By: Modern Russia and Eckhard Cordes, METRO GROUP on July 14, 2011
As Russia’s economy develops, international retailers increasingly compete for shares in the country’s rapidly-expanding consumer market. One of these is METRO GROUP, the largest German and third-largest global retail and wholesale corporation. With nearly 25,000 employees and over 100 stores, Metro is already one of the main foreign employers in Russia. CEO Eckhard Cordes is also the chairman of the Committee on Eastern European Economic Relations - the main organization representing German businesses in Eastern Europe, Russia and Central Asia - and is a member of the Foreign Investment Advisory Council (FIAC), a group of leading foreign businessmen who assist Russian authorities in developing and promoting a favorable investment climate. On the sidelines of the St. Petersburg International Economic Forum (SPIEF) last month, Cordes spoke to Modern Russia about his company’s prospects in Russia, the “special economic relationship” between Russia and Germany and how German businesses can support Russia’s modernization agenda.
What were your main reasons for attending this year’s SPIEF and what did you expect from the event?
The Forum is one of the most important international economic gatherings and a major yardstick of current trends in Russia and Eastern Europe as a whole. Anyone who wants to play a part in the Russian market has to be in St. Petersburg forging contacts. The Russian economy is currently gaining a fresh impetus from high oil and gas prices and at the same time aims to position itself on a broader base. I am particularly keen to find out more about the results of these modernization endeavors.
The St. Petersburg Economic Forum is often described as the “Russian Davos.” Do you share this assessment or do you see significant differences between SPIEF and other leading international economic gatherings?
Davos is obviously still a few years ahead and based on a different tradition but St. Petersburg is making good progress. That said, as a city, St. Petersburg has clear advantages over Davos. The Swiss winter is cold and snowy whereas in St. Petersburg the forum more or less coincides with the city’s wonderful “white nights”. The Forum’s success is evident in the increasing attendance of high-ranking politicians. We at the Committee on Eastern European Economic Relations are working hard to ensure that next year Germany will be represented not only by parliamentarians but by members of the government as well.
Various studies indicate that German firms anticipate positive developments for the Russian economy in 2011 and beyond. Has Russia overcome the financial and economic crisis?
In my view the Russian economy has largely overcome the crisis. One indication of this is the impressive trade growth between Germany and Russia. In the first three months of 2011 we achieved astonishing growth of nearly 40 percent in bilateral trade, enabling us to catch up with our previous record year, 2008. Russia could nevertheless be in an even better position if the modernization efforts of the last years were implemented more consistently. Russia has yet to overcome its reliance on commodities exports.
In the long term, Russia is expected to become one of the world’s most promising growth markets, especially in the consumer goods sector. Where do you see the Russian economy as well as your own company’s role in the Russian market, in ten years’ time?
For the METRO GROUP, Russia is now one of the most important markets in the world. We will be staying on course here and opening up more stores in the future. We have over 100 stores already and with nearly 25,000 employees we are one of the largest foreign employers in the country. Over the next 10 years the Russian economy will be able to take another leap forward especially given the organization of major sporting events such as the 2014 Olympic Winter Games in Sochi and the 2018 FIFA World Cup. Whether it will be enough to carry Russia into the ranks of the world’s five largest economies will, however, depend on the success of the country’s reforms. WTO entry may also play an important role in this context.
Russian authorities are pursuing an active reform agenda to modernize the country’s economy, especially by easing the conditions for doing business. Have you already noticed a concrete impact on your company’s activities in Russia?
The better the state of the Russian economy, the better it will be for the people of Russia, who are also our customers, be it at Real, at Media Markt, at Saturn or in our Metro Cash & Carry wholesale business. That is why the METRO GROUP and the Committee on Eastern European Economic Relations are keenly interested in the economic reform process. Promoting the development of small and medium-sized companies is especially important in this context. We know from Germany that SMEs are highly innovative and flexible, and that they create the jobs of tomorrow. Unleashing private enterprise by increasing financial incentives and support, reducing bureaucracy and the weight of the state in the economy as well as establishing a stable legal system is, at the end of the day, the key to success.
As chairman of the Committee on Eastern European Economic Relations, you also represent German companies that are active in Russia, which are often said to have a “special relationship” with Russia. Do you share this assessment and how can German firms maintain their position in Russia in the face of increasing international competition from, say, China?
The number of German companies in Russia has risen – despite the economic crisis – from 4,800 to 6,000 over the past two years. That is a fact we are very proud of because it demonstrates the strength of our bilateral ties. It is indeed a special relationship – one that is based on many historical, cultural and personal ties. Think, for example, of the large number of German citizens with Russian roots. We must nonetheless constantly refresh our relations, and we are currently doing so through projects like the joint German-Russian science year and, starting in the summer of 2012, the year of German Culture in Russia.
For German as well as international companies, the modernization of the Russian economy is a win-win situation. How can German businesses support these modernization efforts?
There would not be enough space here to list all of the exciting areas of activity. They extend from energy efficiency, which, German technology could help increase by 70 percent in Russia, to agriculture, where German agricultural technologies could help double yields per acre, not to mention the establishment of a modern automotive supplies industry or of a modern healthcare industry. For German businesses, participating in innovation clusters at Skolkovo is no less important than collaborating with Russian firms in nanotechnology. Societal and political impulses are also important. The Committee on Eastern European Economic Relations is keenly interested in intensifying the German-Russian dialogue on legal affairs, which is an area where promising events have recently been held. Last but not least, we are working on the abolition of visa and registration requirements, an area in which we expect further movements on the parts of both Russia and the EU. This would take business relations to new levels at one fell swoop.
Eckhard Cordes, PhD in business administration, is the CEO of METRO GROUP. In October 2010, Cordes was elected Chairman of the Committee on Eastern European Economic Relations, the main organization representing German businesses in Eastern Europe, Russia and Central Asia.
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