Commentary
The end of empires. With our usual exquisite timing, CompleXCountries held a call to discuss the Caucuses and Central Asia in the very week that China’s President Xi Jinping chose to remind the renowned and erudite classical scholar, Donald J. Trump, that this is an issue which goes back to classical Greece.
This region is not only the site of the ancient Silk Road, which China has been trying to revive for over two decades, but it has also changed hands between the Ottoman Empire and Russia. Many populations still speak Turkic languages, and, as became apparent, Russian is still the main international language, despite the end of the Soviet Union. With recent events in the Persian Gulf, China’s Belt and Road initiative may still be transformative.
For most MNCs, the region today does not reflect geopolitical tensions: the countries are true “frontier markets”: in all the countries discussed – Georgia, Armenia, Azerbaijan, Kazakhstan, Uzbekistan – only one foreign bank has a presence, and that is limited to Citibank’s office in Kazakhstan. HSBC pulled out of Armenia in 2024. MNCs have to work with local banks, and need local teams to manage the relationships. Peers even have to use local payment acquirers.
Economically, these countries are generally stable, but not booming. Azerbaijan is the exception with its oil industry. Hard currency is readily available. Remittances out of the region are an issue due to the burdensome bureaucracy which accompanies them, not because of restrictive exchange controls and shortages of hard currency.
One skill, however, is essential to manage business and treasury in these countries: an ability to communicate in Russian, which is still used much more in the region than English. Many of the local banks have web sites which are only in Russian, or have few, if any, staff, who speak English. Every peer on the call has at least one staff member who speaks the language.
Operating issues:
- Many peers sell from an offshore entity. This simplifies the remittance issue: locally, they often have a representative office. Some peers manufacture the in region, but this is usually restricted to one or two countries.
- Peers generally found the local banks to be quite ....Please Login / Register to read the rest of this Commentary.
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