Doing businesses in Russia: bureaucracy, low demand and lack of qualified personnel

In 2011 bureaucracy remained the main obstacle for business development in Russia, and it became even more complicated. Those are the conclusions of yet another international research by the international audit company Grant Thornton International.

According to GTI, pessimistic attitude grows from one year to another: in 2010 the problem of bureaucracy was indicated by 40% of surveyed parties while in 2011 – already 42%. Thankfully, that’s the only negative dynamics in the list of 8 different factors.

Each quarter 2.5 thousand business owners around the world participate in GTI’s research. In Russia, around 100 companies acted as respondents – they represent small and medium businesses with a number of employees from 100 to 499 in 5 biggest cities (Moscow, St.-Petersburg, Yekaterinburg, Nizhny Novgorod, and Novosibirsk). Only CEOs were invited to participate.

Bureaucracy hits harder in St.-Petersburg: 51.3% see this problem as very relevant and serious; then goes Nizhny Novgorod (43.8%) and Moscow (42.9%). In Yekaterinburg, only 31.3% are dissatisfied with the current state of affairs.

Respondents could choose more than one option from the list. If bureaucracy (in general – pressure from the government/regulatory authorities) is on the first place, then low demand and insufficient number of orders are on the second. This problem was indicated by 35% of all respondents in Russia – at least, that was the situation in 2011. On the remaining places are: lack of qualified personnel (34%), insufficient working capital (29%), limited access to long-term financing (29%), and cost of financing (28%).

In general, if factors other than bureaucracy are considered, business expectations have improved for the last 12 months. Low demand (which still goes the second) showed the most positive dynamics: if in 2010 more than a half (51%) of respondents were worried (quite understandably worried as Russia was still recovering from the crisis), then in 2011 only 35% remained.

Not so big, but still an improvement was demonstrated by cost of financing (37% in 2010 vs.28% in 2011) and by the problem of insufficient working capital (37% and 29%, respectively).