Here's a good one, courtesy of MSNBC:
Sept. 18 - Leaving behind Russia's economic maelstrom last week required one last, ugly bout with it. As I waited to check out of Moscow's Radisson Slavyanskaya Hotel, the front desk printer zipped back and forth tallying up several pages of phone charges, at $7 a minute. (Calling the U.S. from Moscow costs more than three times the same call originating in the U.S.) Then it tacked on 20 percent for value-added tax. Ouch
THAT WAS NORMAL for Russia. [Yep. In Russia, foreigners are viewed as wealthy morons who bring their money in for the sole purpose of being robbed.] Because of the crisis, there were new hassles: Local interpreters and the cell phone rental company needed to be paid, in U.S. dollars cash - after all, who wanted rubles - but dollars were scarce. Banks, even American Express, couldn't deliver. Foreign companies that are based here have hard currency delivered in suitcases these days because their accounts are frozen.
"You are leaving this crazy country?" the bellman asked me as I rode down the hotel elevator. "Yes," I said. "Going home." He had seen the look before: "Well, imagine, some of us have to live here."
Yes, or imagine being a foreign company trying to break into this market. I had merely a taste of the dog food others eat every day in their effort to survive in Russia. Getting shaken down by the police, months spent in protracted negotiations that go nowhere, bureaucrats demanding millions in bribes, and the high price of mafia 'protection' have driven the cost and risk of operating in Russia to among the highest in the world. [a great place to invest, huh?]
It must have been tolerable while the economy was booming, while billions were pouring into the stocks, bonds and real estate. The legions of prostitutes and the thugs who ran them were alone sufficient to keep the Versace and Prada stores humming.
Counting his rubles, a Russian army officer exchanged U.S. dollars on the black market last week.
But with the economic crisis, the glamour is gone. For many western companies - and legitimate local companies - hopes for profits have waned. Brokers have packed their bags. The market is gutted. Even some direct investors are wavering. RJR Reynolds, maker of Camel, Salem and the Russian Peter I brand cigarettes, which has invested $400 million in Russia since 1992, has ceased production, at least temporarily.
The move to privatize - which enticed many direct investors - is on ice since free marketeers in the government have been thrown out. Some fear a re-nationalization of key industries, such as oil. "There has been suspicion all along," says Vincent Ramirez, representative for oil investment company Vostimpex.
"Now we KNOW we're pouring our money into a hole."
The crisis has laid bare Russia's biggest problem - a gaping void where laws, and respect for them, should be. The dictatorship lost its clout, reforms opened up possibilities, and power went to those who got there first, by whatever means.
Criminal gangs have carved the country into fiefdoms said to control more than 50 percent of all economic entities, including state firms, banks, and stock exchanges. [make it 90%] . You certainly can't miss, for instance, the beefy guys who populate the lobby of the Radisson Hotel. In Moscow it's a mundane fact that this is the turf of the Chechen mafia. A Georgian group controls one of the neighborhoods favored by wealthy foreigners. "Every so often, a black jeep cruises back and forth, and then a few minutes later, two or three limousines come through," says a European economic analyst who lives in the area. "That's how we know they're meeting."
Despite looking like Hollywood caricatures (double breasted suits straight from The Godfather, dark glasses and Secret Service wiring) the mob is a real threat to economic development, not to mention safety. Restaurant owners pay as much as 30 percent of turnover for "protection." [who said taxes go uncollected in Russia?] Contract killings are more common in Russia than anywhere else in the world, according to Moscow's chief prosecutor.
In 1996, the assassination of Paul Tate, a former manager of the Radisson in Moscow sent a strong signal to foreign businessmen that they were not immune. Just before the murder, Tate worried aloud about threats he was receiving in a dispute over control of the hotel. He was gunned down at a subway station just a stone's throw from the front gate of the hotel. An investigation has revealed little, but the U.S. revoked the visa of a well-known thug in Moscow, who they believe was connected to the crime. Among the expenses for executives working here -personal body guards. "I bring a lot of friends with me wherever I go," says one wryly. "Otherwise I get lonely."
A more prosaic type of shakedown comes in the course of doing business, as enterprise and government officials hold their hands out for bribes. The best possible interpretation is that these officials simply don't understand capitalism.
Often the challenge for foreign companies in Russia is to convince the partner that there's more money to be made by running a profitable business than by making off with the initial investment. [the Russians just proved this thesis wrong by making off with over $100B]
In an oil exploration project near Moscow, for instance, all $20 million of the initial investment went to building amazing surface infrastructure - and none to drilling holes because construction generated better kickbacks.
Clearly, since there is nothing produced by this type of kleptocracy, there can be no trickle down effect. And comparisons between the robber barons in Russia and those in the United States at the turn of the century also fail. In Russia, the newly wealthy send more money out of the country than they re-invest in it.
[read the preceding paragraph over and over again, until it dawns on you what to do about Russian "stocks" in your portfolio]
No wonder average Russians are so deeply cynical. No wonder they avoid paying taxes. There is little to convince them that the money will come back in the form of public service. And no wonder they are rushing out to buy goods as soon as they receive long awaited paychecks. No wonder some Russians long for a firm-handed dictator to restore order or return them to the past.
But the real key is careful building of legal institutions and sensibilities. Regardless of the players in government, the details of their economic plan, or the involvement of international lenders, restoring faith in the system is the challenge.
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