This is Vladivostok, the largest city in Russia’s sparsely-populated and mysterious Far East, eastern terminal of the world’s longest railway (the Trans-Siberian), and headquarters of the Russian Navy’s Pacific Fleet.

From 1958 until the collapse of the Soviet Union, Vladivostok was closed – even Russians needed a special permit to visit the city. Toward the end of the communist era, the city, like the rest of Russia, virtually ground to a halt.

Now, construction cranes are everywhere, and a burgeoning middle-class is conspicuously devouring western consumer goods. Locals are quick to point out that this is a
recent phenomenon – until a few years ago people avoided visible displays
of wealth.

Local entrepreneurs are in short supply: communism had no legitimate place for them. Perhaps that is one reason why foreign entrepreneurs are heavily involved in Vladivostok’s exuberant renaissance. They come for a variety of reasons and from numerous countries. Chinese and South Koreans dominate the Vladivostok scene, whereas Americans have flocked to other parts of the Russian Far East, such as oil
and scenery-rich Sakhalin Island. But they don’t have it all to themselves: Kiwi entrepreneur Martin Tate has
been doing business in Vladivostok
since 1998.

Vladivostok has many attractions. Close to the fast-growing Chinese market, it has rich mineral resources, vast tracts of high-quality farmland, seemingly unlimited tourist potential, and a well-educated but under-employed workforce.

The Russian Far East has earned the nickname "The Wild East" partly because much of it is unexplored. But while there’s plenty of untapped potential, you don’t necessarily have to be an adventurer. Extractive industries such as oil and gas, mining, timber-milling, and fishing tend to be dominated by locals, but foreigners have found a variety of other opportunities.

For example, the Canadian-owned and managed "Vlad Inn" started by exploiting a shortage of hotels catering for western visitors. Established in 1993, it has prospered in the face of harsh economic weather including the 1998 collapse of the rouble. Set amid emerald-green taiga (forest) in Vladivostok’s "secure diplomatic region" (the home of many senior regional administrators) it’s an excellent place for lunch.

Other businesses thrive by importing top-quality consumer products. Soviet Russia successfully developed large-scale industry, but failed miserably when it came to high-quality consumer goods. Now that the doors are open, top brands are making big inroads. Vladivostok’s countless convenience kiosks offer American and European soft drinks and beers alongside Russian brands. Rock bands, even teenage ones, play Fender guitars. Many locals tell me that New Zealand dairy products are the best, and every supermarket I visited had Anchor butter on the shelves (except for one which had sold out!)

Vladivostok is a port, and the sea dominates life, so I was not surprised to find New Zealand-built yachts. At the prestigious "Seven Feet Yacht Club" (named after a traditional expression of goodwill: "May you always have seven feet under your keel") commodore Mikhail Ermakov proudly showed me a 470-class dinghy from Auckland’s "Mackay Boats".

Vladivostok-based importing and distribution company "Moloshniy Mir" puts the Anchor and Enza brands on local supermarket shelves. Martin Tate bought the business from NZ Milk Products in 1998. Since then, he has progressively expanded the company, adding bulk milk products, fruit, malting barley, and manufacturing meat.

Recognising that pet food is one of the world’s fastest-growing consumer items, Tate acquired a local pet food factory and now markets dog-rolls under the brand "Myasnoff" (which translates roughly to "lots of meat").

The story behind the brand-name illustrates an aspect of Russian culture. Tate’s market researchers found that Russian consumers were not interested in names that evoke good nutrition and health, names which would hook a Westerner. In Russia, the keyword is "meat" – and lots of it.

Tate’s recently-established agribusiness "Khorol Grain" shows how an entrepreneur can marshal foreign expertise to leverage previously under-utilised assets. Between Ussuriysk (75 kilometres north of Vladivostok) and Lake Khanka is a vast area of world-class grain land, almost identical to Iowa’s grain-belt country. Under the communists, it was worked by collective farms or ‘kolkhoz’. The now-privatised kolkhoz were inefficient and ineffective, and many have become insolvent. Khorol Grain has acquired thousands of hectares of this land, and is establishing a modern highly-productive operation using imported American machinery and expertise combined with the best local manpower. On the road between Vladivostok and Khorol Grain’s vast fields of maize and soy, we pass many derelict factories and weed-strewn cornfields: evidence that the region has many other under-utilised assets.

Other writers have made much of the difficulties facing small and medium-sized enterprises in Russia. Such horror stories are true, but they’re only one side of the picture. With the currency stabilising and local business increasingly going legitimate, the commercial climate seems to be changing for
the better.

"Increasingly, business can be carried on with the same degree of certainty you’d expect in western cultures", says Tate, who is also the honorary New Zealand consul to Vladivostok.

On my way to Vladivostok, I spent nine weeks as a member of the crew of a Russian yacht. It was an opportunity to find out, at first hand, about the differences between Russian and New Zealand culture. Like Kiwis, my shipmates talked openly of their opinions and values, and often the similarities outweighed the differences. Russians mean what they say, and usually, say what they mean. Their priorities are very different, however, and there were times when I found this infuriating. I was not surprised, because Russian culture is the result of a thousand years of evolution: it is neither eastern nor western, but something in between.

Many westerners come here looking for local business partners. Tate advises against this, and I can understand why. It was difficult enough to keep my opinions to myself for nine weeks: a business partnership lasts considerably longer. When partners disagree over priorities, the business is bound to suffer.

In Vladivostok, as perhaps in all of Russia, politics and business are intimately entwined. Top political leaders are also business leaders, and the hierarchy straddles both realms. It’s also famously corrupt: law enforcement can be influenced by politics. So, while local entrepreneurs seem to flout regulations with impunity, a foreign entrepreneur who annoys a local administrator might find himself under investigation. It pays to respect the rules and regulations.

The foreign entrepreneur must find also a place within the hierarchy, one of many reasons why it is important to cultivate relationships. "You have to be on the spot," says Tate. As I tour Vladivostok, I can see why. This is a high-touch culture: Vladivostokians like face-to-face contact; at meetings and farewells everyone shakes everyone else’s hand; men routinely hug each other. You can’t do this over the phone.

A critical aspect of doing business in Russia is dealing with bureaucracy. Like the culture, Russian bureaucratic traditions have had a millennium of evolution: undoubtedly, they’ll take time to change. However, Moscow’s aggressive push for economic growth is leading to streamlining. "It’s very easy now to set up a (limited liability) company in Russia," says Tate.

Because of their complexity, areas such as customs duties and employment law require detailed local knowledge. "You need to hire very good staff so that you can keep your mind on what’s really important," says Tate. You can get very good staff here – literacy is well over 99 percent and salaries are moderate. This is Russia after all, the country which routinely sends robotic spacecraft to the space station.

A crucial issue for foreign entrepreneurs is size. To be successful, any business operating in Russia must have enough cash-flow to support the staff who handle the morass of regulations and paperwork. Tate employs 40 people, even though he uses subcontractors wherever possible. This is not a place for the small one or two-person business, which would quickly suffocate under the weight of the bureaucracy.

Tate’s office, which commands a sweeping view of picturesque Amur Bay, also houses the New Zealand Consulate and NZTE representative, Irina Osmolovskaya. Tate and Osmolovskaya have helped other New Zealanders wanting to get into the Russian Far East – for example, a Sakhalin-based eco-tourism business offers cruises on a converted ice-breaker.

This city is full of surprises. A local yachtsman tells me that Vladivostok’s former isolation made it very safe. Now, he says, there are problems with crime. I never expected to hear anyone reminiscing about a city that would have seemed (to me) more like a jail than a home! And yet, what he says makes perfect sense. Local businesses put a lot of effort into security: even the Seven Feet Yacht Club is patrolled by armed (though friendly) guards.

It’s all relative, of course. Downtown Vladivostok lacks the menacing street gangs so common in western cities, and the Vlad Inn’s website says it’s safe, even at night, though they recommend a Russian-speaking companion.

"Randomness creates interest," says Tate. "And opportunities," I add.

Naturally, that element of unpredictability brings risk, but in spite of its problems (and one person’s problem is another’s opportunity) this city is determined to go forward. It is as if the city itself exudes that famous Russian resilience. Resilience, and a fair dose of passion.

For the entrepreneur with the time
and patience to do some serious homework, this place offers some very interesting opportunities.