rusia_rising_start.htm

Russian business, and its society in general, have the aura of the old U.S. Wild, Wild West. As this is written, the majority shareholder of Yukos, a major Russian oil conglomerate, has been arrested on embezzlement charges, and a top security official of the same company has been charged with two murders. Makes Enron look tame.

According to recent articles in the Moscow Times, some media analysts have charged that law enforcement has been enlisted by politicians to destroy powerful business interests and further the politicians’ election hopes. Who knows?

In the 12 years since the sudden and unexpected collapse of the Soviet Union and most of world Communism, Russia has embraced vast privatization of business with its resulting property right reforms. According to Valeria Korchagina and Lyuba Korchagina, two writers for the Moscow Times, the latest raids on large firms raise the specter of the government revisiting the privatization and property issues. After all, the current prime minister was a high-ranking member of the KGB at one time.

The Russian Federation defines a small business as one with fewer than 250 employees. With the exception of Russia, Ukraine, and Uzbekistan, most former Soviet governments pay little attention to these small enterprises. This results in difficulty for an entrepreneur who wants to obtain information market research and product development.

Many regional governments are interested in collecting exorbitant taxes, and the level of inspections is onerously frequent. As a defense, companies resort to underreporting and various other corrupt practices. According to Mark Camillo of Georgetown University’s Center for Eurasian, Russian, and East European Studies, all these activities contribute to unhealthy business practices in much of the region.

But entrepreneurs in Russia will soon be getting help from the Young Entrepreneurs’ Organization (YEO). In the fall of 2003, YEO will partner with the U.S. Russia Center For Entrepreneurship to form YEO chapters throughout Russia. This arrangement increases the flow of business information and provides a base for Russian entrepreneurs to obtain face-to-face advice on business issues.

There also are ongoing exchanges between U.S. and Russian entrepreneurs through conferences sponsored by various government and university groups. Russian entrepreneurs have visited San Francisco, Philadelphia, Los Angeles, Washington, D.C., and other U.S. cities. These entrepreneurs have shown interest in construction, advertising, travel, and the restaurant business.

The Center for Citizen Initiatives (www.ccisf.org/pep/overview.htm) is a non-government organization (NGO) formed to assist Russian citizens with political and economic reforms and form partnerships with U.S. groups. It sponsors the Productivity Enhancement Program (PEP) to help entrepreneurs build a sustainable market economy in Russia. PEP receives much support from U.S. service clubs like Rotary International, Kiwanis International, Lions, and Optimist Clubs. You can see from this discussion that these struggling entrepreneurs need all the help they can get.

Entrepreneurs in other countries may want to consider getting some of their local groups involved. This may be a way to form lasting contacts in an area that could eventually be an economic powerhouse.

Russian entrepreneurs have a rough road ahead. The decade since the demise of Communism has left small businesses in the situation where they contribute only about 15% of Gross Domestic Product (GDP). Prime Minister Putin has said medium and small enterprises should make up at least 50% of GDP.

The Russians had such a catastrophic economic collapse, they have not been able to recover quickly. The Chinese had a similar system, but they have managed gradual economic change in a way the Russians did not. Russia now looks to its very large neighbor for entrepreneurial aid and support.

Russia remains quite secretive with less-than-open borders. It has consistently rejected Western culture in many ways, including withdrawing permission for the Peace Corps to operate within its borders. There is not even a current agreement with many worldwide Internet players like Yahoo! They are still struggling with the economic issues that ended the Soviet era. Those same problems have continued to plague every government since the fall--from Gorbachev to Yeltsin to Putin.

Entrepreneurship is struggling, and there are few success stories to report. A bright spot is strong technical expertise in many fields, but the problem is obtaining financial support amid all the economic chaos.

Basic Russian culture is the root cause of their poor economy. Cultural ideas play a major part in determining whether a country has a sound economic system. If people truly want to change their cultural set in order to achieve a better life, they can do it.

For example, Thailand used to send all its young men to years of training in Buddhist monasteries. When they came out, time meant nothing, it had no value, and everything happened so slowly, nothing could be accomplished economically. As a people, the Thais decided to cut this training time to a very short duration, and now their economy is booming.

In contrast, the Russians are terribly afraid of market uncertainties. So many years of strict government control have left the entire population yearning for the safe return of state employment. Some would argue that it is a desire for equality in poverty, which is common to all peasant cultures, and that this is just the kind of society Russia has always had.

The big problem that continues is how to change this longstanding mindset without reverting to old ways and possibly even civil unrest. The world needs to help all it can, because the broken Russian Federation still contains many loose cannons, such as disgruntled nuclear scientists, unguarded atomic weapons, and potential terrorist states like Chechnya.

These are a few local sources of help for Russian entrepreneurs:

Budding Russian entrepreneurs can receive training at the Entrepreneurship and Small Business Center in Moscow: www.esbc.ru/english/programs.htm.

The Russian Agency was established in 1992 as a major consulting group for small-business expertise. This part of their Website--www.ra.siora.ru/eng/partners/index.asp—lists a number of government and NGO partners that offer a wide range of business services.

Other organizations that offer help for the new Russian entrepreneur can be found here: www.chinainfo.ru/plants/c/ruso.buz.cooperation.htm.

Among the opportunities for small entrepreneurs are traditional cottage industries involving local culture. Examples include Matrushka dolls, painted eggs, and regional Russian art, such as paintings and various crafts. Tourism, sewing crafts, restaurants, software programming, and translation services are possible small-business areas of opportunity.

Aspiring Russian entrepreneurs might look to the West for ideas that have never appeared in their country. There are thousands of opportunities about which none of these people know. This is another benefit of exchange programs.

In spite of mountainous difficulties facing new Russian businesspeople, there are some reports of success:

In St. Petersburg (www.pcgazette.com/commentary/2001/aug01/schuh8-31.htm), one reporter encountered enterprising street businesses involved with currency exchange, souvenir vending, and Matrushka dolls (including a Bill Clinton doll imbedded with Monica, Paula, and Hillary).

The Vera Geppa Fashion Centre in Kursk is owned by Geppa Vera Vitalevna. It is a company that designs and makes clothes, organizes fashion shows, and trains designers. It began in 1987 when private enterprise was first allowed.

Kusmina Tatiana Sergeevna, from Nizhni Novgorod, started her businesses in 1991 with some borrowed money. She now owns a restaurant, dance club, billiard club, hairdressing salon, and a parking lot.

Stephan and Zhora Pachikov turned the outstanding programming

skills of Russian scientists into a profitable business. Though not traditional small business people, they have sold several patented products and have begun other start-ups. All companies begin small and sometimes become large and profitable, so their's is a good example for all www.time.com/time/europe/specials/eeurope/people/pachikov.html.

The Tula business, Lubava Enterprise, makes and sells sewing goods. Zhebeleva Olga Vladimirovna formed this company to be independent of others and give her children the education she feels they deserve.

Russians had to start from nothing after the collapse of the Soviet Union in 1991, and there are opportunities we don’t think about. Alexander Tulchin is a young Russian who found such an opportunity. There are no food brokers in Russia and he wants to be one, so he was among a recent group in Maryland (www.bizmonthly.com/1_2002/3.html) who came to get training by U.S. advisors.

When she lost her engineering job as a result of restructuring Russia into a market economy, Shvalova Tatiana Alexandrovna of Tula became an entrepreneur. Her small business manufactures and sells knitted goods for children and trains others in the knitting skills.

Let’s hope the star makes it out of the clouds.

SOURCES

Camillo, Mark. “Summary: The next Generation of Russian Entrepreneurs – Carving the New Russia”. Georgetown University Center for Eurasian, Russian, and East European Studies, April 24, 2003: ceres.georgetown.edu/events/gunn.html

Harrison, Lawrence E., and Huntington, Samuel P., Editors. Culture Matters. Basic Books, 2002. p. 3.

Korchagina, Valeria, and Pronina, Lyuba. “Illarionov Raises Fear of Civil War”. The Moscow Times.com, July 15, 2003.

Latynina, Yulia. “Russia Headed Toward Junta of the Siloviki”. The Moscow Times.com, July 16, 2003.

Russian Federation: www.unece.org/operact/gallery/ru/ru-gal.htm

Saradzhyan, Simon, and Korchagina, Valeria. “Head of Yukos' Parent Company Arrested”. The Moscow Times.com, July 3, 2003.

Yansong, Lu. “Broad Vistas for Russian-Chinese Cooperation: Interview.” People’s Daily, November 28, 2002: english.peopledaily.com.cn/200211/28/eng20021128_107626.shtml

Young Entrepreneurs’ Organization and US Russia Center for Entrepreneurship. “Media Release.” January 18, 2003: www.fed.org/pressroom/pressreleases/Partnership%20Press%20Release%20Final.pdf

RESOURCES

Center for Citizen Initiatives to assist Russians with political and economic reforms: www.ccisf.org/pep/overview.htm

Entrepreneurship and Small Business Center in Moscow: www.esbc.ru/english/programs.htm

Lazarick, Len. “Russian Entrepreneurs Hone Business Skills”. The Business Monthly: www.bizmonthly.com/1_2002/3.html

Meier, Andrew. “The Brothers Pachikov”. Time.com/Europe: www.time.com/time/europe/specials/eeurope/people/pachikov.html

MoscowTimes.com is the archive for SOURCES 1 through 3 above. After one week the URLs for these articles are available only by subscription: www.themoscowtimes.com/indexes/01.html

Russian Agency for small business consulting: www.ra.siora.ru/eng/partners/index.asp

Schuh, Jim. “Russian entrepreneurs cater to US visitors”. PCGazette.com, June, 2003: www.pcgazette.com/commentary/2001/aug01/schuh8-31.htm

Other helpful organizations: www.chinainfo.ru/plants/c/ruso.buz.cooperation.htm

Yank Elliott is a home-based entrepreneur and freelance business writer in Belhaven, North Carolina, USA. His Website is www.furriwhalesworld.com. He is currently a staff writer for IAHBE. Contact Yank at globalbiz@furriwhalesworld.com.