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Articles: Business thrives in Russia's deep south

Posted by admin on Friday, July 02, 2004 - 07:00 AM

It was not until Anna Migr had a baby that she spotted her chance to go into business in Russia -- making infant clothes.
"When I bore a child I had a problem finding knitwear for children. The idea came to me that the market was wide open," said the former accountant, who moved to Krasnodar in Russia's southwest from Belarus after marrying a local. Migr is one of a generation of young entrepreneurs who are seizing opportunities in the relatively business-friendly region of Krasnodar, Russia's old agricultural heartland, and reaping profits from the country's economic boom. She talks about her next move as she watches a row of Japanese sewing machines embroider floral patterns on blouses in her workshop, which employs 90 people and turns out thousands of garments for the Russian market. "Four years ago when I first saw this equipment I thought it was state of the art," said the 35-year-old businesswoman whose company is called Cleopatra Styl. Migr is now getting ready to install machinery from Italy to automate the cutting of knitted fabrics, until now carried out by teams of women working at tables. She expects productivity to jump and profits to soar. Krasnodar, one of Russia's richest regions with seaside resorts and a prosperous farm sector, has drawn investors like Swiss foods group Nestle, Swedish packager Tetrapak and Russian dairy and juice maker Wimm-Bill-Dann. With a population of five million, Krasnodar has one of Russia's 10 largest regional economies though per capita income is middle ranking among the nation's 89 regions, according to official statistics. Shops, cafes and restaurants open It is the growth of restaurant chains, local supermarkets, travel agencies and fashion and electronics stores lining the streets of Krasnodar City, the region's capital, which is most striking. It is a sign that the good life, though still denied to millions of Russians living in poverty, is no longer the preserve of the middle classes in Moscow and St Petersburg and is starting to spread to the provinces. "I wish I had taken photographs of the main street (in Krasnodar) two years ago," said Eduardo Aguilar, a Mexican who run's Nestle's operation in Timashevsk, a small town outside the regional capital. "There was very little. Now a new shop opens every other week." Small business has lagged in most of post-Soviet Russia where giant oil, metals, food processing and engineering firms dominate the economy. Krasnodar may be seeing faster growth of a get-up-and-go enterprise culture than much of the country. Local authorities say small ventures are springing up faster than ever. "Small and medium companies represented 6-7 percent of the economy three years ago. Now it's around 20 percent," said Krasnodar's deputy governor Alexander Remezkov. "We want to double this figure." Raising finance can still be a stumbling block in a country where banks are happier to lend to established ventures. "It's very easy to set up a new business here," said Elena Sarytcheva, who runs a local travel agency called InterLine and would like raise a $200,000 loan to build a hotel. "But the problem is getting bank credits." Getting started Sarytcheva, who arranges twice-weekly charter flights to Istanbul and weekly summer season flights to Anatolia in Turkey, also says her clients are getting more picky about their holidays abroad as they become more prosperous. "In the early 1990s people would stay in very cheap hotels. Now there is great demand for five-star accommodation," she said as she dined with her business partner in a restaurant which she also manages. For those like Cleopatra Styl's Migr who spot a niche in the market and can obtain finance, business can expand quickly. Migr, who now wants to start making swimwear, was able to start her venture with a 2 million rouble ($67,000) local government loan granted on the strength of her business plan. Yevgeny Sursanov, 33, who has worked as a hairdresser for 11 years, invested $100,000 three years ago with two business partners in a new salon, loosely modelled on fashionable Western chains like Toni&Guy and Jacques Dessange. The salon, called E & C Standart, employs 19 hairdressers earning an average of $500 a month in a former confectionery store on Krasnodar City's main high street. On a recent Saturday it was packed with young women having their hair styled. "We are planning to open a smaller salon soon in a shopping mall in the city centre," said Sursanov, who is doing $25,000 of business a month. Asked whether corruption -- often said by economists to be a major drag on small business in Russia -- was a problem, one entrepreneur said it was ever-present but manageable. "You always know what you have to pay. There is an informal price list," said the importer, who asked not to be identified. He said he had paid bribes to speed up granting of permits. Deputy Remezkov says the local government is trying to slash red tape. "We want businessmen to think the authorities are working for them and not burdening them," he said. "The most important thing is to create the best conditions for developing business."

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