Expanding markets: Eastern promise that may not deliver: Western businesses looking for opportunities in Russia could find it fraught with problems they did not expect

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EASTERN Europe may be hailed by many as the great untapped market that cash- strapped Western companies need to deal with the tough competition in their traditional markets, but it is not a destination for the unwary.

Doing business in Russia, in particular, is far from straightforward, according to a report just published by Price Waterhouse, the accountants.

Global companies seeking to set up in the country are generally adapting quickly to the conditions. But experience has shown that they should only recruit 'hardened expatriates' well accustomed to working in difficult locations.

Much of the information in the report is similar to that for companies and their staff entering any foreign country. For example, likely candidates and their families should be fully committed to the assignment and should visit the place before making a final decision.

Those selected should be given training in the cultural background of the location, in addition to receiving language training. Care must be taken about children's schooling and about providing general support to the overseas staff. Finally, preparations for employees' return should be made well in advance.

But as an area emerging from an economic and political system that is totally removed from anything staff are likely to have experienced, eastern Europe has special problems.

The most important difference between Russia and countries such as Poland, Hungary and the Czech Republic is the growing crime rate and general lawlessness.

In addition, the political uncertainty in Russia and the shortage of hard currency is delaying the progress of change in commercial activity. As a result, the time that needs to be spent on establishing a business and training local staff is greater than many companies expect.

Meanwhile, the conditions can make it difficult and frustrating for those used to the sophistication and technological advances of the West.

The report, entitled Managing Expatriates in Russia, quotes one manager as saying: 'The simplest of tasks here can be a nightmare . . . getting a visa for someone can take a whole day.' Another adds: 'Working under difficult conditions can sometimes put quite a stressful load on expats trying to operate here, but the company doesn't really recognise this as true hardship.'

Moreover, the report, which forms part of a set covering eastern Europe, says the country's well-publicised economic problems have helped inflation to hit 20 to 30 per cent a month. This is affecting those parts of the population that are still reliant on state wages rather than benefiting from the freer market conditions elsewhere.

In advice that sounds reminiscent of that given to travellers to the larger cities of the United States, the report, by PW's international assignment services, says expatriates 'need to become aware of which areas to avoid and how to minimise the likelihood of falling victim to theft and muggings'.

Furthermore, the authors warn that - unlike other parts of the region, where conditions for foreigners are improving - many aspects of Russian life are deteriorating. As one expatriate put it: 'I loved Moscow when I first arrived here over a year ago, but the situation has become noticeably worse. I've been mugged twice. I'm really pleased to be going home.'

Although security can become expensive, the firm recommends that employees be given protection, including the offer of a full-time driver instead of a company car.

All of this contributes to Moscow attracting an average of three rest-and-recreation trips a year - in spite of its abundance of culture and sports. Most companies offer the cost of a round trip to the nearest western European destination, such as Helsinki.

But some expatriates quoted in the report suggested this is not enough. 'We used to give three R&R trips of four days, but you really need at least a week to unwind,' one said. Another added: 'I really believe you need to get out of here at least four times a year. Six to seven weeks at a stretch is the limit of my endurance here - beyond that I get counter-productive.'

This may deter some expatriates from lengthening their assignments after the initial three-year period.

But it is not all bad news. While skill shortages do exist, the clear message from companies operating in Russia is that the younger generation in particular has impressive capabilities. Russian staff tend to be mobile, moving on for the attraction of a better job rather than for the money.

Andrew McErlain, partner in charge of PW's international assignment services in Europe, said: 'In spite of the current difficulties and the painful process of transforming the economy, Russia still has much to attract foreign investors.

'Financial aid from the West is increasing opportunities for Russian companies, and there is greater scope for investors as the country integrates into the world economy.'

(Photograph omitted)