Canada’s missing in Russia

For years, we’ve heard how our similarities in geography and resource endowment should be the basis for a stronger economic relationship between Canada and Russia. Shared issues such as Arctic sovereignty, sustainable development of the North, and global warming strongly underline the case for a more robust engagement between our two countries.

Now, a new report by the Canadian Senate Standing Committee on Foreign Affairs and International Trade adds a persuasive and well-researched argument for stepping up Canada’s commercial relations with Russia. The report (Canada and Russia: Building on Today’s Successes for Tomorrow’s Potential) is required reading for any Canadian executive, investor, or government official seeking inside knowledge about doing business in Russia.

With the G8 and G20 summits approaching, it also gives timely advice to our government leaders on how they can advance Canada’s commercial agenda in Russia by taking a more prominent and active role in engaging their Russian counterparts.

The senators’ report is based on their fact-finding tour of Russia last fall, which included 26 meetings with 40 representatives from the Russian government, Canadian and Russian businesses, international organizations, and others. It sums up many of the key lessons that Canadian companies, such as Kinross Gold, have learned during years of operating in Russia.

Their bottom line – Canadian companies “can succeed in Russia cleanly and without reproach” – is a message that needs to be heard by Canada’s business and investment community.

The senators’ conclusion, and their “recipe for success” in Russia, square closely with Kinross’s experience. As Canada’s largest single investor in Russia, we have learned the critical importance of having a committed local partner; of understanding the mechanics of various Russian government agencies and knowing where decision-making power lies; of clearly demonstrating the benefits that our investment brings to the local population; and, above all, of being patient – and persistent – in pursuing our goals.

The report does not sugar-coat the realities of doing business in Russia. It points out the unique challenges of dealing with an evolving bureaucracy combined with a protectionist mindset, and relates examples of Canadian companies that have been stymied in their attempts to break into the Russian market.

In some cases, the problems these companies faced have proven intractable, but in others, initial delays and frustrations have eventually been resolved. Inevitably, those who’ve succeeded point to the importance of taking a long-term perspective, cultivating personal relationships, and understanding that in Russia, government always plays a bigger role in guiding business decisions than it does at home.

The report notes that the Western media has tended to focus unduly on business failures in Russia rather than on success stories. This, in turn, has fed the perception of a corrupt and unworkable system. “The negative experiences are only part of the story and do a great disservice in scaring away a greater number of trade and investment initiatives that might lead to systemic reforms,” the senators astutely observe.

The Canadian panel met with a number of Russian officials who discussed anti-corruption efforts under way, as well as new initiatives to encourage foreign investment. Significantly for mining companies and other businesses in the extractive sector, the senators heard that legislation governing subsoil extraction would be revisited and changed, based on consultations with foreign businesses, in order to attract investment.

For Canadian companies hoping to expand into Russia, the senators offer encouragement, citing opportunities in infrastructure development, agriculture, transportation, timber and paper, natural resources, construction and housing, and green technologies.

The report concludes with specific recommendations to the Canadian government based on comments from their Russian hosts. A key recommendation is that senior Canadian federal and provincial representatives have a higher profile in Russia. The senators note that governments of other G8 and G20 countries conduct regular high-level visits to Russia, giving companies in those countries a decided advantage over Canadian businesses in the Russian market.

The focus of next month’s G8 and G20 meetings will be global and multilateral, but they also provide an ideal opportunity for our government to follow the senators’ advice, and begin elevating our bilateral engagement with Russia to a new level.

Tye W. Burt is president and CEO of Toronto-based Kinross Gold Corp.