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Expats can help the Russian economy

The number of foreign specialists working in Russia has been declining rapidly over the last several years. These specialists often perceive Russian capitalism as something temporary that depends on oil prices. Under such conditions, expats are not likely able to make a serious contribution to the modernization of the Russian economy, but their view of local realities is nonetheless valuable for understanding the processes that hinder economic development, researchers from HSE’s Laboratory for Comparative Analysis of Post-Socialist Development Vladimir Karacharovskiy, Ovsey Shkaratan and Gordey Yastrebov concluded from a research study

Foreign professionals (expats) working in Russia fall into social groups in which today’s researchers are seeking an alternative to the government for Russia’s modernization. In addition, these groups include the “new middle class”, professionals involved in the sectors of the new economy and innovative entrepreneurs.

Vladimir Karacharovskiy, Ovsey Shkaratan and Gordey Yastrebov, all of whom are employees of HSE’s Laboratory for Comparative Analysis of Post-Socialist Development, tasked themselves with analyzing the extent to which expats are able to make a positive contribution to the transformation of the Russian economy, as well as what their role is in processes of modernization. To do this, a special study was conducted as part of the project “Expats on the Russian Labor Market” (Khamovniki Foundation for Social Research Support, 2013). The results of the study were based on the analysis of data from 150 interviews with foreign professionals, top managers and specialists who all work in mixed labor teams at Russian companies in Russia or at Russian branches of transnational companies. The interviews’ geographical span included Moscow, St. Petersburg, Nizhny Novgorod and Novosibirsk. Among interviewees were expats from the U.S., Europe, South America and Southeast Asia.

Foreigners are concentrated in capitals

According to Russia’s Federal Migration Service, the number of foreign-invested organizations in Russia has grown by 160% since the year 2000, while their turnover is currently around 33% of the overall turnover of all Russian enterprises. Currently, more than 100,000 specialists from non-CIS countries work in Russia, Vladimir Karacharovskiy said, and of these specialists, over 40,000 are managers of their respective companies and their divisions. Additionally, highly qualified executives and specialists make up around 6.4% of the overall foreign workforce in Russia.

Most foreign professionals are employed at Moscow-based companies with around 40% of all foreign management personnel and 35% of highly qualified specialists working in Moscow. In addition, some 8% of all executives and highly qualified specialists work in the Moscow Region. St. Petersburg is also among the country’s leading cities with respect to number of expats. Close to 12% of Russia’s management personnel and 4% of highly qualified specialists work in St. Petersburg. Following Moscow and St. Petersburg are Krasnodar Territory; the regions of Tyumen, Leningrad, Kaluga, Sverdlovsk and Sakhalin; and also Krasnoyarsk and Primorsky territories. These regions account for another almost 23% of expats.

Such “absolute savages”

An entire industry has arisen in Russia over the last 25 years – the foreign labor market, which has its traditions, rules and costs. Larger cities have cafes, clubs and even entire neighborhoods for expats. The researchers noted that experience sharing, mutual interests and sometimes mutual irritation are building up among expats.

The make-up of foreigners working in Russia is very heterogeneous. Statistical data show that most foreign specialists come to Russia from the U.S., Britain, Germany and France. Many of them lead a fairly isolated way of life in Russia, and do not aim towards cultural exchange.

Concerning the specific judgments expats have about themselves, the researchers cited a British top manager of a specialized publication: “All of these communities of expats are rather fragmented and broken up into sections… They all have their own circumstances and conditions, and it’s very difficult to unite them all together… For example, Western Europeans [meaning Europeans that represent various countries in Europe] greatly differ from each other, and Americans all the more so. Complete and absolute wild people in this sense [in the sense of overcoming cultural barriers]! There’s no one type at all – they’re absolutely different.”

The researchers nonetheless identified three types of expats based on their ability to integrate into Russian culture.

The first type includes nonintegrated specialists. Their employers abroad have tasked them with maintaining cultural cleanliness.

The second type consists of expats that have undergone cultural assimilation and largely behave like Russians.

The third type is made up of specialists who accept Russian culture, but do not change their own personal positions.

Oil prices have not fallen yet

The research study also identified three groups of expats in respect to the nature of the effect on the host culture:

  • Utilitarians: expats who come to Russia only for money
  • Ideologues: expats who aim to instill Western management models in Russia
  • Modernists: expats whose mission is to find points of contact with Russian business culture and build new models of efficient operations. This group, Karacharovskiy notes, is the most valuable in terms of having a positive influence on the development of the Russian economy.

Statistics show, however, that Russia is not currently as popular a market as it was in the 2000s. While between 2000 and 2008, the number of foreign specialists from Western countries had been growing steadily, increasing by 150% from the U.S. and 60% from the EU, crisis has caused the opposite to occur, the report says. Between 2008 and 2011, upwards of 66% of specialists from the U.S. and 64% of specialists from the EU left Russia. “In spite of relative stability in the macroeconomic situation in 2010-2011, this process is not reversing,” the researchers note. They focus on the fact that to a large degree, a negative perception of the Russian version of capitalism has formed among expats. Expats see Russian capitalism as corrupt, bureaucratic and temporary, existing only until oil prices fall. Overall, the surveys show that foreign specialists often plan their stay in Russia to last up to two or three years.

Figure 1. The change in the number of foreign professions from EU countries and the U.S. who worked in Russia between 2000 and 2012.*

1. Based on data from Rosstat (http://www.gks.ru/). The graphics were constructed based on data for 2000 and 2005-2012; data for the U.S. is from 2000 and 2003-2012.
2. Shows the number of foreign specialists working in Russia from the following countries (‘000 people): the U.S., Britain, Germany, France, Italy and Finland.

The decline in the number of expats playing a role in the Russia economy, Ovsey Shkaratan says, is catastrophic. “This means that we are not developing high-tech production, Shkaratan said.

Russians’ last-minute work style

In the study, particular attention was paid to expats’ perception of Russian work culture. For the most part, foreign professionals noted Russians’ inclination of having a last-minute work mode. The interviews often contained such characteristics: “For me, it was wild that particularly Russians work very hard. They can stay late and arrive early. They can come in on weekends. People don’t do such things where I’m from…” Overall, expats’ perception of the Russian work culture is fairly contradictory and often negative. The interviews often cited Russians as being undisciplined, unable to take on responsibilities and often indifferent to a company’s business.

The study’s authors reached the conclusion that the stratum of expats in Russia is fairly narrow, and one can only discuss the spotty impact that it can provide. “Additionally, in terms of modernization processes, the massive presence of bearers of the new “cultural code” is not as important as the mere idea of falling into the culture of sociocultural examples that are new, attractive and have proven their advantage,” the researchers said.

In addition, indirect influence is no less significant. Foreign professionals are solving the unique task of “branding” the host culture’s qualities that they do not encounter in analogous situations of working in their home countries. This creates the fundamental basis for national self-analysis.


Author: Marina Selina, May 21, 2014