The Davos Word — Issue #4, Jan 19th 2017

The Russia House Newspaper | Thursday, January 19th 2017 | Nr. 4 | rh2017.com

THE DAVOS WORD Rounding Off the Action at Russia House

Our Delegations are deconstructing their stalls, businessmen are negotiating the finishing touches on new contracts, and security services are preparing to escort VIPs back to their private jets. After all the business sessions, awesome parties, key meetings, and business deals at the WEF, we can all agree that the last few days have been anything but ordinary. Now we’re in the home stretch and all the action at the World Economic Forum is winding down.

This will be the final issue of the Davos Word this year, the official newspaper of Russia House 2017, but our doors are still open for guests until tomorrow. If you’ve still got some business at Russia House or missed the chance to have a conversation with anyone, be sure to stop by and say hello before you leave back to the real world.

Interviews

Guest Opinions

Russia House journalists have kept up the pace for our final issue, finishing up a whirlwind tour of interviews yesterday. Tom Blackwell, the CEO of EM Communications, was the key speaker at a panel discussion on Life’s Digital Disruptions and gave an interview to Russia House on Brexit and Russian financial markets. Find his interview on page 2 and the summary of our working discussion on page 3. Read the interview from the Director of Roscongress Alexander Stuglev about Russian international forums on page 4. Last, but most certainly not least, we sat down with Ulmart majority shareholder August Meyer to get his thoughts on doing business in Russia.

Find the interview on page 6.

Ranging from comical to serious, we’ve received a large amount of feedback from our guests. We’ve gathered our favorite comments from visitors and sponsors of the Russia House and dedicated a whole page to the interesting thoughts of our patrons. Find them on page 5.

Goodbye From Russia House Brian Kean, the Editor in Chief of the Davos Word, finishes off the issue with his final thoughts on WEF, Davos, and all the events that we’ve had the pleasure to host at Russia House. His letter and a photo from all the participants of the Davos Word can be found on page 7.

2 Thursday, January 19th 2017

Russian Tech is ‘Standout Positive Sector‘ -- EM CEO Tom Blackwell

Tom Blackwell, CEO EM Tom Blackwell, a native Brit who became the CEO of Moscow-based company EM, is in the business of helping connect Russia and the West in a meaningful way. His company focuses on advising Russian companies on investor relations communications and assisting in developing communication strategies for Russian businesses wishing to offer up shares in their companies to Western investors. Russia House got Tom’s take on Brexit and his predictions for Russian financial markets.

– Is the UK is serious about Brexit?

– On the eve of the referendum, I went to bed at 2 AM absolutely convinced that the UK wasn’t serious about Brexit and then I woke up to find out that I was wrong. It turns out that 52 percent allegedly were serious. A different question is whether they understand what Brexit actually means and

I think its safe to say that we’re still working that out as a country. Yes, there are a lot of people who are unhappy with the current setup, but it’s hard to say what exactly Brexit will deliver and whether or not that will coincide with what people hope will happen.

– Will 2017 be a year of black swans or green shoots for Russia?

– Let’s hope that we don’t see any more black swans, I’m not sure that anyone has the appetite for even more black swans. Hopefully we’ve gotten rid of those in 2016. My personal view is that the Russian markets, in terms of new deals and IPOs, couldn’t be any worse than they have been in the past couple of years – there was almost nothing. The only way is up in that respect.

I think that the recovery will actually still be slow, even if we do see positive changes following Trump, Brexit, and all of that. The knock-on effect on fi-

nancial markets will take some time to come through the system.

Because markets have been so strained in the last few years, you’ve had this growing and growing pipeline of companies that are technically ready to go IPO and would like to go the moment that they sense that markets are ready for them. These are companies in traditional sectors like energy, resources, and commodities, and newer, funky consumer tech and retail firms.

There are probably a hundred companies that are technically ready to go tomorrow if they feel the demand is there.

A lot of international businesses, even if they have a more fundamental positive long term view on Russia, have been reluctant to be seen publicly to be doing deals with Russia. I think that a slight easing of the political bickering will make companies able to put politics aside look at business in Russia on an economic level. That may bring a slight increase in terms of people willing to do business and it will cause a lift in economic activity.

– What do you think about the Russian tech sector?

– Tech has been one of the really big standout positive sectors over the last few years. It’s no secret that the Russian market has been in an extremely difficult state over the last three years, but if there’s been one sector that has managed to stay a little bit removed from geopolitical tensions, it’s tech.

Number two, there are just simply some fantastic brains in Russia, people who are just natural tech wizards. If you look at Ulmart, there are some phenomenal businesses that have actually been performing well lately. I think this is one of the big bright areas for Russia even in the challenging environment.

Can these people take on the global players? Absolutely, why not?

Tech is a global industry by definition, so if you come up with a good idea, there are no obstacles to realize it.

The Davos Word

3

Life‘s Digital Disruption: 10 Years From Now Are we going to stop talking to our wives? Will Facebook die? Is life too short to wait for our credit card?

Our session on Life’s Digital Disruptions collected the most outlandish 10-year predictions for the future of technology.

Banking Michael Hecker, Managing Director of Redline Capital, often travels to Luxembourg, the financial center of Europe, on business. He sees every financial institution along the way as he is traveling from the airport to the city center and can’t help but think: “I’m driving through something that will one day become a museum.” His prognosis is that brick and mortar banks will no longer exist. Instead, each financial institution will be nothing more than one super computer.

One program will replace all financial centers.

He believes that the process of technology replacing manual jobs is not a threat, but it will become dangerous to society once it begins to creep into professional positions like lawyers and bankers: “Manufacturing is replaced by automation, retail is replaced by digital market places, but now the digital transformation is staring to hit the elite layers of society.”

Media Vedomosti, one of the most influential business daily newspapers in Russia, is facing the same challenges as many other print media in developed countries. Editor-in-Chief Tatiana Lysova believes that people are turning to multiple information channels will lower the overall quality of media content. “In a few years, the media industry will resemble retail, where Google News and Yandex will be supermarkets. And just as in any supermarket, consumers don’t really check the producer, they check the product.” However, there is an upside to this process. People look for boutique retail shops for clothing and accessories to set themselves apart, so Tatiana believes that people will also look for boutiques in media. “Just like having a Chanel purse for a lady, getting relevant information is important for public officials and business people, and they are ready to pay for it.”

Telecommunication Andrey Kuzyaev, President of ER-Telecom, predicts that everything will move even faster. “Whenever you call someone, you have to wait. When-

Human Relationships Hanna Aase, founder and CEO of Wonderloop, is sure that we will live in a virtual reality in the space of a decade: “We are the first generation that walks around with a phone, and we are the last.” Hanna’s forecast is that our world will be composed of video profiles. People will visit their friends for tea on the other side of the world through virtual reality glasses.

Egor Yakovlev, founder of Tvigle, agrees, and forecasts a major new trend which he calls the digital avatar: “It’s a new kind of artificial technology that will do 90% of the communication with your wife, and better than you do now.”

Egor Yakovlev, founder of Tvigle

ever you’re connecting to Facebook, again, you’re waiting. Even when you’re waiting for your credit card back from an ATM, you’re waiting and wasting your life. My dream for the future is that these processes will be faster and we will be happier as a result.”

Kuzyaev spoke about how his company is helping to transform communication infrastructure to fully digital technology: “What matters is the new quality and speed of the digital technologies and we are working on making this a reality in the very near future.”

Culture Cultural industries face the same challenges as business, but with some small and notable differences. Fekla Tolstoy, Development Manager of Leo Tolstoy Museum in Russia, welcomes digital innovation, but only if the content is thoughtful and entertaining.

“The key challenge is how to build the bridge between millions of gigabytes and the audience.” Tolstoy applauds virtual technology in education and culture, but stresses the importance of creativity. “Putting touch screens into the museum halls for attracting teenagers doesn’t work anymore. They see it at home.”

4 Thursday, January 19th 2017

Secret of Success ‘Hidden in the Details’ – Roscongress CEO Alexander Stuglev

Alexander Stuglev, Roscongress CEO The Roscongress Foundation holds events across the globe, enabling international business leaders, experts, journalists, and government officials to contribute to the development of social entrepreneurship and charity initiatives. Alexander Stuglev, CEO of Roscongress, told us about the Foundation’s key accomplishments and its future projects.

– What role did Roscongress play in organizing Russia House?

– Roscongress Foundation actively promoted Russia House as the official Russian residence in Davos.

Most of the participants of the business sessions, including both Russian and foreign entrepreneurs, businessmen, and politicians, are frequent guests of The St. Petersburg International Economic Forum (SPIEF), which we organize.

– What is the key mission of Russia House?

– The foremost goal of this

event is to drive attention to Russia as an investment target. Foreign guests and partners receive information about opportunities to do business in Russia through business sessions and one-on-one meetings at Russia House. We aim to show that Russia is open to dialogue – that is why the doors of Russia House are always open.

– Roscongress has organized a vast variety of events over the course of the past 10 years. What do you consider your biggest success?

– Our experience allows us to organize top-class business events worldwide, from Montevideo to Vladivistok, and we invite high-level businessmen, political leaders and journalists. We’ve built a team of exceptionally talented and diligent professionals over the past decade.

All together, this is what we consider our biggest success.

– Which Roscongress events can we look forward to this year?

– Our 2017 calendar is full of events. The Russian Investment Forum in Sochi is our next major event, and we welcome the participation of Russian Prime Minister Dmitry Medvedev at the RIF on February 27-28.

Next up, we will hold The International Arctic Forum “Arctic: Territory for Dialogue” from March 29-30.

We are pleased to announce that Russian President Vladimir Putin will be among our guests. We are also planning to organize sessions abroad in China, Cuba, Germany and Spain among other countries. We will share more information on these sessions soon. I would also like to highlight that we are inviting guests of Russia House to attend the 21st St. Petersburg International Economic Forum taking place on June 1-3, 2017.

– Can you share the secret behind a successful international event?

– First and foremost, we’ve learned to carefully analyze every single element of each one of our events – from transportation and logistics to the components of every item in the program. We also strive to build a relationship with our participants that fosters a deep level of trust. I’m convinced the secret of success is hidden in the details.

SPIEF The St. Petersburg International Economic Forum (SPIEF) is a leading global platform for representatives of the business community to meet and discuss the key economic issues facing Russia and the world as a whole. Organized by Roscongress, it is a first-class event in the business world – participants include heads of state and government, executives of international companies and organizations, leading experts and journalists from around the world.

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The Davos Word

What People Think About Russia House here. I’m a reporter, but in Davos I’m representing a startup. I think that Russia House is very popular; people are going to be excited. But the place is too small, many people want to come.”

- Patrick Reevel Managing Editor Pro Journo (Switzerland & USA)

“I just came across Russia House by chance and attended Life’s Digital Disruption session. It was a great talk with really interesting speakers – really knowledgeable in the industry.”

Guests of Russia House share their opinions “We came only a couple of minutes ago, but already feel this great atmosphere! Wonderful music, tasty vodka, beautiful ladies – Russia House is just an amazing place.”

- Matías García Oliver & Norberto Pontiroli Secretariat for Strategic Affairs Office of the Chief of the Cabinet of Ministers (Argentina)

“I personally really enjoyed Digital Breakfast at Russia House. We had a very fruitful discussion with a lot of interesting people. By the way, I have been to Russia around 10 or 15 times, once stayed there for 3 months in a row. And I must say that from the spirit Russia is very similar to Germany. ” - Burckhardt Bonello General Partner & CEO Found Fair Ventures (Germany)

“I love Russia House because of the awesome vodka from St. Petersburg.”

- Fabian Carlos Guhl Founder & CEO AMPION (Germany and Africa)

“Russia House is like a pinnacle of Davos – great parties, great conference, we really enjoyed it. The best part was Russia-US panel today.”

- Craig Smith Publisher EuropaProperty.com (Europe)

“I’m here because I like Russians. Africans love Russians, Russians love Africans. Let’s make babies!

Russia is a fascinating historical place. I studied history in high school. I like Peter the Great; he did some very interesting things. Catherine was also an incredible leader.

I’m an architect, and the Russian constructivist movement of 1919 – “levoye iskusstvo” («левое искусство» – leftist art) – inspired my architecture.”

Bryan Liverpool, IT Manager Stampa Governance Consulting (Switzerland)

- Mokena Makeka Owner & Creative Designer Makeka Design Lab (South Africa)

“I’m here with my Russian friends, and I like the atmosphere a lot. Nice location, nice atmosphere.

Everything is good.”

- Andreas Höfner Managing Director Arbitrage Analytics (Switzerland)

“Russia House is amazing. I’m very impressed by the atmosphere. I live here upstairs, so this morning, when I woke up, somebody very kind gave me some hot tea, and just said: “You have to come tonight. There’s going be a party.”

- Alberto Alemanno Professor HEC Paris (France)

“I’m based in Moscow, so it’s funny to see the house full of Russians

“Wonderful! Russia House is the place that facilitates people’s conversations. Everything is pretty well organized. I had a chance to visit the business sessions. I believe that the events at Russia House are very substantial. But the company I represent is a bit different. For us it is important to be there at the right time, hanging out with girls. Last year, I made the whole night. What about vodka Onegin? You’re asking me, Pushkin.

For Pushkin, what matters is to feel relaxed. Vodka Onegin can make any event relaxing.”

- Andrey Pushkin Managing Partner Tenzor Consulting Group

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Want to Invest in Russia? Find a Good Local Partner – August Meyer, Ulmart Shareholder

August Meyer, Ulmart Shareholder We sat down with one of Ulmart’s shareholders August Meyer, an American-born investor who acquired Russian citizenship. We spoke on a range of issues, from Mr. Meyer’s opinions on global political developments to his comments on investing in Russia and advice to Western investors thinking about getting into the market.

– What do you think are the biggest obstacles to a thawing of US-Russia relations?

– There was a deal in place between Russia and the West on Ukraine right before the Yanukovich government was overthrown. The deal blew up for whatever reason, but they seemed to like that it blew up. From Mr. Putin’s perspective, I can see plenty of reasons why the Russian side would be angry.

How do you continue negotiating with someone who will turn on you the very next day after signing an agreement?

There’s a number of countries that do things the US doesn’t like, but it seems like US policy makers are obsessed with Russia and Mr. Putin.

China is Communist but they aren’t demonized the way Russia is. There’s no negative in the US to bashing Putin

and Russia – it seems to be one of very few issues with bipartisan agreement in Congress. Politicians find it much easier for their careers to have a negative view on Russia. That needs to change.

– Do you think Trump will overcome some of these obstacles?

– Trump can very well be the person to lead a breakthrough in US-Russia relations and completely change the dynamic. At the very least, he will take a fresh look and a practical point of view. He knows there has to be give and take – Mr. Putin needs some things and the US needs to receive some things in return. I hope that he takes a realistic position. I’m cautiously optimistic.

– What are some of the biggest risks of investing into Russia?

– Most of the risks are just the standard risks that investors would find anywhere. I don’t believe that Russia has any unique problems that don’t exist elsewhere. However, there are some rule of law issues in Russia. A garden variety contract claim in a Connecticut municipal court – you know you’re getting a fair shot. But the same dispute in Tomsk, where your opponent has some good connections... I think

there is a greater chance to corruptly influence Russian courts. There’s no magic bullet for this problem. It will take considerable time and effort.

– What advice would you give to foreigners wanting to invest?

– It’s always good if you have a great local partner. I’ve been successful in Russia because I forged a good partnership and if you can arrange for that, it will become one of your biggest assets.

– How do you find a good Russian partner?

– I would say shared values and long-term focus are the most important things to look for. I’ve been in business with Dima (Dmitry Kostygin, Ulmart major shareholder) since 2001, so I think it’s important to share how we met. I have an interest in Ayn Rand.

She was actually born in Saint Petersburg. I reached out to the Ayn Rand Institute there and they suggested to get in touch with Dmitry Kostygin, who actually did some of the translations of her work into Russian. From the beginning, I believed that we had shared values because of our shared interest in her.

I’ve never seen anything in any of his activities that would make me question his integrity. Even when we’ve had to develop strategies against opponents, we never came up with any dirty tactics. You can get a good feel for someone if you observe them when they think no one is watching. When Dima and I are discussing problems we have with competitors, they are honest and blunt conversations. He never once made any proposals that were unethical or of questionable integrity. That’s one of the ways that he gained my trust.

– What do you think 2017 has in store for your investments?

– This year could be a great year for us. I think we’ve seen the bottom in whatever this is. I don’t consider it a crisis. If you have some rubles in your pocket and you can go home to see your family, that’s not a crisis. I think we’ve turned the corner and I see some green shoots ahead.

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The Davos Word

Fighting the Good Fight There is a belief by many that the 4th Industrial Revolution is causing pain and misfortune in small communities scattered about the planet.

Technology makes labor redundant and gainful employment becomes unemployment. Sitting at home posting on Facebook or Twitter random thoughts about pets and photos of children – maximizing very real parts of the technological revolution – these voices rant about how technology has caused their job loss.

Losing a job is a horrible experience. It creates stress on par with the death of close loved one. Blaming technology is easy because it is there; because it is truly changing every aspect of our lives – how many of us have hung up in frustration when struggling to communicate with digital voices on phones?

Politicians throughout the world play on fear and misunderstanding and promise to return jobs from “offshore.” They blame others for callousness – “how dare so-andso politician kill the jobs in your

The Davos Word Team

community?!” They promise to return the widget factory – which had been closed not because of technology but because its owners found cheaper labor in South East Asia – and defeat the ‘elitist’ technocrats gathered in places like Davos. The same people who make up crazy ideas like Twitter, Facebook, Uber and Google. Ideas with the supposed obvious goals of killing jobs.

In order for us to succeed, for us to overcome the powers of antiglobalization that tell us to build walls, exclude and hate – and if this path is followed, then jobs will return and all will be well – we need to innovate and innovate. We need to come together and not apart. If politicians will prefer to choose a path of playing on the fears and the struggles of people for the sole purpose of gaining power, then in 2017 it will be up to the businesses gathered this week in Davos to fight these strategies for power.

As Davos 2017 closes out on this Friday, a new era will commence in world relations. An era less pre-

dictable than we have seen in decades – maybe all will work out; but, if the mood of the forces that voted for such change in order to fight the “harmful” effects of technology (change, progress, tolerance) have their way, our roles will be clearly defined. We must come back to Davos confident that we kept innovating, creating and changing the world – and then jobs will come.

We must be certain that we have crafted a clear and simple message to the world – technological change is not the bogeyman in the closet. Change and progress are ok and change and progress will eventually relieve you of your pain and suffering.

Russia House 2017 will become Russia House 2018, and we will be confident that we have fought the good fight.

Have a safe and productive year and see you in Davos 2018!

- Brian Kean Chief Editor

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The Davos Word The Russia House Newspaper is the official newspaper for RH’17, published by Ulmart and distributed free of charge with a daily circulation of 500 copies. Reporters are graduate journalism students at the Saint Petersburg E State University. Online version of the SS RH’17 Newspaper available at rh2017.com RA T S TAL Chief Editor: Deputy Chief Editor: Brian Kean Maria Abozova Chief International Officer at Ulmart Ulmart Reporters: Mykhaylo Bonovskyy Valerie Kuzmina Oleg Maslov Julia Shimf

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