Window on Eurasia: Ever Fewer Russians Interested in Starting Their Own Businesses

Paul Goble

            Staunton, May 7 – Only seven percent of Russian citizens currently engage in entrepreneurial activity and few of the remainder even consider that a possibility, according to the Global Entrepreneurial Survey, which ranks Russia 67^th out of 69 countries in terms of the number of people who form and operate new companies.

            Olga Verkhovskaya, the head of the Russian office of the survey, told “Svobodnaya pressa” that the percentage of Russians who say they intend to open a business has declined to two percent, the lowest that measure has been since 2006 and a figure far lower than in other countries (svpressa.ru/society/article/67165/).

            Educated young Russians, she said, mostly want to become government employees or managers for large companies, a pattern that has been true since the onset of the economic crisis in 2009.  Few are likely to find employment in new companies either: 20 percent of Russian entrepreneurs – half the share in 2011 – say they plan new hires this year.

            According to the survey, “only 3.8 percent of Russians queried said that they intend to open their own business ‘in the next three years,’” a figure far lower than in other BRIKS countries, where 21 percent say they intend to, and in Eastern Europe, where 24 percent made that declaration.

            Only 13 percent of Russians say that there are favorable conditions for opening a business. Of those who do go into business, Verkhovskaya said, more than a third said they had done so because they couldn’t find a job otherwise and needed income to support themselves and their families.

             Some analysts suggest that rising taxes explain this distaste among Russians for entrepreneurial activity, but Maksim Timofeyev, director of the Moscow Center for Financial Problems, says that taxes are only one of many problems that Russians thinking about opening a business now face.

            There are various administrative barriers, widespread requirements for bribery, and high interest rates on business loans to small businesses, he said.  But the largest problem is “the total monopolization” of many spheres of the Russian economy, something that makes it hard if not impossible for small businesses to compete.

            Indeed, he continued, many of the four million small businesses now operating in the Russian Federation are likely to fail, swelling the ranks of the unemployed and making an entrepreneurial career all that much less attractive.

            Immigrants are far more likely than Russians to open their own businesses, with 5.3 percent of those from the “near abroad” having done so compared with only 2.4 percent of Russians.  The reason that immigrants can do so, experts say, is that they have “their own sources” of financing within the immigrant communities, “plus,” “Svobodnaya pressa” concludes, “a well-known” inclination toward entrepreneurial activity.