Russia’s emerging entrepreneurs

Maxim Nogotkov has always had an entrepreneurial streak. By the time he was 14, he had a steady income from the wholesale business he had started. Today, the 34-year-old is the president of Russian cellphone retailer Svyaznoy Group, which has sales of US$4.9b and a network of 2,400 shops. The winner of Ernst & Young’s Russian Entrepreneur Of The Year®, Nogotkov is now diversifying into banking.

How do you think entrepreneurship and entrepreneurs are perceived in your country today?
People look at entrepreneurs positively in Russia. We’ve come a long way. Twenty years ago, I was ashamed of being a retailer because it was something that was prohibited – we were looked on as criminals.

What is it like doing business in Russia?
It’s more or less comfortable. The culture and language are the same throughout the country. In our business, we don’t have problems with bureaucracy or tax issues, so there’s a good working environment. The law is still an issue, however. Although the courts are becoming more
professional, there can be disputes and problems with shareholder agreements.Most companies here sign agreements under UK law because they trust it more.

“In the past two decades, private companies have performed better than state-owned ones. As a result, we are seeing attitudes shift every year as people realize that private companies are better at creating jobs and wealth.”

Maxim Nogotkov
President, Svyaznoy Group

What challenges and opportunities do you face?
The long distances can make it expensive to deliver goods. Russia’s outsourcing services are not as well developed as in other countries, but they are getting better. This year, we are in a position to outsource our logistics.There are many areas in which progress could be made to bring Russia up to Western standards; for instance, there is a lack of infrastructure such as modern retail and office space. One exception is the internet, which in Russia is well developed compared with Western Europe.

Would you say the market in Russia is open to overseas companies? Is there a need to form joint-venture partnerships with local players, as many companies have opted to do in China?
Culturally, the mentality is more European than Chinese,and I believe Russia is a much more developed country from an industrial and Technological perspective. There are no restrictions on foreign shareholdings and you don’t have to have local partners. I think the market is completely open.

What are the two key measures the Government could take that would improve the environment for businesses in Russia?
There is room to cut taxes by selling inefficient state-owned enterprises, such as telecoms and banks. Tax collection must also improve; 30% of the economy is still the “gray economy” [trade via unofficial channels]. In the past two decades, private companies have performed better than state-owned ones. As a result, we are seeing attitudes shift every year as people realize that private companies are better at creating jobs and wealth.

Your group’s move into banking seems like quite a leap from cellphone retailing. Why did you decide to diversify in this way?
We have been providing a top-up and utility bill payment service in our shops for 10 years, so it’s not such a big leap. We think banking is a good complementary service. We believe that cellphones will be like electronic wallets with NFC (Near Field Communication) technology. You will be able to pay and see your finances from your smartphone.Already, we have about a million customers and we have doubled our bank’s capital investments in the past 12 months. We are continuing to develop the card and personal loans business and are creating a whole range of new products. This is just the start of our journey

The interview was written by:

  • Andrew Stone

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