02
Economy
RUSSIA BEYOND THE HEADLINES WWW.RBTH.RU
BOOKMARKS www.yandex.ru Search engine's website
en.rian.ru/business RIA Novosti newswire
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www.russoft.org Association of Russian programming companies
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Business News Interview From Russia to Silicon Valley with love… why Yandex
chose to explore the heart of Google country
New Kremlin team to spearhead mergers
and acquisitions abroad
Deputy Prime Minister Igor Sechin, also head
of state oil major Rosneft, is leading an effort
by the Russian government to assist com-
panies in acquiring assets abroad, reported.
The idea is not new: most recently, British
carmaker LDV was bought by Russian billion- Arkady Volozh:
aire Oleg Deripaska’s GAZ group in 2006.
However, these efforts have often encountered
opposition in the West. To assist with the proc-
ess, the Russian government has hired top
JP Morgan banker Natasha Tsukanova as an
informal adviser. Prior to joining JP Morgan in Taking a wider
London, the Russian-born Tsukanova worked
for the Russian Privatisation Centre at the State
Ministry of Property in 1992.
Kommersant
view of the internet
Government, Central Bank to propose
investing in IMF bonds
President Dmitry Medvedev has instructed the
government and Central Bank to submit pro- FROM PERSONAL ARCHIVES
posals on the possibility of investing in bonds
issued by the International Monetary Fund, the
Kremlin press service said. Medvedev also
gave instructions “to ensure the realisation of We caught up with Arkady was maybe one of the first as their business language. when every business is more the crisis that we do now. On
Russia’s interests in the further reforms of the Volozh to find out how his RN Dossier commercial projects in the Our presence is in no way an concerned with productivity the other hand, even without
IMF’s and World Bank’s vote quota system and company has survived world connecting search “intrusion” on Google’s ter- and efficiency. the IPO, the preparation it-
management system as well as the updates of Google’s advance on its Arkady Volozh is the found- with computer linguistics. ritory. Our company is still In revenues we are growing self helped us to become a
their functions.” The government and the Cen- market, about the peculiarities er and CEO of Yandex. A se- That’s also where I met some focused on the domestic mar- slower than before the crisis, stronger, more mature com-
tral Bank must draw up and submit to the gov- of the internet in Russia and rial entrepreneur with a back- of the founding partners of ket. While some IT compa- but we are still profi table. We pany. We still consider an IPO
ernment proposals on ways to improve Russian about his plans for the future. ground in computer science, Yandex, so in a way, our com- nies outsource to Russia, we chose not to lay off personnel, as an option sometime in the
legislation as regards the oversight and regula- Even in the midst of the crisis, Mr Volozh co-founded sev- pany can trace its roots to are outsourcing to America. although we have stopped future.
tion of financial markets with the aim of meet- Volozh is not be willing to give eral successful IT enterpris- that time. expansion. We are currently
ing the commitments taken during meetings of up Yandex. es, including InfiNet Wireless, We never set up Yandex to im- How has the global economic taking a “wait and see” strat- For you, is Yandex just a busi-
the heads of state and government at the G20 a Russian provider of wire- itate what others were doing. crisis affected Yandex? egy, restructuring parts of the ness, a hobby or even a child? If,
summit in London in April 2009. Interfax
ARTEM ZAGORODNOV
less networking technology. In We’ve been in the business Our main source of revenue company and focusing on our 10 years from now, somebody
RUSSIA NOW 2000, Arkady left his position longer than other search en- is search advertising. We have core business of search. offers to buy Yandex from you,
of CEO of CompTek to become gines and have created many been lucky because, while TV would you agree?
Inflation slows down, says report How was Yandex able to hold the CEO of Yandex (founded original products. For exam- and newspapers are experi- Prior to the crisis, you were plan- Any good business is a hobby.
Inflation continued to drop in May. It is not on to its home territory and suc- in 1997). Among his earlier ple, we began doing parallel encing a serious drop in ad- ning an IPO? What happened? We have an integrated com-
expected to exceed 1pc, which is significantly cessfully compete with Google achievements was the devel- searches among different vertising revenues, some We went through the entire pany culture and I can hon-
less than the 1.4pc experienced in May 2008. in the post-Soviet market? opment of electronic search media – text, photos, videos, parts of the internet advertis- preparation process for a estly say that many people
In annual terms, this means a level of less than First, Russia has a large for use in patents, Russian news, blogs – and showing ing market continue to grow. Nasdaq IPO and were almost who come here to work make
10pc. Previously, the two sectors leading a enough audience using the classical literature and the Bi- them all on one results page Plain old “internet banners” ready to go public just before Yandex a central part of their
rise in prices were oil and gas, which grew internet. Secondly, we have a ble. Mr Volozh holds a degree back in 2000, while Google have dropped, but more tar- the crisis hit. It’s probably lives.
21pc and 30.1pc respectively in the month of strong mathematical – and, in applied mathematics from and Yahoo caught on to that geted search advertising has good that we didn’t do that, I wouldn’t sell everything, but
April, following global trends. thus, computer program- the Gubkin Institute of Oil and idea several years later. actually grown. In part, that’s because we wouldn’t have if somebody wanted to buy a
The slowdown in inflation is good news for the ming – culture in Russia. Gas. He is married and has because they produce meas- had the manoeuvrability to portion of my shares, I would
Russian government, which has been strug- Hence hundreds of highly three children. How is the “Russian internet” urable results – at a time guide the company through probably consider it.
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gling to balance the seemingly irreconcilable skilled persons are able to de- different from the internet in
goals of keeping down prices and stimulating sign and provide competitive other languages?
economic growth. internet services. That’s why One major difference is that
Recently, it has also been reported that – for Russia has Yandex. clients are inside Russia, an- the Russian internet is much
the first time since the crisis began – unem- Yandex takes an active role other 10pc come from other less regulated than the inter-
ployment has dropped. in developing this culture. We former Soviet countries and net in other languages and
IT will show us the way...
Troika Dialog Investment Bank offer a Masters-level two- 10pc come from further countries. It’s a myth that we
year programme at our abroad. have strict rules governing
School of Data Analysis to content. Sometimes it’s good,
CONTINUED FROM PAGE 1
search engine Yandex, incentives – such as “special
Defence sector boasts growth train future specialists for Often Russian versions of al- sometimes it’s bad, but cur- launched in 1997. economic zones” for innova-
The Russian defence sector, largely consid- the company. The programme ready popular internet servic- rently practically anything “Microsoft views Russia not The company’s growth has tion – experts see mini-Sili-
ered one of the worst-hit by the economic focuses on fi elds related to in- es (eg Facebook) are developed goes on the Russian web. only as a market of strategic been impressive, despite eco- con Valleys springing up in
crisis, actually experienced a growth in output ternet searches and data and become popular, but, as a importance but also a global nomic ups and downs. Yan- such unlikely hubs as
of 2.1pc in the first quarter of this year, as structures. Many of the pro- rule, they come online one or two Why did Yandex recently open a centre for innovation and dex’s revenue topped $300m Akademgorok, Nizhny
compared to 2008. Deputy Prime Minister Ser- gramme’s graduates come to years after the originals. Can’t laboratory in Silicon Valley? growth,” said Nikolay Pry- in 2008. Russia remains one Novgorod and St Petersburg.
gei Ivanov, who oversees the defence sector, work at Yandex, others fi nd we keep up? Our main resource is people: anishnikov, president of Mi- of the few countries in the In these hubs, scientists and
discussed this information with Prime Minister employment elsewhere, in- This is not entirely true. In we go wherever we can fi nd crosoft Russia. world – along with China, designers are encouraged to
Vladimir Putin at his country residence in No- cluding at Google. fact, we started developing a them. We have our main of- “Strategically savvy compa- South Korea and a few oth- develop not only hi-tech
go-Ogarevo earlier this month. Ivanov attrib- In Russia, we have experi- search engine – connecting fi ces in Moscow, smaller labs nies realise this is the time to ers – where a domestic search ideas, but marketable prod-
uted the phenomenon to a change of produc- enced a 25pc annual growth linguistics with a digital in St Petersburg, Yekaterin- gain a competitive edge they engine remains more popular ucts.“W e have a great number
tion priorities: while civilian goods produced at in internet users over the last search – before there even burg, Kiev and a few other can leverage when the crisis than Google or Yahoo . of people with a high level of
military factories dropped by around 10pc, a several years. Millions of was an internet. In 1989, after places and, now, in Califor- is over, which is why they Like Google, Yandex has education who are ready to
similar increase in defense orders countered people come online each year, college, we developed a nia. The team in Silicon Val- choose to invest,” Pryanishik- branched into a wide array of use new technologies to cre-
the negative effects of the fall in consumer de- and many of them choose search engine for the Soviet ley consists of Americans (in- ov said. “In many cases, eco- services, among them shop- ate start-ups,” added Pry-
mand. The largest growth in military produc- Yandex as a search engine. Patent Registery to keep cluding some Russian-Amer- nomic downturns encourage ping, blogs and money trans- anishnikov.
tion was seen in the shipbuilding sector, which Currently, around 80pc of our track of their records. This icans), and they use English people to seek new business fers. It has also generated The Russian government is
expanded 2.4 times during the first quarter of opportunities and develop several ideas of its own, in- taking steps to tap the huge
2009, according to Ivanov. something new.” cluding a system of tracking potential of the hi-tech sec-
Vremya Novostei At a press conference in Mos- Moscow traffic jams via tor. Also promising are more
Yandex – yet another index
cow, Steve Ballmer praised roaming mobile phone sig- fundamental signs of devel-
the Russian government’s nals. Fortune Magazine said opment: the number of Rus-
Traffic on the Moscow Metro sees Yandex originated from a com- the Old and New Testaments in its nascent stage of devel- anti-crisis efforts and prom- Yandex had an “arguably su- sian internet users has in-
steepest decline since WWII pany called Arkadia, which of the Christian Bible in Rus- opment (5,000 servers and ised the money would go to- perior” search technology to creased by 25pc, mobile
The Moscow Metro, considered the backbone created two search programs sian. This was followed by the 4GB of text), Yandex was ward increasing Russians’ its US rivals, rooted in the phone penetration is more
of the city’s transportation network, has seen under the DOS operating sys- development of digital Rus- launched on September 23, computer literacy skills, es- complex nature of word end- than 100pc and PC owner-
the largest drop in traffic since World War II. tem in 1990. In 1993 Arka- sian dictionaries and more ad- 1997. Since then, both the tablishing innovation centres ings in the Russian lan- ship has exploded.
Completed in 1935 in an elaborate style that is dia became a subsidiary of the vanced search techniques. Russian internet and Yandex’s and providing free software guage. “Russia actually looks more
honoured to this day, the Moscow Metro com- company Comptek, which took At the Netcom ’96 exhibi- services have multiplied in to start-up companies. By “We’re happy to coordinate like a developed market, but
prises more than 170 stations and carries search software to a new level tion, the first products with scale and scope. entering the 2012, Microsoft hopes to pro- with Yandex on our fi rst joint one that still has opportuni-
around 10m people a day. It is considered the by allowing it to work with the the Yandex name appeared: realm of photo identification, vide 300,000 Russians with project for Internet Explorer ties to grow quickly,” said Pry-
world’s second-busiest underground system, specifics of Russian morphol- Yandex.Site and Yandex.Dict. videos, shopping, traffic jams IT skills and training. 8 distribution,” said Pry- anishnikov. Covering 20pc of
after the Tokyo system. ogy. This technology led to the These programs fascilitat- and other fields. A new generation of tech en- anishnikov. Firefox 3.1 also the earth’s surface on 11 time
The 7pc drop in passenger traffic experienced creation of the Computer Bi- ed morphologically advanced The name Yandex originated trepreneurs is beginning to selected Yandex as its default zones has its advantages: the
during the first quarter of 2009 was explained ble Manual in 1994, which al- searches within websites. from the phrase “yet another reveal itself, as was the case set provider in Russia – over need for digital services will
by Metro chief Dmitry Gayev, who said it was lowed users to search through With the Russian internet still index”. during the last crisis. The Google. always be high, and will keep
a consequence of the massive lay-offs among most famous, of course, is the With the help of government increasing.
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immigrant manual labourers. Workers from
other countries often lived outside Moscow’s
expensive centre and travel via the Metro to
construction sites. It has been reported that
many guest workers, mostly from former Soviet
Q&A Russia Now continues its new section, in which readers can receive expert answers to
republics such as Tajikstan and Uzbekistan,
have gone home. RIA Novosti
any questions concerning business and living conditions in modern Russia
Volkswagen to produce Audis in Kaluga
Volkswagen group has announced plans to
launch production of Audi cars in its Kaluga
Pay systems, business startup, real estate
factory. The company opened its first Russian
factory in Kaluga three years ago, and seeks to
diversify its production in the region to combat
KONSTANTIN BORISOV
schools, and also job oppor-
ROBERT SMIRNOV
legal entity (the founder) to not undertake any functions ership by non-residents, set-
falling consumer demand. The factory was MANAGING DIRECTOR, MORGAN HUNT tunities for spouses – if a
YAKOVLEV AND PARTNERS LEGAL GROUP
the registration authorities: performed by the parent or- ting certain restrictions on,
one of many opened in Russia by foreign car
EXECUTIVE RECRUITMENT
company is looking for an an extract from the register ganisation. Representative for example, ownership of
makers to take advantage of a new law that expat candidate, a spouse of In what ways can business of foreign legal entities of offices of foreign legal enti- agricultural land, land near
allowed them to import components at a 0-3pc What does the pay system an expat will have the advan- involving foreign capital be the relevant country. ties may be opened in Russia national borders and land
tax rate on condition that they gradually switch in Russia consist of? How do tage of living here (it means organised in Russia? Apart from that, the proce- only with special permission used for defence and securi-
to domestically produced parts. Volkswagen medical insurance and pen- no relocation and accommo- I would identify three ways: dure is the same as for set- from the accrediting body – ty purposes.
has been developing partnerships in the Kalu- sion insurance work? dation costs for an employer) purchasing an existing busi- ting up a Russian company. federal ministries, the State The list of border territories
ga region to fulfill this obliation. It is hoped that The pay system in Russia and being aware of the Rus- ness, setting up an organisa- There are several ways of Registration Chamber or the is specifi ed by the authori-
the original production run of 62,000 cars will consists of a salary base and sian mentality. tion with foreign participa- purchasing an existing busi- Russian Chamber of Com- ties.
grow to 150,000 cars. Vedomosti annual bonuses that depend Some expats prefer not to tion, and opening represent- ness in Russia: acquiring merce and Industry, depend- According to the law on ag-
on individual and company bring their families with ative offices and branches of shares, acquiring a compa- ing on the nature of busi- ricultural land management,
performance. Russia now them and travel home as a foreign company. All these ny’s underlying assets, ac- ness. foreign citizens – and also
Russian oil reserves to last only until has a developed private med- often as possible. Some com- are types of direct invest- quiring an enterprise as a legal entities in which foreign
2020, experts say ical insurance system. The panies – especially multina- ment in the Russian econo- property holding, or restruc- What special conditions citizens and legal entities
Gennady Shmal, president of the Russian Union pension system still belongs tionals – cover expats’ travel my and are therefore regu- turing a legal entity by way apply to the acquisition of own more than 50pc of the
of Oil and Gas Producers, said the country’s to the government, which costs on trips home several lated by the law on foreign of a merger or takeover. real estate by foreigners in registered capital – can only
oil reserves would suffice only until 2020. He controls the investing and times per year.. investment in the Russian The system for creating Russia? lease agricultural land. The
said 870,000 metres of exploration wells were spending of it. Pensions are Federation. branches of foreign legal en- Originally foreign citizens same rules apply to land used
drilled in the country last year, compared to 3m allowed to be invested in low- What is specific about Russian However, banks, credit and tities is regulated by the law were denied the opportunity for defence and security pur-
metres drilled annually during the Soviet era. risk securities such as state attitude toward work? not-for-profi t organisations, on foreign investment in the to acquire land in Russia, but poses. It must be borne in
Over the past 10 years, the country’s explored bonds. The lowest income tax Tasks are executed slower insurance companies and Russian Federation, which they were given this right mind that this law applies
reserves have increased by only 2.8bn tonnes in Europe, 13pc, makes Rus- than in Europe. It is not lazi- certain other industries and says branches of foreign when the Russian Federa- not only to foreign legal enti-
(20.58bn bbl), while production totalled 4bn sia an attractive place to ness, just different speed of sectors are regulated by sep- companies are subject to ac- tion Land Code came into ties but also to legal entities
tonnes (29.4bn bbl). Since spending on explo- work.. work. Russians often stay at arate laws. creditation as stipulated by force in 2001. in which foreign capital has
ration amounts to at least $5-$6 per metric work later but the intensity Setting up a company with the government of the Rus- Today foreign citizens enjoy more than a 50pc share.
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tonnes (over $10 in East Siberia), Russia will Can an expat bring their fam- of their activity during busi- foreign capital is a basic way sian Federation. the same rights as Russians,
need more than 100bn roubles ($3bn/€2.3bn) ily with them? ness hours may be lower. of securing investment from Unlike a branch, a repre- and can contract any deals We welcome your questions:
to increase its oil reserves by 500m tonnes Yes, and many expats do. Liv- Russians also make friends at outside the country. The law sentative office may only involving land, including editor.uk@rg.ru
(3.68bn bbl). Offshore exploration projects cost ing conditions don’t differ work and value the environ- currently requires only one represent and protect the in- purchase and sale. However,
even more at 1m roubles ($29,950/€22,790) much from those in Europe. ment and human factor more additional document, which terests of the parent organi- a particular set of legal reg- Find more answers on
per 1km of exploration wells. FC Novosti There are English language highly that Europeans. must be submitted by the sation in Russia, and may ulations controls land own- www.rbth.ru
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