Dagestan: State Hobbles Cobblers

Amid widespread poverty and economic decay, Dagestan's traditional shoemakers are a rare success story, but official red tape is forcing their thriving mini-industry into the black market.

Dagestan, located between the Caspian Sea and Chechnya, is one of the poorest parts of the Russian Federation. Since the collapse of the Soviet Union its shoe factories, like many other state businesses, have gone into terminal decline.

In their place has come an army of private, local cobblers, whose products line the shelves of shops and are sold as far away as the southern Russian city of Rostov and the capital Moscow.

Shoemakers complain, however, that the authorities try to stifle, rather than welcome entrepreneurs.

Navigating the maze of local bureaucracy is prohibitively difficult and expensive, driving most private shoemakers into the black market. Employees of these small businesses never know when they might face fines, arrest, or confiscation of property.

Despite these difficulties, the underground business is booming.

Akhmed Ramazanov, whose company Vyubor (Choice) is one of a minority working legally, said that of the 500 ateliers in the regional capital Makhachkala, 400 had not declared themselves to the tax authorities.

Each of these, he said, is producing between 300 and 500 pairs of shoes a month and "now, many new ateliers are being set up that we don't know about".

In total, Dagestan manufactures some three million pairs of shoes a year, with capacity for plenty more, according to the Association of Cobblers chairman Ramazan Ragimov.

One reason for this relative success is that shoemaking is a traditional activity in Dagestan, particularly among Laks - one of the republic's dozens of tiny ethnic groups. Skills to produce handmade shoes are passed from generation to generation.

At Vyubor, cobblers work only to order, producing just 300 pairs a month, but quality is high. The firm boasts 800 shoe templates over which the leather is stretched before sewing begins. And although work is done mostly by hand, Ramazanov said he was also putting profits into buying modern equipment.

For shoemakers, the real prize is to enter the market in the rest of Russia.

Ramazanov, who has worked in shoemaking all his life, including a period learning in Italy, said that about 60 per cent of black market shoes from Dagestan were sold in other Russian regions.

There, they must compete with Chinese imports - which account for as much as 80 per cent of the market - and with shoemakers based around Russia's major southern city of Rostov, now the source for half of Russian-made shoes.

Dagestan's shoemakers say that their products are not only of high quality, but cheap, retailing at about 20-30 US dollars a pair, compared to 100 dollars for comparable Italian shoes.

But they have none of the government support provided their Russian counterparts in the Rostov region, and find themselves struggling to make a decent living.

An official with the economics ministry in Dagestan, who asked not to be named, said that there was no official aid for the sector. Just one small shoe business had received state credits - back in 2000.

Because so many Dagestani shoemakers work in the black market, they can not even advertise. When their products are sold across Russia, they are labelled as coming not from Dagestan, but Rostov, Ramazanov said.

But in an attempt to emerge from the shadows, some small ateliers are joining forces. A partnership recently formed from 70 small businesses now counts 100 members, said its chairman Ragim Ramazanov.

While remaining in charge of their own businesses, partners in the alliance were able to pool resources and get greater protection when dealing with the authorities, he said.

The head of an underground atelier called Badavi said he wished he could turn legal. "If it was up to me, I would pay taxes, and expand my production," he said. "We have everything we need - cheap labour, a market and materials. But the situation today is that people managing to do well have to hide this, as if it was a criminal business."

He described a colleague who had tried registering and had to negotiate a mass of bureaucracy before running into regulatory officials who found a long list of faults with his company. Heavy fines, fees and bribes followed.

For the mostly young men working in the underground industry, rewards are few. Kurban Ismailov, who got his job after leaving the army, said he makes just 40 rubles, or about 1.3 dollars, per pair of shoes, which then sell for about 450 rubles.

Twelve hour shifts without breaks are needed to earn a living.

The real money is in Moscow where some black market Dagestani shoes are sold under false, prestigious foreign labels. And, say Dagestan's cobblers, it isn't always easy to tell the difference between the two.

Musa Musaev is a regular contributor to IWPR.