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Difficulties of EB5 Program in Russia

26.03.2018
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Due to my type of work very often I communicate with the colleagues in the United States of America. With many of them we maintain long-term and fruitful cooperation. There is quite a large number of investors in the USA, who, despite strained political relations between Russia and America, are actively investing in Russian business. There are a lot of investors in Russia, too, who invest in the American economy. But political issue and relations between the governments, as history shows, most often have nothing to do with the goals and desires of the people themselves of these countries, and they want to build relationships with each other and are looking for ways of interaction.
 
One of the areas of my business is working with foreign investors on the EB5 program. More than 5 years ago, the office in the Middle East was opened and for almost two years we have been working in the Russian market. Very often, on the part of my colleagues from various Regional Centers, I receive request to promote their projects in Russia and proposals for finding investors, who would like to invest in EB5 program. At the same time, it should be noted that the activity of my colleagues in the USA is very low, whereas their desire to get a new client is high. The total number of EB5 investors from Russia is not large and owners of the Regional Centers sometimes take very odd and sometimes quite erroneous position. Misunderstanding of the local market conditions, lack of experience and knowledge of the local mentality is the main reason for these mistakes. And hence, as a consequence, delusion and a completely wrong assessment of prospects and opportunities occur.
 
Recently I came across several articles in the US media, which describe the situation with the real estate market in the USA, in particular, it is about buyers from Russia. Almost a billion dollars per year! - this is the amount that investors from Russia invest in real estate in the USA (and this amount was obtained according to the most conservative estimates). So, this is only real estate. If we talk about the activity of Russians towards the United States as a whole, then the amount of investment in America will be much higher.
 
So what's the problem with EB5 program then? The answer is surprisingly simple. But if you want to find the root cause of the low popularity of EB5 program in Russia, you need to look much deeper.
 
The main problem with the low popularity of EB5 program in Russia is the almost complete lack of information about the program among Russian investors. People simply are unaware of such a program at all. A lack of knowledge about the program generates all kinds of myths and conjectures, which are skillfully used by unclean agencies and intermediaries. All this in general, not only hampers development, but on the contrary aggravates the situation.
 
A wealthy businessman from the CIS countries, however, as well as a businessman, for example, from the Middle East are modern, highly educated people who know exactly what they want, know how to count money well and ask clear and specific questions about the products they are buying. They want to understand where and why they are investing money. No agency can answer all these questions at the same level as the owner of the project in the United States does. And if the owner of the Regional Center lays this mission on the agency and does not want to conduct a direct dialogue with a client, then no one will take this project seriously. This is a given that needs to be accepted. There is no other option. Russia, the CIS countries or countries of the Middle East are not China, where the bulk of business is built on acceptance of the opinion of a "respected person" who can be trusted only on the grounds that he is "respected" and then build business on this. In this case they ask questions and want intelligible and clear answers.
 
Almost none of my colleagues in the US Regional Centers think about the fact that the activity of Russians in the real estate market of America is colossal. Few people also know that, for example, search queries for legal services in the USA by Russian-speaking Internet users exceed all requests for the United States, taken together almost five times. More than 150 thousand search queries monthly are in the field of immigration and legal services, I'm not talking about the requests for purchase of real estate in the USA, education in the USA and so on. And this is only a superficial analysis. If we take not only Russia but the CIS as a whole, then the figure will be two or two and a half times higher. The need for a local market in the United States is very high!
 
It would seem an excellent field for activities! In reality, the situation is completely opposite.
 
Every businessman knows that the growth of any industry involves participation of many companies that together create the mainstream. But why almost all the Regional Centers in the USA behave, I would say very selfishly or even arrogantly: "I will not go to where there is already someone or anything different; my project is the best and I do not want another project standing next to me "... and so on. And the situation when some Regional Centers offer agencies payments of tens of thousands of dollars for each client under EB5 program, but at the same time they do not want to invest several hundred dollars in their own promotion, information articles about themselves and their projects, looks absurd. But fortunately, not all Regional Centers take such a position. Many understand and realize that the Chinese market is not the only pebble on the beach and it is necessary to change the approach, change the development strategy and adapt to the rapidly changing modern world.
 
Only competition, development and availability of various proposals in EB5 area, awareness of potential clients, openness and willingness to conduct a direct dialogue with a client - this is the only recipe for success!
 
It is necessary to start with the fact that no Regional Center is present in the CIS market personally, or through its official representative office. Only a few agencies or intermediaries, who often have very superficial knowledge of the program, represent some of the Regional Centers. As I said above, you need to know the local mentality and understand the peculiarities of the local market in order to successfully operate here. I see and know for sure that colleagues in the USA do not have an elementary understanding that words such as agent, intermediary, broker - in understanding of the Russian-speaking client often have an extremely negative value. The modern history has taught a Russian businessman that an "intermediary" or "agent" hides additional payments, and sometimes the difficulties and barriers getting on way. This is part of the mentality. This should be understood and ignoring these facts is the path to collapse.
 
The Russian-speaking client wants to conduct a direct dialogue, articles, information materials are required, seminars and presentations are to be conducted, it is required to give a client the opportunity to interact directly with the projects. One of the most frequent questions I hear from my clients is why, if this company is so successful and has many customers, does it have no representative office in the local market? Why do I, as a client, have to communicate with an intermediary firm instead of communicating to the project itself?
 
The CIS market is huge and there is enough space for many companies that want to build long-term and fruitful cooperation. And dread and fear of competition will only lead to stagnation and, eventually, companies that are afraid or unwilling to act themselves will be thrown overboard by those who are ready for competition, who are prepared to speak openly with their clients and directly fight for each of them.
 
Recently we have created a platform, which is a bridge between the American business and a Russian-speaking client, where there are no intermediaries and hidden payments, one can conduct an open and direct dialogue. The platform is new, but already now we see a huge concernment in it both from potential customers and from business. Every day the number of our users is growing. We also see concernment on the part of the companies in the United States that share our vision and, which is most important, understand the current trends and join us now. The number of such companies is growing, there are already Regional Centers that work with us, there are law firms, real estate agents, companies that offer services in the field of education and others. The activity is growing, and we see it. And I am sure that every day the number of American colleagues who are aware of the need for active action will increase steadily, because it is we who create this mainstream!
 
Amalgamation, creation of a company with many participants, opinions and proposals is the main instrument for growth of the industry as a whole and the key to success in any business!

 

Denis Karasyov, CEO of Pangaea Investment Company, founder of MEET-USA.COM Portal

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