Countertrade: One Ad Was Worth 93 Bicycles
BOSTON — SOVIET and United States publishers Natan Slezinger and Robert Friedmann are undaunted by the bad press on joint ventures in the Soviet Union - and plan to counter it with a joint venture of their own. Their publishing firm, Kompass, launches a new journal this month, Moscow International Business, aimed at guiding US, Soviet, and East-bloc entrepreneurs interested in exploring each other's markets.
The two publishers along with their Soviet and US editors discussed their new venture with the Monitor last month.
``There is a vast Soviet market of 285 million consumers anxious to be Americanized in terms of products,'' says Mr. Friedmann.
The major obstacle to more joint ventures, Kompass editors agree, is the problem of how to repatriate profits.
``The ruble is not convertible, and efforts to make it so are likely to be very painful,'' says Soviet editor Nikolai Starostin.
Soviet economists are working on a ruble-conversion formula to be backed by Soviet gold, he adds. But until such schemes are worked out, joint ventures depend critically on ``creative countertrade.'' A typical countertrade, says Friedmann, involves a US firm providing technology or goods in exchange for Soviet petroleum or fur hats.
One recent transaction for their new journal, the editors explain with a smile, involved trading a full page ad for 93 bicycles from a Soviet manufacturer. ``The first three models arrived last week, and we're looking for a distributor, says US editor-in-chief Edward Nathan. ``If not, we know our Christmas bonuses.''
But the 93-bicycle problem is no joke for US businesses searching for ways to take their profits out of the Soviet Union.
More to offer than caviar
The Soviets have more to offer than caviar and fur hats in negotiating ``miniconglomerates of countertrade,'' US publisher Friedmann insists. He refers to a list of current barter arrangements involving an improbable range of products: Heavy machinery, ceramics and china, electronic microscopes, drilling and exploration equipment, watches, black bread, Georgian wine, beeswax, honey, fish products, parsley, mushrooms, cast iron objects, wire, rope, almonds, mineral waters, marble, as well as petroleum-based products.
US lawyers and businessmen are reluctant to give the names of contacts they have used to negotiate such creative barter arrangements, says Mr. Nathan. ``Doing business in the Soviet Union can be a little Byzantine.''
But it is precisely this complexity, the editors hope, that will provide the new publication with its publishing niche.
The first edition of the new journal, for example, includes a diary outlining how one US businesswoman set up a joint venture; a discussion of the business challenges of entrepreneurs in the Soviet coop movement, or ``coop cowboys;'' a corporate blueprint for doing business in the agrichemical sector; and an analysis of political risk insurance.
The correspondents share an appreciation for the difficulties of East-bloc markets, says editor Nathan. ``Because of the problem of repatriating profits, it requires a flexible, creative approach to doing business. You never know when someone is going to introduce you to someone who will help you solve your repatriation of rubles problem.''
The experience with private enterprise in the Soviet Union has been mixed, the publishers admit. Soviet private cooperatives are being taxed at rates as high as 85 percent, says Mr. Starostin. ``But that's 15 percent more than they were able to keep before.''
The key to doing business in the Soviet Union is a wide range of contacts, the editors agree. Their promotional materials promise ``privileged access to decisionmakers in Soviet business.''
But even apart from the need for close official contacts, part of the cost of doing business for some Russian partners is still bribes and protection money, they add. ``The first cooperatives were connected with crime, and part of the costs of doing business for Soviet partners may be protection or extortion,'' Starostin explains. ``But that's just a decentralized version of past practice. Bureaucrats used to get it before.''