It’s quite difficult for young businessmen to develop their business in Russia. In particular, in this country registration procedure is not simple (see details in research of Ernst & Young “Entrepreneurs speak out: A call to action for G20 governments”).
According to research, only 12% of respondents believe that Russia is the best place for entrepreneurial activity. 36% of respondents called the USA as the country with the most favourable environment for startuppers.
Weakness of Russia is in low volume of granting bank credits for small and medium firms - a little more than one third from medium level for G20 countries. Education expenditures are lower than average ones for G20 countries, low income - 3.6% for starting business, it’s not much. Moreover, the registration procedure is very complicated because of many stages and delays in comparison with the most countries of G20.
Russian experts mostly agree with western experts. “Taking part in establishment of business in this country by adaptation of international financial and legal rules to our reality, I would note that not all of these rules are applicable and viable” said Alexander Rybakov, the general director of “Ryabinnikov &Partners. Financial Assistant”.
The freezing of business activity, in particular among youth, depends on corruption, immaturity of legal system and their mutated symbiosis represented by the court system and Ministry of Internal Affairs. By having legal practice in many regions on this country we see obstacles for doing business in Russia, in particular, it’s quite difficult to get a loan and start retail business as well”.
According to the expert, the entrepreneurs themselves are on thin ice,since they get customs and tax payments to be paid to the state to themselves, and give a reason for tough actions. On question “Did you try to do it fair way?” they respond: “It’s non-profitable, everybody lives that way!”
The circle could be broken only by acts of will, by legal and economic reforms.
According to Armen Bakhtin, managing partner of the Law Firm PRIORITET, company incorporation procedure in Russia is still complicated and, as a rule, requires qualified lawyers knowing all practical details. All administrative procedures relating to incorporation takes at least three weeks. The main problem on contacting with state authorities at this stage is in the approach and attitude of officials to the potential businessman. Registration authorities have unlimited possibilities for delial in registration for formal reasons, told Armen Bakhtin.
You cannot fix the formal mistake in application, you should start all registration procedure from the beginning by paying state fee, certifying the documents by notary, etc. It’s absolutely necessary to create a system where registration authorities could help the applicant by having dialogue in process of registration and fixing formal mistakes. It relates to other procedures with interaction between business and state. I’m convinced that building the relationships in the form of active dialogue could upgrade the investment climate in Russia”.
It’s not so bad here in Russia, and Europe has problems as well. According to Olga Ponomareva, the managing partner of the “Assistance for business projects” group of audit and law companies, the procedure of incorporation became much easier. However in comparison with registration in other counties our procedure is quite complicated. There are several reasons, among them the formal approach of the officials, the procedure itself, which does not comply with laws, expert says. For example, the "one window" system is used, so simultaneously with the registration in tax authorities the applicant should be registered in off-budget funds and statistic authorities. In reality Moscow entrepreneur has to do it by himself, and this is waste of time for standing in lines etc. With this low-pressure service the entrepreneur shall pay 2-4 times less than his "colleague" in Europe.
Among the obstacles for startuppers Olga Ponomareva noted complicated system of tax and accounting: As a rule, you need an accountant, this is additional costs which are very sensitive on the first stage.
According to Maxim Zaytsev, senior bonds analyst of Investment Group "Nord Capital", the main obstacles for development of Russian business are administrative ones. Reducing state fees, reducing the period for consideration of applications upon registration – this could promote the development of small and medium business, expert said. It's necessary to toughen liability for illegal denial in registration or for protraction of consideration of documents because of corruption.
Vladimir Rozhankovsky, director of analytical department Investment Group "Nord Capital", adds that currently the government take in Russian economics is 45%. This is very similar to specific countries like China, Cuba, Venezuela and North Korea. "In the beginning of 90s Russia took western development model but after 10 yearof practice changed its way, expert specified. Apart from small and medium business the government take in the big business is more, over 65%. It's complicated to attract investments into the Russian capital with this roll to state assets. Since the state decided to go back to partial monopoly to natural resources and heavy industry, it has to draft specific amendments to current legislation providing an insurance of western investments.
In turn western experts advise Russia to upgrade the entrepreneurial culture. The research showed that its development is a positive image requirement on the global stage. I think, it's essential and important trend, Olga Ponomareva agrees. Today our business-culture is weak since it was born in "the dashing 90s" with part of bandit subculture. It was not long since western companies came to us; Russian people start travelling and analyze the way of living of people in other countries. And now the generation of young businessmen differs from those pioneers from Viktor Pelevin's "Generation P".
Source: «Russian business-magazine»