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

 

By Yevgeny Schukin

 

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

 

Finding Office Space

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

 

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

 

Moscow Labor Market

Russian unemployment is at an all-time peak, measuring anofficial 14.2 percent this past June. Many companies have halved their staff tosurvive, and local employment agencies predict additional layoffs in thefuture. Meanwhile, wages remain depressed in Moscow following the financialturmoil of the past year. Benefits—training, office cars, cell phones—have alsobeen reduced. **Ancor**, a recruitingagency operating throughout Russia, reports the following as current monthly,pre-tax salary rates in Moscow for a Western company seeking employees: 

 

¨     SalesManager (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, areoperating in the Moscow area that can help a company find qualified staff. Manyrecruiting companies also provide employment and consulting services on thelabor market, while some can even help out with payroll services. 

 

Telephones, Cell Phones, and the Internet

Most foreign companies in Moscow contract with privatedigital overlay providers rather than with Russian cable providers, such asMoscow City Telephone Network. A regular service package includes theinstallation fee, a monthly payment, and a per-minute traffic fee. Installationfees vary among companies, currently ranging from $450-850 per line. An averagemonthly payment is $20-25 per line. European Russia can be reached at anaverage rate of $0.25-0.50 per minute, while long distance calls to the UnitedStates and Western Europe cost about $1.60 per minute. 

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

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

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Finding Banking Services

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

 

Worldwide **VISA**,**MasterCard**,****and **EuroCard**credit anddebit cards are accepted by a limited number of Russian banks. Following thecrisis, 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 bankof the Moscow city administration). 

 

*Formore 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.