Following recent reports of deep seeded problems in the Russian economy, Alexei Beltyukov, Advisor of the Skolkovo Foundation, has put forth ways in which he believes that the slide can be arrested.
Even before the Crimean standoff, there were many reports that Russia’s economy slowed sharply at the turn of the year, with investors pulling their money out of the country. Earlier this month, Russian Economy Minister Alexei Ulyukayev announced that the Russian economy grew by just 0.8 percent in the first quarter, much poorer than the perceived forecasts of 2.5 percent.
Russian markets have been shaken by the Ukrainian struggle since the beginning of the conflict last month. The main stock index dropped 10 percent in March, wiping out billions in market capitalization. In the first quarter of 2014, the ruble lost 9 percent against the dollar, greatly increasing the cost of imports. In March, Deputy Economy Minister Andrey Klepach told reporters that up to $70 billion may have left Russia in the first three months of the year. That compares with about $63 billion for all of 2013, he said.
The Crimean tensions are the latest in a laundry list of problems that have led to economic slowdown and the exodus of capital. According to Bloomberg Businessweek, the expansion of Russia’s $2 trillion economy slowed for a fourth year in 2013, after consumer spending fell and investment sagged along with demand for energy.
Meanwhile, A Reuters report suggests that Russia’s gross domestic product had risen by only around 1.4 percent in 2013. In December 2012, it was predicted that the GDP would rise by 3.2 percent. At the time, economists predicted the growth would only be around 2 percent, but recent developments have sparked Russia’s Finance Minister, Anton Siluanov, to predict that the Russian economy will possibly post zero growth this year.
RT reported that the minister predicted the unsettling growth in a recent government meeting. “GDP growth is estimated as rather low, 0.5 percent. Perhaps it will be around zero,” the minister said.
The problem for Russian entrepreneurs gets worse, however. According to Katya Ponomareva, who runs a consultancy on investments in Latvia and Bulgaria, educated middle-class Russians are voting with their feet. Inquiries by professionals from Russia seeking refuge in Eastern Europe have jumped in recent weeks, she says.
With the entrepreneurial talent and the capital leaving the country at an alarming rate, Alexei Beltyukov believes that something needs to be done to improve the situation quickly.
Alexei Beltyukov recommends that in order for Russia to reestablish itself, it needs to truly celebrate entrepreneurs. It is his belief that the Russian government needs to put systems in place to support small business and entrepreneurs.
Alexei Beltyukov is one of the founding fathers of the Skolkovo Foundation. The Skolkovo Foundation is a government sanctioned organization that works to promote technology, business and innovation across Russia. Founded in 2010, their aim is to improve the economy by empowering small business owners and usher in a new era of entrepreneurship. As Alexei Beltyukov likes says, the Skolkovo Foundation provides entrepreneurs in technology areas with the opportunities that he himself never had, growing up in the Soviet Union.
The foundation offers many services to assist Russian entrepreneurs, including a consultation service, which offers advice and business strategies; technological incubation; tax breaks for Russian business people and more. The most noteworthy service provided by the foundation is the level of grant money that the organization provides to entrepreneurs investing in new enterprise.
To date, the financial assistance offered by the Skolkovo Foundation has created many new opportunities for entrepreneurs. Over a thousand Russian businesses have already benefited from grants and tax breaks awarded by the foundation. Furthermore, according to a recent article in the Moscow Times, business development through the foundation has resulted in the creation of over 13,000 jobs.
The Skolkovo Foundation is extremely passionate about bringing forth broader growth in the Russian economy. Beltyukov believes that the foundation is on the right track, but that the nation could benefit from an even heavier focus on entrepreneurship. With recent developments, forecasts may not be as positive as initially expected, but he believes that Russia has much to hope for in the hands of its budding entrepreneurs.
Alexei Beltyukov believes that this type of investment by the Russian government will help the nation’s entrepreneurs to be the intellectual tides that lifts all boats and rescues the Russian economy from its current predicament.
Stephen Elliott contributed to this article.