From E&Y to the embassy

From 22 January 2007 – Ambassador of the Republic of Hungary to the United Kingdom.

Borbala Czako, Country Managing Partner of Ernst & Young in Hungary and Deputy Managing Partner Central Europe South worked as the TAS service line leader of the firm between 2002 and 2005. She joined Ernst & Young in January 2002 from the World Bank Group, where she worked for 10 years. She was the Chief of Mission of IFC with investment banking responsibilities in Hungary and the region. On special assignments from the WBG she worked in Washington D.C. and Africa as well.

She has extensive experience in large private sector transactions in greenfield investments, privatization, mergers and aquisitions (Westel, Matáv, TetraPack, Suzuki, Pannonplast, Rambox) and financial sector investments (Raiffeisen Unicbank, InterEuropa Bank, First Hungary Fund, Euroventures). In her recent assignments Borbala worked on securitisation, environmental, energy efficiency, SME, health and educational projects.

Embassy of Hungary in the UK

// originally read about in Accountancy, march 2007

That's a career of my dream.

Grown up in a diplomatic family, in my childhood I inertially imagined my career as a one in foreign relations - but pragmatism prevailed as when it was to decide where to go after school, and international economics was the correct decision :)

Now, as I do not work at a foreign ministry (inclusively because there is no foreign ministry I'd like to work for: neither the Russian, nor the Belarusian until it's over with Lukashenka), my only possible way of becoming diplomat is to become something comparable to Entrepreneur of the Year (as this lady did) and then be invited for ambassadorship for the sake of prestige.

Gotta do that!
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Russia: Authoritarianism Means Ineffective Economy

Right as I was writing the reply on Karolus' comment here about that foreign investors are not afraid of political risks involved with Russia, the Russian fund market started its fall. I just wonder at what stage to sell my investment fund shares.

MICEX Index last week

Yeah, and somebody thought here that democracy and economy do not relate to each other and that you can make business without taking care of politics as if it was something from a different planet. Indifference towards politics is common among my fellow yuppies and generally among Russians - they just go and vote for Putin without actually knowing a bit about what this man is.

For the Russian society as a whole the absence of democracy means the following:

- No transparency of state governance caused by lack of freedom of speech, especially in the regions outside Moscow and St. Petersburg. The media are state-controlled and therefore dependent on people in the administration and have no possibility of objective coverage of their faults

- No or blocked legal ways of influencing and adjusting the state policy: no democratic elections means no democratic parliament. Currently the only opposition party in the Duma are Communists. The governors’ elections were cancelled after the Beslan tragedy as a means to “fight terrorism” (yes, it was really said so). Instead, governors are directly appointed by the president and have therefore no accountability before the region’s population

- No guaranty of property rights, see YUKOS affair, the current raid on Russneft. In the regions the whole is, again, much harsher than in Moscow or St. Pete. Once a local authority sees an attractive business, it does not take too long for him to make the owner sell it for a low price after a couple of fiscal, medical, fire inspections coming across and after a “warm and confident” talk in the bureaucrat’s office

- Absence of independent courts and therefore no chance for victims of state despotism to bring the authorities or entities related to them to trial and, especially, to win. Judges are bought and sold.

- Monopoly rather than Oligopoly, both in politics and economy. Instead of Yeltsin era “oligarch clans” we now have the “different towers of one Kremlin”, several groups inside the ruling junta (e.g. “siloviki”, remainders of the Yeltsin “family” etc). Gazprom is becoming an anti-Utopian-style empire corporation with its own bank, media, football club, airlines and soon even armed forces. Rosneft is going the same way.

- No or blocked legal ways of publicly discussing the state policy except for the internet. Without publicity and exposure to criticism the state is limited in sources of creative ideas

- Corruption has nowadays a much greater scale than at worst Yeltsin's times


For businesses it means:

- Extra expenses on corruption: a sad but true fact is that budgets of most investment projects have bribe and kickback expenses a special article

- Extra bureaucratic burden: difficulties in registering a business, taxation – it all goes hand in hand with state authoritarianism

- General decline in [business] ethics in the society, therefore development of an unhealthy business culture and business climate.


So for all that we see a wave of non-resident investors leaving the Russian fund market last week.

I sometimes have the feeling that we are in danger to see the BRIC missing the "R" in a mid-term perspective. For this to be prevented, Russia must get back to the democratic path as soon as possible - at least to the limited democracy of Yeltsin times. A sort of a chance is coming up in 2008 where we'll have presidential elections. The elections will of course be anything but fair and democratic, but we have a chance that the new czar will be more liberal and democracy-oriented (Russia's democratic and modernization tendencies always depend on who's head of state). It seems that Putin's appointing of Dmitry Medvedev (current deputy Prime Minister) as The Kremlin Candidate would give us better chances than the of militarist former KGB-spy Sergei Ivanov, an other vice PM and #2 prospective Putin's pick.
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Work/live convergence

At the office full of twentysomethings where my girlfriend, Niki, works, everyone was comparing their salaries, and the owner of the company got really angry. And his being angry made for a tough week, so Niki asked him if she could take Friday off.

He said, “If you’re going to be successful you need to start putting your career before your life.”

Of course she took the day off.

When she told her mother about the situation, her mother said, “If you don’t put your life before work you will never be happy.”

Hearing this conflicting advice from two of the most influential elders in your life is confusing. What does Niki’s boss say to his kids when he gets home? Does he tell them to put work before life? What would Niki’s mom say to young people she works with? Would she tell them to go home early?

This whole notion of needing to separate work and life implies that your career, which takes up about 75% of your day, is something you simply try to get through so you can go home and do what you really enjoy for the other 25%. What a terrible way to live.

Interesting post at penelopetrunk.com

The main thing is that you really enjoy your work so that it does not leave your interests and potential unrealized. Plus, very important is that your friends and/or family members work with you. Plus a maximally flexible working schedule.

The answer is own business
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It's time to win

My article on the Manifesto of new generation f Belarusian politicians

- kindly translated into English by the guys from TOL blog Belarus

and

quoted on Global Voices Online
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Following a scandal

A strange feeling to find an account of one of the money laundering SPEs mentioned in a recent money laundering scandal at the bank currently audited. (see (1) and (2), both in Russian)

Russia is a country of thieves run by thieves. Everywhere you step in business, you can always expect something semi-illegal, and the further the more. Anywhere the state has a role - everywhere, absolutely everywhere there is corruption. Hardly a single sign of things like business ethics or simple human moral. And there is also a plenty of people in the West who take benefits from the Russian intransparent undemocratic regime and money laundering by the KGB&oligarchia-driven Russian semi-criminal economy, just like the former German Bundeskanzler Schröder.

Even if the article by Natalia Morar or the Frenkel Letters, about the Cyclopean schemes of milliards of USD flushing to unknown accounts of unknown people, are not 100% true, they do perfectly reflect Russian reality. In the wild 1990ies the criminals wore vulgar pink jackets, golden chains and sports pants, now they wear Brioni, drive Bentleys, have a "Yedinaya Rossia" party member's card and a "honorable veteran of the KGB" certificate in their pocket together with a second passport of some Maldive islands.

Every bank is surely involved in some money laundering, or "obnalichka" (something like the opposite of money laundering, i.e. hiding illegal usage of legally earned money) or at least tax avoidance schemes via bloody Cyprus. And while auditing it is even senseless to look for fraud, because 1) it is obviously there and 2) if you find something, reporting to authorities will not bring anything because some people in the authorities are most likely to have a share in the scheme themselves.

It's rational for people to violate over-strict and unlogical, or even harmful, laws that are not strictly defended by the corrupt state. And the more the laws get violated, the more strict and unlogical they become. We end up in a vicious circle that forms a culture of principal disrespect to laws and rules and value of evasion of legislation. That's the situation in Russia.
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Russian banks are fit for IPO

My article for The Deloitte Times on IPOs of Russian Banks. Yeah, IPO is a trendy topic they're really fit or it! ) It's good that their going public will at least nominally reduce the state's role in the banking system. Though, this fact is rather like a water drop in a desert...

Russian banks are fit for IPO

Russian banks must raise equity through IPO to secure their own finances. Alexander Chaichits Čajčyc argues they are fit for the challenge.

Russian capital markets are set to take a new step in their evolution this year with the flotation of the first major banks and other financial institutions. Two large Russian banks, Sberbank and VTB, are conducting IPOs this spring.

Sberbank is the largest national bank in Russia and one of the few with shares already traded on the stock market. A successor of the Soviet system of savings banks, it has over 20,000 branches and sub-branches, and the value of its assets is six times higher than that of its nearest rivals. The bank is also fourth among Russian companies in market capitalization. The bank’s share placement in March, known as the “people’s IPO” from the state’s efforts to distribute shares among the public, raised RUR 230.2bn (USD 8.8bn) by selling 2.587mn shares. Funds raised will finance the development of the bank for the next three years.

VTB (former Vneshtorgbank) has the second largest net assets among banks in Russia. Amongst debt issued by Russian banks, VTB’s bonds and Eurobonds have the highest credit ratings with Moody’s and Fitch. VTB’s IPO is the next step in a large-scale strategy to expand into the Western European market of investment services.

The current major shareholder of Sberbank and VTB is the Russian government, with a 99.9 percent share in VTB. The bank’s IPO will decrease the Government’s stake by to 75 percent plus one share. The state’s majority ownership of Sberbank fell from 63.7 percent to 60 percent in its March offering.

The media and business communities are keeping a keen eye on Sberbank and VTB to see who will secure a more successful IPO. Analysts predict that the stateowned banks’ IPOs are just the beginning of a future IPO boom for Russian banking.

The advantages of a public offering for banks are generally the same as for non-financial institutions. As the bank grows, it becomes unfeasible to sustain the debt/equity ratio required by the Central Bank by simply regulating loans raised. To have its two feet firmly on the ground, the bank needs to increase its equity. This may be done in three ways: by raising funds from existing shareholders, by selling a stake to a strategic investor, or by issuing equity or debt on public markets.

All three capital raising initiatives have their pitfalls. Existing shareholders are not always ready to absorb the complete issue, especially when it is a large amount. The sale of a large stake to a strategic investor requires care and precision in the search for an investor, which will in turn result in the emergence of a new power balance among shareholders, and changes to the management structure. Again, a strategic investor’s resources may not be large enough to cover the needs of a fast-growing bank.

The most reliable tool in this respect is an initial public offering. First, the market is more able to cope with a large issue than a strategic investor. Second, capital dilution through an IPO does not necessarily result in the emergence of a new major shareholder which challenges the existing power balance.

Floating a Russian bank on a stock exchange and complying with tough issuer requirements on reporting and transparency can demonstrate its business management standards. Publicly traded shares are liquid and quoted in real time, making them sensitive to the continuing performance of the bank. All this makes a positive impact on the bank’s reputation, which should potentially allow it to raise additional capital at a lower price.

2005-2006 saw the IPOs of three Chinese and three Japanese banks, as well as others in Austria, France, Greece, and the Netherlands. In 2006, two new world records were set for IPO capital raised. Both the world’s largest IPOs were from state-owned banks.

On 1 June, the Bank of China placed its stock on the Hong Kong Stock Exchange, raising USD 9.7bn. In the six months following this, the record IPO volume was beaten again, also by a Chinese bank. In October, the Hong Kong and Singapore Stock Exchanges started trading shares in the Industrial and Commercial Bank of China, which managed to raise almost USD 22bn.

Sberbank is one of just a few Russian banks currently traded on the stock market. Last year, AKB Rosbank prepared for an IPO, but the whole package was sold to a strategic investor at the last minute. Many large and mid-sized banks intend to go public, encouraged by The Central Bank of Russia. All this is evidence of a potentially massive inflow of banks’ shares to the stock market: Russian banks are considered fit for IPO. Much of the preceding IPOs’ success will depend on the pioneers, Sberbank and VTB, which explains the particular interest in their placements. Hardly anyone doubts that the first fry will be far from a flop.

Alexander Čajčyc, Deloitte
Rosbank, Russian Banks and Brokers Reports

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Tropical Moscow

The weather is purely tropical here in Moscow. +30 degrees, and we auditors as usually get sat the into most stifling room. And moreover I have missed my session of swimming pool (
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Solidarity with Belarus

The 16th of every month is a Day of Solidarity with the victims of political repressions in Belarus

One of the few things we can do to support the people struggling for democracy in Belarus.



The Belarusian community of Moscow usually puts flowers to the monument to Janka Kupała, one of the most important Belarusian poets of the 20th century who died under unclear circumstances in Moscow in 1941. There are versions that his fall from a stairs in the Moskva hotel was inspired by Soviet secret police - just as in 1999 the politicians Viktar Hančar, Jury Zacharanka, Anatol Krasoŭski disappeared [and were obviously killed] and Hienadź Karpienka died of a "heart attack" in the moment when they all were most dangerous to the dictator Lukashenka.

More photos on my Belarusian-Russian blog
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Eurovision'2007

Eurovision Song Contest

Every year everybody says that Eurovision is crap and they do not want to see it. But still, for at least several days it becomes the most discussed topic in Russian media and blogs.

The winning song from Serbia is though not bad, but nothing special at all at the same time. Just an other whiny ballad in Serbian - I even liked the Bosnian song that took 3rd place on ESC'2006 more.

Ukraine's trashy Verka Serdyuchka - that's who was supposed to win! :)

The man (hm!) is famous in post-Soviet countries for his unfunny humorist shows and sketches, and only a couple of years ago he started to sing songs that were of bad taste too but still something good for moving one's body after some vodka on a village disco.

An important topic discussed in Russia is now whether it says "Lasha Tumbai" or "Russia, goodbye!" in Serdyuchka's song. Some Russian bloggers already proposed to boycott him just as they hysterically called for a boycott on Estonian goods a week ago because of Estonian government replacing a Soviet monument in Tallinn. Ridiculous and lächerlich! As most neighbors with a complicated history of relations do, many Russians and Ukrainians don't like each other. As I have noticed, Russians express this in rudeness and aggression; and Ukrainians laugh Russians off and put them in situations where they look stupid. This is a typical case.

Russia's Serebro and Belarus' Dźmitry Kałdun aka Koldun were nothing special at all. Just an other two Eurovision songs: not bad, but not brilliant neither. Much more I liked the songs presented by Germany, Latvia, Lithuania, Ireland (I can't believe they got the last place!).

As to me, the very best song of this year's contest was Sopho Khalvashi of Georgia with "Visionary Dream". The promo video is as marvelous as the song itself!



That girl just broke my heart! The song got few votes - but that's because it's just too good for Eurovision, if you ask me.
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Scylla defeating Charybdis: WW2 in Belarus

My article on TOL blog Belarus

Reflections on the official holiday of Victory Day, 9th of May, 2007 by Aleś Čajčyc for Pozirk.org.

Translated from Bełarusian by eolonir and ox populi.

The Ninth of May. The “red day” as it is also known, one marked red both in the calendars and in peoples' memories. The Victory day. The day which I can't help calling the day of Pobeda. (Pobeda means “victory” in Russian, whereas in Belarusian it is called “pieramoha”). I catch myself at trying to use this Russian word in my language. The Russian and Soviet clichés and stereotypes are rooted too deeply in my mind – it is difficult to separate the Soviet myth and Soviet name of the event from the actual event.

In the Soviet mythology the victory over Fascist Germany in the Great Patriotic War – Vialikaj Ajčynnaj Vajnie (in Belarusian) -- Velikoj Ociečestvennoj Vojnie (in Russian) was a part of a long and awesome epic story about the power of communism. Soviet propaganda aligned all anti-communist movements, among them the “White Army”, the Western Democracies, the Belarusian Liberation movements under one category -- the enemies of communism, the dark forces. Victory over the Nazis was presented as the first step to the world communism domination.

Such holidays are usually celebrated to honour a victory against an external enemy and to honour the national army which made that victory possible. For Russia, the predecessor and successor of the Soviet Union, this war had really been the national patriotic war, the war for the national liberation. One can understand that it might be possible for the question about crimes of Stalinist regime and terror inside the country to be moved down the agenda – considering the threat to the existence of Russia as a country. The Russians were fighting for the very right to exist. Incidentally, the tradition to commemorate victories long after they have taken place is typical of Moscow – the 1812 Victory or taking over Kazan' had been celebrated for decades.

Lukashenka's Belarus has added another, special meaning to the celebrations of the 9th of May. Having no ideological or metaphorical grounding on which to build up the state system, the regime keeps grappling at the remnants of the past, at these emotional Soviet symbols. Moreover, it enslaves the present within the remnants of totalitarian past. How “patriotic” had this war been for those who had been occupied themselves? How much of a holiday is this for Bełaruś?

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