Russian Small Business, Authorities and the State

Abstract

IN RUSSIA THERE ARE AS MANY AS 844 000 registered small companies,' with over 6 million full-time employees.2 In total over 12 million people are currently engaged in the small business sector, including self-employed and temporary employees. As a result, about 27 million Russians live on incomes from working in small businesses. Over half of Russia's small firms are in trading and other services, 21% are in construction and only 12% are manufacturers. By official data, during 1997 small companies produced about 12% of national product. The official economic situation of small business in Novosibirsk is not very different from the average Russian one. There are 25 124 small business companies registered in the city, that is 40.4% of all firms. The busiest spheres of activity are trade and public catering (52.9%)3 and construction (21%). Some 18% of the Novosibirsk labour force is employed by small private companies, which provide 19% of all payments to the city's budget and produce 11% of products manufactured in Novosibirsk. I shall refrain from making any quantitative comparisons between Western and Russian small business development as 'statistical evidence on the evolution of small enterprises in Russia is scant and unreliable' (Aslund, 1997, p. 193). The above official figures do not reflect the real economic picture of small business development in the Russian market, greatly underestimating its role in the economy of both the country and the region. However, there is no doubt about the present contrast between the entrepreneurial environments in the West and Russia in terms of government policies and procedures, socioeconomic conditions and entrepreneurial and business skills. For example, practices of small business regulation in many advanced countries such as the USA, Australia, Sweden, the UK and Japan mainly 'help attract potential entrepreneurs to start a business' (Gnyawali & Fogel, 1994, p. 43), while in Russia the whole system of state regulation is like an endless ladder where every step is an obstacle provoking the small entrepreneur to abandon the business. Socioeconomic conditions are also very different, with peculiarly negative public opinion and social values in relation to private enterprises and profit making in Russia. That is why a great part of the activity of small enterprises is hidden within the shadow sector. Depending on the company, its proportion of informal activity varies from 10% to 90%.4 Many entrepreneurs work either to a large extent or wholly