“Private business is like a hen laying golden eggs”

First deputy chairman of the State Duma Committee on Economic Policy and Entrepreneurship Vladimir Golovnev discuses opportunities for doing business in Russia.

– Mr. Golovnev, what direction did you career take? How were you elected to the State Duma?

– I came to the Russian parliament from the private sector. I was the head of a company that I founded myself fifteen years ago. I started with zero. There were four employees when we began, and right now there are more than thirteen and a half thousand. We work in the light industry and the textile sectors. The factories produce uniforms and personal defense devices.

I finished high school in Vladivostok with a gold medal. In Moscow, I graduated from the Aviation Institute with a red diploma. I began graduate school, but military aviation was far past its heyday. Together with my friends from the university I started a company called Vostok-Service. We started with uniforms, special industrial footwear, as well as other accessories that would be needed for the working man. We were not switching our line of business and still continue doing what we started to do fifteen years ago. Today, our company is the largest enterprise of that type in all post-soviet countries, and, as 2008 figures will show, the largest of all similar producers in Europe.  

– Did you ever consider entering the American market?

– We have tried that; however, I think that maybe we were not using the right strategy. The U.S. has its own specifics. The approaches are different. While in Russia almost all employers prefer to give out their uniforms to their workers, in the U.S., employers give money to their workers for them to buy uniforms individually.

I thought that the experience I acquired in managing a company successfully could be put to use at the federal level. Last year, I was elected to the Duma as a representative of the Russia United Party. I am working in the economics block right now and serve as first deputy chairman of the Committee on Economic Policy and Entrepreneurship.

– How often at Committee hearings does the topic of Russian-American economic cooperation come up?

– As far as the United States in particular, these issues are not talked about too frequently. At the same time, we do look very seriously at international cooperation. In the State Duma, there is an entire subcommittee on Issues of International Cooperation. We clearly realize that Russia is not some isolated territory occupying one seventh of all land on Earth. The world has become global.

If in 1917, you needed a double-bottom suitcase to transport valuable things from one place to another, today, it is possible to transfer large sums of money between two countries with one click of a mouse. We are very interested in attracting investment to Russia – not only in the form of money, but also in the form of new technologies. We discuss these matters quite often.    

– Many experts noted that when President Medvedev came to power, one of the first issues that he raised was the need to adopt measures to make it easier for small and medium companies  to operate in Russia.

– It truly was a significant remark. In recent times, the attitude of the government to small and medium businesses has shifted, and greater priority is given to the development of such enterprises. They lead to innovative economics. Finally, the government seems to have moved from words to action. As the situation stands right now, without the removal of excessive administrative barriers, without changing the tax policy, small and medium businesses would not only lack the potential for becoming the driving force of innovation, but also could not simply survive. 

Administrative resources at all levels are being used to crush and drive out small businesses. Endless inspections are often just the means for complicating the work of an entrepreneur. Instead of increasing production volumes, small and medium companies are forced to spend time fighting corruption. Altogether, decreasing the number of mandatory inspections and moving to notice registration procedures can substantially simplify the operations of a small business. Furthermore, these measures would stimulate the intensified development of business in our country. People working in small and medium businesses constitute the middle class, whose size is the chief indicator of the development of the national economy.      

– What message do these priorities of President Medvedev send to the world?

– For one, talking about these issues makes it evident that the President is absolutely aware about what is going on. He is a liberal at his foundation. He is only 42 years old, and most substantive events in his life all occurred in the 1990s. For Russian and foreign entrepreneurs, this was a message that likened private enterprise with a hen that is capable of laying golden eggs.

The main task of the government is to make those eggs as large as possible, to make it not the chicken egg, but an egg of an ostrich.

In my view, the task of the state should be to lay off as much authority as possible from its own shoulders into the hands of the private industry. We need that to lower the number of people on welfare services and to increase the number of people working. It would provide the means of livelihood to their families, taxes for the state, a modern army, and good social programs. We can no longer afford not to be concerned with the numbers – small business in Russia comprises only 15 to 20 percent of all companies, a number drastically short of what that figure is in developed countries.   

As far as the second message goes, the President showed that Russia is strong not only in its oil production. Today, as we are building an innovation-based economy, we need the diversity of ideas. Let us work in the agricultural sector together. Just think about what fields we have! What resources are available to us! At the same time, prices on agricultural produce around the world are very high. We are now looking at the possibility of giving agricultural concession.

– Would any specific program be established to realize this project?

– I think so. As a businessmen and a politician, I think that business is responding positively. We should look at how the elections were conducted. Also, we need to appreciate our government’s ability to inherit development strategies.

Businessmen need for laws to be clear and the situation to be calm. When there are clear rules of the game, it is possible to build a strategy not only for one or two years, but for five and ten years. This is very important for business. 

– In your view, to what extent does the State Duma sympathize with the concerns of a private businessman? How do its actions reflect these interests?

– I will separate these concepts – to sympathize and to reflect. For starters, I will say that the tendency that exists right now is very constructive. Around 70 to 80 people in the Duma have gone through the school of real business – not the kind of business that was in the 1990s. We have different business right now, much more civilized. People in the Duma do understand these things. Another issue is whether we will be able to relate that understanding to others who also make decisions. Business is not like a cow that you can milk. We need to create such conditions that the cow would produce more milk.

This is more a methodological question than it is a legislative one. We have many legislators now in the Duma who have traveled around the world, including to the United States. They can draw comparisons. Only by comparison do we understand what direction we should move in.