TRICKS OF THE TRADE: TIPS FOR OPENING AN OFFICE IN MOSCOW

 

By Yevgeny Schukin

 

Although U.S. and other foreign companies have increasingly pursued business activities in Russia’s regions, Moscow continues to attract the lion’s share of foreign interest. Moscow has a relative abundance of business services and resources, extensive transport links with other regions and countries, and a relatively strong consumer base among Russian markets. After the August 1998 ruble crisis, however, many U.S. companies are uncertain as to the availability, quality, and cost of resources for opening an office in Moscow.

 

Finding Office Space

Office space is available at many business centers throughout Moscow. Many major hotels also rent offices within their buildings. In general, the more Westernized a site, the more publicized, and the closer to the city center—the higher the price. If budgets are limited, companies that do not want or need a central, street-level location should consider an office outside the city center.

 

According to Stiles & Riabokobylko, a real estate agency operating in Moscow, office rents in Moscow have fallen by 30 percent since August 1998. Average prices for Western-standard office space are as low as $500-$750 per square meter per year. Occupancy is also down, making this a tenant’s market. To cope with the downturn, many Moscow landlords are offering aggressive terms for renewals or new rental leases.

 

Moscow Labor Market

Russian unemployment is at an all-time peak, measuring an official 14.2 percent this past June. Many companies have halved their staff to survive, and local employment agencies predict additional layoffs in the future. Meanwhile, wages remain depressed in Moscow following the financial turmoil of the past year. Benefits—training, office cars, cell phones—have also been reduced. Ancor, a recruiting agency operating throughout Russia, reports the following as current monthly, pre-tax salary rates in Moscow for a Western company seeking employees:

 

¨     Sales Manager (Key Account Manager):                $1,600

¨  Executive/Personal Assistant:                               $500-$1,000

¨  Secretary/Receptionist:                                              $300-$500

¨  Accountant:                                                             $900

¨  Systems Engineer:                                              $1,000

 

A number of recruiting agencies, foreign and domestic, are operating in the Moscow area that can help a company find qualified staff. Many recruiting companies also provide employment and consulting services on the labor market, while some can even help out with payroll services.

 

Telephones, Cell Phones, and the Internet

Most foreign companies in Moscow contract with private digital overlay providers rather than with Russian cable providers, such as Moscow City Telephone Network. A regular service package includes the installation fee, a monthly payment, and a per-minute traffic fee. Installation fees vary among companies, currently ranging from $450-850 per line. An average monthly payment is $20-25 per line. European Russia can be reached at an average rate of $0.25-0.50 per minute, while long distance calls to the United States and Western Europe cost about $1.60 per minute.

 

There are three major cellular phone operators in Moscow: BeeLine, Mobile Telephone Systems, and Moscow Cellular Phone. These three companies offer a wide range of service plans and fees, with minimum costs as much as $20-25 a month. Operators give substantial preferences to corporate clients, who may obtain a certain number of cell phones and who pay no traffic fees within the same network.

 

Moscow now boasts some 25-30 Internet service providers. Most of them will provide the connection for free and charge approximately $10-20 per month for a base tariff allowing up to 10 hours of on-line Internet connection, with fees of $0.50-2 per each additional hour. Selected operators offer unlimited access to the Internet for $40-50 a month. Digital overlay phone providers offer Internet access for $500-700 a month for corporate clients with 50 users or more.

 

Finding Banking Services

There were some 1,372 banks in Moscow in 1998, of which 36 were banks with full or partial foreign ownership. The financial crisis paralyzed Russia’s banking system, prompting foreign companies to transfer their accounts to banks with the highest credibility. U.S. banks in Moscow include Chase Manhattan, Citibank, Bank of America, Bank of New York, and American Express Bank Ltd.

 

Worldwide VISA, MasterCard, and EuroCard credit and debit cards are accepted by a limited number of Russian banks. Following the crisis, the most reliable among Russian banks accepting cards are state-owned Sberbank and Vneshtorgbank, as well as Gazprombank and Moscow International Bank, and Bank of Moscow (authorized bank of the Moscow city administration).

 

For more information on opening an office in Moscow, visit BISNIS Online at www.bisnis.doc.gov/bisnis/country/990716mos.htm.

 

Yevgeny Schukin is a BISNIS Representative in Moscow.