Institutional and General Economic Constraints to Economic Growth: Findings from the Industrial Enterprise Survey

In December 2007, the Institute for the Economy in Transition (IET) carried out a survey of Russian industrial enterprises to identify their perceived constraints to successful economic development. Senior managers of enterprises were asked to answer 2 groups of questions and to assess: 1) government interference in decision making of enterprises, and 2) changes in various factors that may constrain further output growth. Findings of the survey suggest a conclusion that the structure of constraints to industrial growth, at least for medium and large businesses, considerably changed in the last 2-3 years. At present, the most critical barriers include constraints relatively new for firms and different from those experienced in the previous decade -- constraints related to energy, labor , and transportation. According to the abovementioned BEEPS, these areas were problematic in less than 15% of all cases, i.e. actually they were not considered as problems back in 2002 and 2005. However, according to this survey, the situation changed drastically by the end of 2007. Enterprises face very serious “physical” constraints to further growth, and it is very hard for them to solve such problems in a traditional way by “settling a problem with officials”.