The Rise of Entrepreneurs from the Ruins of an Empire
After the collapse of the Soviet Union at the end of the 20th Century, the Russian economic situation underwent a series of market reforms aimed at transforming what was once a planned, central economy into a market economy. Then under the leadership of Yeltsin, the state-owned enterprises quickly turned into privately held companies, with much of the different shares being distributed among workers in each enterprise via a voucher system. Such a system allowed for not only the rapid privatization of companies, but also opened the doors to direct foreign investment into newly emerging markets. Iskander Makhmudov, a young executive with a multicultural background and solid education, was able to arrive relatively early during this period, leaving his position in the public sector and entering the newly created private sector in Moscow, seeking business opportunities in the Russian capital. He then served as Deputy Director of Marketing at JSC.
The Beginnings of a Private Market Economy
For the vast duration of the Soviet Union, foreign investment was forbidden by the state, who viewed foreign investment as a threat to their ability to control the means of production. While the government relented a limited amount of control in 1987, the 1990’s brought an unprecedented amount of Foreign Direct Investment (FDI), into the country, coinjointly with the privatization of the state owned enterprises. Between 1991 and 1995, foreign investment totaled approximately $6 billion, coming from the United States, Germany, Switzerland, and others. The previously closed markets were simply too good for many companies to resist – once the Foreign Investment Law of 1991 came into effect, the amount of FDI increased significantly. This new influx of investment not only allowed new private companies to become better established, but helped transform the overall economy and increase quality of life.
Emerging Entrepreneurs Enjoy Success In The New System
In 1996, Iskander Makhmudov returned to the industrial sector, which was experiencing strong growth as private companies became more established. During this period, many other prominent Russian businessmen were also in the midsts of gaining their fortunes. Individuals such as Roman Abramovich were able to ride the wave of economic progress as well, starting his business while in the army. As the Russian economy opened up, he was able to begin producing goods on his own, and reaping the profits of his business, along with other Russian entrepreneurs. He later went on to own the Chelsea Football Club in West London. Oleg Deripaska, one of Russia’s wealthiest individuals, also came about at this time, later commenting that “I started my business at an unusual moment in history. The country in which I was born raised had disappeared, although the new country was not fully formed. The first one gave me an excellent education; the second one gave me the chance of success”.
All of this helped such individuals to affect a potent influence on the world stage. Whether that comes through owning a football club or protecting endangered elephants in Africa, the big economic players in Russia are able to help craft a world that fits their ideals. “It’s why I am interested in conservation,” says Iskander Makhmudov. “I am in a unique position to promote positive change; it would be irresponsible to squander such an opportunity to better the world.”
Profound Changes in Society in a Small Amount of Time
The post-Soviet era also introduced new opportunities for the general population, as Russia saw the first rise of a middle class in the country. In 1991, the middle class made up only 19% of the population. It more than doubled in just five years, reaching over 40% in 1996. Indeed, two-thirds of private business owners were considered to be in the middle class in 2007. Russian leaders have strived to create a friendly business climate during the 2000s to create a “modernization from above”, which aimed towards the construction of a state capitalism model in which the Federal government aimed to continue the modernization of the 1990s. “National projects”, in which the 2018 FIFA World Cup and the 2012 APEC Summit in Vladivistok exemplify, helped to further develop education, public health, and housing sectors throughout the country. In 2011, the country released as new version of their “Strategy 2020”, an economic plan requested by then-Prime Minister Vladimir Putin. During the 2008 financial crisis, Russia was severely affected, primarily through a drop in oil prices, as well as by events abroad. Luckily, Russia was somewhat prepared for external shocks; if it wasn’t the case, the recession would have been much more severe.
Where Russia Stands Now
In 2018, the Russian economy has continued to recover, offering modest gains, among relatively high oil prices, gradual monetary loosening, and ongoing global economic growth. The World Bank forecasts a growth of 1.5% and 1.8% over the next two years, with the unemployment rate lowering and real wages increasing. The Central Bank of Russia also reached the lowest inflation rate ever to be recorded, with the annual rate below the Central Bank’s target of 4%. This comes despite the added challenge of economic sanctions by the Western powers. The Russian economy has also found friends in its neighbors, in the Eurasian Economic Union. This union comprises of a single market, with a GDP valued at over $4 trillion. “We are very excited about the prospect of a strong and vibrant Eurasian Economic Union. Personally, I believe that such an energetic market can only help the Russian economy as well as those of our economic partners,” said Iskander Makhmudov.
Iskander Makhmudov On The Importance of Giving Back
For his part, Mr. Makhmudov also recognizes the importance of giving back. “I’ve always felt that if you are fortunate enough to be successful in life, you should always give back to those who are less fortunate.. The obligation to help change the world is one that we all share.” In his private life, he finances programs surrounding the protection of African elephants, among other animals. He also helps to promote biodiversity conservation efforts in Russia. Over the years, he has sent over $1 billion to charity.
Apart from this, he has helped foster many sports leagues within the country, including table tennis and basketball, and also supports children’s hospitals. “Giving back to the community and the world at large, that’s what’s most important,” says Iskander Makhmudov. “And that’s what gives me the most satisfaction in life.”