01.10.2013

“Youthful Start-up Culture Spreads To Russia’s Regions”

Enthusiasm for start-ups has gr own since the financ ial crisishit Russia in 2008 but state programs, sponsors and youngentrepreneurs are also dri ving the tr end. Budding businesspeople in the r egions face different challenges: a narr owermarket, more varied consumer habits that contrast with thosein the capitals and extra administrative barriers. Red tape canbe a greater burden on small businesses.

Federal programs help to overcome these barriers and easethe process of starting a business. These are widely advertised inthe press and on television. Less well known are those offered byinternational sponsors. For example, the International BusinessLeaders Forum (IBLF) r uns the pr ogram, Youth Business inRussia, or Молодёжный бизнес России (MBR). The programbrings together federal authorities, commercial organizationsand private individuals to become advisors and coaches. Banksprovide loans on favorable terms.

By focusing on the cr e-ation of small businesses theproject aims t o tackle youthunemployment. Young peopleare two to three times morelikely to be unemployed thanolder people of w orking age,according to figures from theOrganization for EconomicCooperation and Development. By helping to form and devel-op small businesses, such pr ojects are likely to bring downunemployment in general. In mature economies, 80 percent of new jobs are createdby small businesses.

The small and medium size ent erprise (SME) sect or accounts for about 50percent of gross domestic product and an absolute majority of jobs in OECD coun-tries. Opora Russia, The All R ussian Non-governmental Organization of Small andMedium Business, estimates that the c ountry has3.4 million entrepreneurs, and that SMEs accountfor about 25 percent of jobs and about 17 percentof GDP. That’s a small but gr owing body of entre-preneurs. The q uestion for many people is howto join it.

The IBLF ar gues that 20 pe rcent of peoplehave the pot ential to become entrepreneurs butless than 5 percent have the opportunity. Researchby David Blanchflower, of the University of Sterling, and Andrew Oswald, of WarwickUniversity, in the UK, f ound that the pr obability of bein g self-employed actuallyrises with age but the re is no firm link t o education: highly educ ated people ar emore likely to be self-employed in the US and UK, but less lik ely in Canada. Self-employment is higher in the US among the dominant social groups but in the UKethnic minorities dominate.

Other studies find that you are two-to-three times more likely to be self-employedif you have an entr epreneurial parent. Research also shows a str ong link betw eensetting up an independent business and ha ving access to capital, such as an inhe ri-tance. This suggests that advice and the availability of lump sums or cheap loans arevital to success. And this is what federal and private sector initiatives provide.

The IBLF r uns in man y countries besides R ussia, like Canada and Ukr aine.The project was launched in K aluga Oblast five years ago and has expanded t o sixregions, adding Voronezh, Novosibirsk, and Rostov oblasts and P rimorskiy krai. InJuly 2012 the MBR project was launched in Moscow.

By January 2013 MBR had appr oved 139 projects with overall value of over 20.3million rubles, or $530,000 USD. In t otal, the program has so f ar created 470 jobs,about half of them in V oronezh region, a third in Kaluga region and the r est splitbetween Vladivostok and Novosibirsk. It’s not just about cr eating jobs, however. Byinvolving state authorities as well as young entrepreneurs, the organizers of MBR saythey promote a c ommon language, a shared interest in Russia’s economic growthand opportunities on all sides.