annual meeting
He suggested that business in Russia is good and the prospects bright, though ratings and image suggest otherwise. To emphasize this point, Mr. Sucher noted that businesses in Russia posted a net profit of approximately $120 billion over the past 12 months compared to $90 billion by German companies. He agreed with Mr. Borisov that SMEs are stunted in Russia, yet based on his own experience as an entrepreneur in Russia, he has never seen opportunities so bright.
Aton’s Bernard Sucher makes a point as Sergei Borisov, Anders Aslund and Charles Ryan listen.
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tunity to play an active role in setting the multilateral trade agenda.
Mr. Borisov spoke about obstacles that hinder SME development in Russia. While corruption is often cited as the biggest obstacle, he believes there are others that are more pressing. According to surveys conducted by OPORA in partnership with other experts, staffing problems are the biggest concern of Russian SMEs. He explained that it is difficult for small businesses to find skilled personnel. Low demand and poor access to financing and credit rank next as major worries. Only 13 percent say they feel negative pressure from corruption.
Mr. Borisov proposed creating anchor companies around which small businesses can have better access to the resources that will help them grow. This concept has already seen some success in Tatarstan, for example, but more work is needed. He stated that competition is the key to growth, but his organization is yet to find the exact obstacles that prohibit competition. Though various initiatives have been attempted to spur innovation, it is the development of competition that will bring innovation to its full potential. Mr. Borisov believes that organizations like OPORA can play a greater role in the development of SMEs, and hopes to see its impact grow in the future. Bernard Sucher characterized himself as an activist for the professional community in Russia for the past 20 years.
Drawing on broader themes from Russia’s economic development, Mr. Sucher echoed Mr. Åslund’s analysis that global integration will move Russia’s economy forward. Membership in the WTO will benefit consumers almost immediately, he pointed out. Russia’s pent up demand is being unlocked and driving growth and innovation. Another theme of note is import substitution. Russia is investing in itself and establishing value chains that reduce its dependence on the import of goods it should be producing for itself. A third theme is efficiency. Russia’s inefficient use of railways for shipping is just one example of how great opportunity exists for whoever can begin the transition to modern modes of transport. Looking forward to major events like the Olympics and World Cup being hosted by Russia, the potential for profit by having a stake in the tourism value chain is enormous. But there are some problems, Mr. Sucher admitted. He placed a lack of trust and, ultimately, transparency at the heart of Russia’s economic problems. The feeling that information is power to be guarded is stifling to the economy when combined with inherent skepticism of outsiders. Russia’s reliance on the state for investment in infrastructure results in gross inefficiency and diminished growth potential. At the same time, a lack of
Russia Business Watch Fall-Winter 2012 Winter 2010-2011
Sergei Borisov related his efforts to support Russian small- and medium-sized enterprises (SMEs). Through Sberbank’s and OPORA’s efforts and governmental reform, small businesses are increasing their share of the overall economy, which is crucial to economic diversification. However, the situation is not stable and is complicated. For example, he pointed to the crackdown on kiosks as a negative development for SMEs. Systemic changes to promote SME growth have been included in previous socio-economic development road maps, but only 40 percent have been carried out so far. The road maps being formed today look similar, so it is questionable whether any real progress will be made. Reforms to promote SME development often take a backseat to budgetary reforms.
Small businesses in Russia view declarations of governmental support with a wary eye. While the reforms implemented and institutions created are promising, Mr. Borisov argued that stronger measures need to be taken. One promising idea is the practice of clustering. However, the heavy involvement of government in the private market holds back progress. He cited the lack of public involvement in pension reform as an example of this. The high cost of and access to necessary infrastructure also prohibit small companies from developing.
There is a surge of interest in Russia to position businesses to take advantages of future trends by venture capital firms like RUSNANO. But he does not believe opportunity only exists for “creatives” like RUSNANO in Russia. Mr. Sucher argued that the inefficiencies in Russia’s economy provide ample room for what he calls “copycat” companies. Using his startup of a wholesale bakery as an example, he pointed to the disproportionate profits that can be made by starting a simple business that fills in the gaps of Russia’s economy as it catches up to the developed world. He emphasized that Russia is still a young economy.
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