Businesses hoping to trade with Soviets face many obstacles

October 12, 1990|By Liz Atwood | Liz Atwood,Evening Sun Staff

David Streb of Towson wants to open a video production office in the Soviet Union. Donald Harbick, vice president of a Columbia health-care corporation, is looking to sell medical equipment to the Soviets.

They are but two of hundreds of Maryland business people enticed by the opportunities presented as the Soviet Union turns from communism and toward capitalism.

Yesterday, representatives from about 60 state businesses were briefed during a seminar on the opportunities and pitfalls of investing in the U.S.S.R. They were told that, despite the vast market opportunities, obstacles still are great for American businesses wanting to do business with the Soviets.

Telephone lines in the Soviet Union sometimes don't work. Faxes don't get through. Roads are so poor that products can't get to market. Businesses can get bogged down in a vast bureaucracy, and figuring out whom to contact can be a nightmare made even worse by the independence movement in some republics.

"Converting the entire Soviet Union economy is no simple task," said Geoffrey S. Mitchell, a director of the World Trade Center Institute, a private non-profit organization that helps train business, government and educational leaders to operate in the global economy.

The institute sponsored yesterday's seminar, which featured U.S.S.R. trade representatives and officials from Soviet business associations.

They said the most serious obstacle that American businesses face is a psychological one.

"In the Soviet Union, no one remembers what private property is," said Robert N. Ruzanov, trade representative of the U.S.S.R. in the United States. "People are frightened by it."

A Soviet will consider himself rich if he has an apartment, a dacha [country home], a car, a television and a VCR, Ruzanov said.

"Now he hears there are going to be millionaires next to him and he has been taught that millionaires will exploit him," Ruzanov said.

Despite such fears, leaders in the Soviet Union agree that the country will have to adopt a free-market system in order to revive the crumbling economy. How fast that will happen could depend on which of two economic reform proposals President Mikhail Gorbachev accepts later this month.

Ruzanov urged the Maryland business representatives not to be timid.

"One has to take risks," he said. "Not a single big capital investment in the world was created without risk."

Although the Americans expressed concerns about the Soviet Union's lack of hard currency, the poor roads and risks of theft, a number of business leaders seemed determined to work with the Soviets.

They cited a market of nearly 300 million people crying out for consumer products and a country that is rich in oil, gold and timber.

Currently, at least 75 to 100 Maryland companies are trading with the Soviet Union, according to the Maryland International Division.

These range from corporate giants such as Black & Decker Co., which has been selling power tools to the Soviets for decades, to Chesapeake International Corp., an eight-person company that acts as a broker for lumber, metals and chemical deals between the U.S.S.R. and Western Europe.

Maryland has been one of the most active states in establishing exchange programs and business ventures with the Soviets, according to Eric Feldmann, director of the Maryland International Division.

In the spring, Gov. William Donald Schaefer visited the Soviet Union, accompanied by more than 20 business leaders, and a number of exchange agreements have been signed between this state and the U.S.S.R.

Carl C. Pergler heads a Chevy Chase company called Base Corp. that he hopes will provide information and services to other western businesses in the Soviet Union. His company is typical in that it requires only a small capital investment.

While acknowledging that investing in the Soviet Union has risks, Pergler said, "If you're going to survive, you've got to get into it now."

Frequently, Americans have unrealistic expectations, he said. "A lot of people go over naively expecting to sign a joint venture agreement and they get discouraged," he said.

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