Thats the mob I mean - people you pay protection money to in order to do business. The FSB took over and became the universal krysha, imposing an additional tax on businesses.

The Russian mob has a hand in everything important in Russia. If you go as a tourist, you'll probably feel fairly safe and nobody will notice you. If you go as an investor and try to start a company you will most definitely deal with the mob. It will probably start with you dealing with the police and other 'officials' who are actually a front for the mob.

Isn't it more likely that tourism is also a big business? Tourists only come back (or tell others to go) if they feel safe. Asking tourists for protection money or other such things is just shooting yourself in the foot if you (indirectly) get money from tourism.

Right. In other words if you go there as a tourist you will most likely get no problems from the mob. They might own the hotel, but you'll be mostly safe. You won't have to bribe them, you won't have to have a bodyguard with you.

If you go there ready to start a business or invest a couple million dollars, you'll definetly deal with mobsters.

Russia didn't work out for these guys either: http://en.wikipedia.org/wiki/Long-Term_Capital_Management

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