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GR in Russia in the Post-Covid Era

LEVICK |

GR in Russia in the Post-Covid Era

Deep meaningful conversation: how the dialogue between business and government will change after the COVID-19 pandemic

“In recent years, GR communications have been following the past practices being focused on national projects and achievement of KPIs set by the ruling establishment. Currently, as national projects have ceased to be mentioned at government sessions for many weeks, we can expect the tone of the dialogue to change significantly”, says Eduard Voytenko, Director General of Baikal Communications Group

The COVID-19 pandemic will keep Russia entranced for at least another month. Business will continue its struggle for survival, and the government will issue a few more packages of support measures that will be available only for certain companies. Most experts are unanimous in their forecasts: Russia is heading for a prolonged recession. Many companies will reduce their costs, large business areas will be frozen, let alone single projects.

In this context it’s worth figuring out the prospective GR trends in Russia both in-house and outsourced. What will serve as the development driver for the relations between the government and the business in the near future?

GR has always served as an instrument that helped advance business development. Improving market conditions by involving public authorities in order to gain a foothold in new niches: this mission made GR the privilege of large players at the federal and regional levels. During the periods of economic recession or increase of state control, GR takes on the protective function and becomes a tool for maintaining the scale of business and its financial indicators.

It is obvious that the GR experts are in high demand working at the top of their capacity at the moment. Due to the pandemic, some sectors need urgent state aid; some, unfortunately, cannot count on it, but are trying to accumulate a reserve in order to ease their financial burden during the recovery period once the restrictions are lifted. In connection with the President’s latest initiative to develop a roadmap for recovery once the COVID pandemic is over, a lot of companies will attempt to influence the government’s strategy in favor of their industries.

However, every step taken at the moment shall count as force majeure and anti-recession communications, and it is hardly possible to imagine the form that the dialogue between business and government will take in the coming years. However, it is essential to start examining the pattern in order to strengthen the trust between the companies and important industry and political stakeholders in the future competitive environment of a comprehensive and long-term recession.

In recent years, the framework of GR communications has often followed the following scenario: the government strived to achieve certain goals (their own KPIs) from business, and the business easily involved in such self-motivated work with the goal to stay close to the government bodies. The dialogue was channeled mainly around national projects. Today we can hardly count the weeks since national projects were mentioned by the government. We can also hardly imagine that these growth drivers of sectoral public management will not undergo significant fundamental changes in the new economic reality.

It is vital that Russia is in a strategically vulnerable position. In the long run, we do not have an external or reliable natural source (similar to oil in the “fat 2000s”) that would fuel economic growth. The coming recession is caused not only by the pandemic and the falling prices for “black gold”; it is also fueled by less visible, but no less influential trends. In particular, a sharp decline in foreign investment in Russia, especially after the so-called “Michael Calvey Case”. Investors will not return to Russia in the near future and not only because of the political risks and a decrease in confidence, but also because of the world economy shrinking. Thus, in addition to the traditional decline in investment activity in the emerging markets (Russia), there will remain additional lack of trust on the part of international business, even among similar economies.

We will be forced to search for the sources of development within Russia, and the government’s poor mobilization in efficient achievement of goals through national projects after some time will force the government and the business to engage in a dialogue on the new principles for establishing preferences. Vladimir Putin has already mentioned the new core values of development: the roadmap that the government will prepare should be aimed at increasing citizens’ incomes and economic growth. Of course, it will be impossible to set the political and managerial aims at these goals explicitly and immediately, although the President called for taking into account the “long-term consequences for Russia’s economy”.

After the pandemic there will be several influencing trends simultaneously. We can expect that the first, short-term trend will be the communication gap. It arises from the difference of views on the situation after the pandemic in many sectors. Many state bodies, individual officials will be sure: the government has taken every effort and even more than that, to help entrepreneurs minimize the losses (nobody takes into account the media noise) and survive during several months of the COVID-19 lockdown. The business has a completely different point of view. Both the difficulty of obtaining state aid and the band-aid nature of the solutions, as well as the reduction of development prospects in the Russian market: all these reasons will generate a number of common requests for updating the state policy in various industries. At some point the authorities will not be ready for this; and those who will be able to maintain communications and wait for the leadership of the country to change their guidelines will benefit from the situation.

The second reactionary trend will be predetermined by a mutual attempt to reverse to pre-recession communications at the previous pace and with the principles of imposing the framework on the business by the state, as well as the attempt to fit into the government’s initiatives by gaining some profit or at least less damages on the part of the business. However, as the medium and long-term effects of the recession manifest themselves, the relevance of this model will soon decline.

The third trend, which is just starting to take shape in the outline of new strategic documents, will be based on the new “national idea”, which will be very simple. For citizens it will stand for increase in material well-being and a strategic increase in living standards. For the state it will stand for increasing fiscal revenues, reducing costs while maintaining the level of development of the social sphere, developing of legal safeguards and efficient “technical” mechanisms for implementing the citizens’ needs. The authorities will be willing to engage in a dialogue with those major players that top up the budget, do not withdraw funds unduly, and can secure well-paid jobs. All these factors will soon become no less significant argument for a successful dialogue than the willingness to engage in labeling experiments.

We should probably mention workplaces separately. This is an important aspect, building a dialogue around which will promote both part of the business (both large and state-owned companies) and the authorities (especially in the regions). It is a very profitable future communication niche for the companies showing stable or increasing employment rate at the background of the growing unemployment. Overcoming unemployment is the most important socio-economic task. However, there is a risk that such important indicators as, for example, labor productivity, innovativeness, export orientation, transparency will be moved to the background, and large players will try to develop a system to access the resources based on the quantitative employment indicators while applying GR techniques.

And this is a chance for the government to take an effort and avoid the mistakes of the “full-fledged socialism”. They should unite with the business to develop mutual understanding about the essential aid and sufficient measures of state control and administrative influence on the strategies of companies with growth prospects in the domestic and foreign markets using highly productive labor as their main advantage. The businesses that create conditions for the growth of small companies and self-employed will also be in high demand. Those are trading platforms, services that facilitate business, the banking sector and its representatives that address the needs for the entrepreneurs (the banks offering anti-crisis loans are being carefully monitored). All these business activities will serve as the useful aid to start efficient interaction with the authorities in the post-COVID era.

At the same time, one should not forecast GR benefits only for innovative companies with a developed IT factor. Some industries always stand apart. It is clear that the deeper and wider the recession will develop, the wider window of opportunities we will witness, according to the tradition, for the tobacco and alcohol industries, which secure stable and large-scale fiscal revenues. The pressure on these industries may be eased, and the fight against counterfeit goods, especially in the cigarette and alcohol market, can be significantly strengthened for better collection of excise taxes. But the fuel and energy industry as well as aviation, for example, which will take a long time to recover, will do as much as possible for the sole purpose of obtaining state money. And this, of course, will also result in successful GR, largely due to the fact that the government is held hostage by the powerful industrial giants.

Most likely, the public policy in the social sphere, especially in the pharmaceutical industry and in the healthcare system, will be revised.  The insurance companies that have been criticized by Valentina Matvienko, as well as pharmaceutical companies, especially suppliers of expensive drugs, shall get ready for active GR communications. Due to the state’s shrinking financial means, the long-discussed strategically significant decisions can be made that are related to manufacture of the Russian analogues of drugs under patent protection, on the sharing of risks between the state and the pharmaceutical manufacturer in the treatment of patients with most expensive drugs.

In general, whatever industry we consider separately, a fairly predictable list of issues will determine the state’s interest in the dialogue. Can the industry or its specific representative contribute to the growth of well-being and pumping up the budget? Can the proposed solution potentially reduce financial and administrative costs? Can it contribute to the development of (preferably) high-performance jobs?

As a conclusion, one may note that the best outcome of the recession that Russia is facing can be the improvement of both state policy and business strategies. With cautious optimism, one can count on the government finally putting the development of better and more transparent conditions for entrepreneurs at the forefront. And the business will have an extra chance to appeal to the state for solving its problems and to promote the ideas for development rather than participate with their costly initiatives in the implementation of government’s plans that often prove to be far from the economic and financial reality.

Eduard Voytenko is the Chief Executive Officer at Baikal Communications Group, leading GR and lobbying strategies in the interests of Russian and international companies from different industries including companies with public ownership. 

LEVICK |

GR in Russia in the Post-Covid Era

Deep meaningful conversation: how the dialogue between business and government will change after the COVID-19 pandemic

“In recent years, GR communications have been following the past practices being focused on national projects and achievement of KPIs set by the ruling establishment. Currently, as national projects have ceased to be mentioned at government sessions for many weeks, we can expect the tone of the dialogue to change significantly”, says Eduard Voytenko, Director General of Baikal Communications Group

The COVID-19 pandemic will keep Russia entranced for at least another month. Business will continue its struggle for survival, and the government will issue a few more packages of support measures that will be available only for certain companies. Most experts are unanimous in their forecasts: Russia is heading for a prolonged recession. Many companies will reduce their costs, large business areas will be frozen, let alone single projects.

In this context it’s worth figuring out the prospective GR trends in Russia both in-house and outsourced. What will serve as the development driver for the relations between the government and the business in the near future?

GR has always served as an instrument that helped advance business development. Improving market conditions by involving public authorities in order to gain a foothold in new niches: this mission made GR the privilege of large players at the federal and regional levels. During the periods of economic recession or increase of state control, GR takes on the protective function and becomes a tool for maintaining the scale of business and its financial indicators.

It is obvious that the GR experts are in high demand working at the top of their capacity at the moment. Due to the pandemic, some sectors need urgent state aid; some, unfortunately, cannot count on it, but are trying to accumulate a reserve in order to ease their financial burden during the recovery period once the restrictions are lifted. In connection with the President’s latest initiative to develop a roadmap for recovery once the COVID pandemic is over, a lot of companies will attempt to influence the government’s strategy in favor of their industries.

However, every step taken at the moment shall count as force majeure and anti-recession communications, and it is hardly possible to imagine the form that the dialogue between business and government will take in the coming years. However, it is essential to start examining the pattern in order to strengthen the trust between the companies and important industry and political stakeholders in the future competitive environment of a comprehensive and long-term recession.

In recent years, the framework of GR communications has often followed the following scenario: the government strived to achieve certain goals (their own KPIs) from business, and the business easily involved in such self-motivated work with the goal to stay close to the government bodies. The dialogue was channeled mainly around national projects. Today we can hardly count the weeks since national projects were mentioned by the government. We can also hardly imagine that these growth drivers of sectoral public management will not undergo significant fundamental changes in the new economic reality.

It is vital that Russia is in a strategically vulnerable position. In the long run, we do not have an external or reliable natural source (similar to oil in the “fat 2000s”) that would fuel economic growth. The coming recession is caused not only by the pandemic and the falling prices for “black gold”; it is also fueled by less visible, but no less influential trends. In particular, a sharp decline in foreign investment in Russia, especially after the so-called “Michael Calvey Case”. Investors will not return to Russia in the near future and not only because of the political risks and a decrease in confidence, but also because of the world economy shrinking. Thus, in addition to the traditional decline in investment activity in the emerging markets (Russia), there will remain additional lack of trust on the part of international business, even among similar economies.

We will be forced to search for the sources of development within Russia, and the government’s poor mobilization in efficient achievement of goals through national projects after some time will force the government and the business to engage in a dialogue on the new principles for establishing preferences. Vladimir Putin has already mentioned the new core values of development: the roadmap that the government will prepare should be aimed at increasing citizens’ incomes and economic growth. Of course, it will be impossible to set the political and managerial aims at these goals explicitly and immediately, although the President called for taking into account the “long-term consequences for Russia’s economy”.

After the pandemic there will be several influencing trends simultaneously. We can expect that the first, short-term trend will be the communication gap. It arises from the difference of views on the situation after the pandemic in many sectors. Many state bodies, individual officials will be sure: the government has taken every effort and even more than that, to help entrepreneurs minimize the losses (nobody takes into account the media noise) and survive during several months of the COVID-19 lockdown. The business has a completely different point of view. Both the difficulty of obtaining state aid and the band-aid nature of the solutions, as well as the reduction of development prospects in the Russian market: all these reasons will generate a number of common requests for updating the state policy in various industries. At some point the authorities will not be ready for this; and those who will be able to maintain communications and wait for the leadership of the country to change their guidelines will benefit from the situation.

The second reactionary trend will be predetermined by a mutual attempt to reverse to pre-recession communications at the previous pace and with the principles of imposing the framework on the business by the state, as well as the attempt to fit into the government’s initiatives by gaining some profit or at least less damages on the part of the business. However, as the medium and long-term effects of the recession manifest themselves, the relevance of this model will soon decline.

The third trend, which is just starting to take shape in the outline of new strategic documents, will be based on the new “national idea”, which will be very simple. For citizens it will stand for increase in material well-being and a strategic increase in living standards. For the state it will stand for increasing fiscal revenues, reducing costs while maintaining the level of development of the social sphere, developing of legal safeguards and efficient “technical” mechanisms for implementing the citizens’ needs. The authorities will be willing to engage in a dialogue with those major players that top up the budget, do not withdraw funds unduly, and can secure well-paid jobs. All these factors will soon become no less significant argument for a successful dialogue than the willingness to engage in labeling experiments.

We should probably mention workplaces separately. This is an important aspect, building a dialogue around which will promote both part of the business (both large and state-owned companies) and the authorities (especially in the regions). It is a very profitable future communication niche for the companies showing stable or increasing employment rate at the background of the growing unemployment. Overcoming unemployment is the most important socio-economic task. However, there is a risk that such important indicators as, for example, labor productivity, innovativeness, export orientation, transparency will be moved to the background, and large players will try to develop a system to access the resources based on the quantitative employment indicators while applying GR techniques.

And this is a chance for the government to take an effort and avoid the mistakes of the “full-fledged socialism”. They should unite with the business to develop mutual understanding about the essential aid and sufficient measures of state control and administrative influence on the strategies of companies with growth prospects in the domestic and foreign markets using highly productive labor as their main advantage. The businesses that create conditions for the growth of small companies and self-employed will also be in high demand. Those are trading platforms, services that facilitate business, the banking sector and its representatives that address the needs for the entrepreneurs (the banks offering anti-crisis loans are being carefully monitored). All these business activities will serve as the useful aid to start efficient interaction with the authorities in the post-COVID era.

At the same time, one should not forecast GR benefits only for innovative companies with a developed IT factor. Some industries always stand apart. It is clear that the deeper and wider the recession will develop, the wider window of opportunities we will witness, according to the tradition, for the tobacco and alcohol industries, which secure stable and large-scale fiscal revenues. The pressure on these industries may be eased, and the fight against counterfeit goods, especially in the cigarette and alcohol market, can be significantly strengthened for better collection of excise taxes. But the fuel and energy industry as well as aviation, for example, which will take a long time to recover, will do as much as possible for the sole purpose of obtaining state money. And this, of course, will also result in successful GR, largely due to the fact that the government is held hostage by the powerful industrial giants.

Most likely, the public policy in the social sphere, especially in the pharmaceutical industry and in the healthcare system, will be revised.  The insurance companies that have been criticized by Valentina Matvienko, as well as pharmaceutical companies, especially suppliers of expensive drugs, shall get ready for active GR communications. Due to the state’s shrinking financial means, the long-discussed strategically significant decisions can be made that are related to manufacture of the Russian analogues of drugs under patent protection, on the sharing of risks between the state and the pharmaceutical manufacturer in the treatment of patients with most expensive drugs.

In general, whatever industry we consider separately, a fairly predictable list of issues will determine the state’s interest in the dialogue. Can the industry or its specific representative contribute to the growth of well-being and pumping up the budget? Can the proposed solution potentially reduce financial and administrative costs? Can it contribute to the development of (preferably) high-performance jobs?

As a conclusion, one may note that the best outcome of the recession that Russia is facing can be the improvement of both state policy and business strategies. With cautious optimism, one can count on the government finally putting the development of better and more transparent conditions for entrepreneurs at the forefront. And the business will have an extra chance to appeal to the state for solving its problems and to promote the ideas for development rather than participate with their costly initiatives in the implementation of government’s plans that often prove to be far from the economic and financial reality.

Eduard Voytenko is the Chief Executive Officer at Baikal Communications Group, leading GR and lobbying strategies in the interests of Russian and international companies from different industries including companies with public ownership. 

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