Yevgeny Yenyutin still shudders at the memory of the day he decided to sink his fortune in a new business deep in the Russian woods.

Three years on, his hopes of high returns from cheap labour and abundant timber are in tatters. Recouping millions of dollars of investment that transformed a ruined linen mill into a high-tech plywood factory remains a distant dream.

His life, once spent amid the comforts of Moscow, is now an exasperating struggle to keep his business afloat and to inject some motivation into his workers - first of all to keep them off the bottle.

Russia may be tempting more and more foreign investors but Mr Yenyutin's experience is a reminder that beyond the big cities, where the population has caught up with change after a decade of market reform, old habits and Soviet mentality live on.

"When we came here, we obviously planned to hire only those without a drinking problem," said Alexander Vorobyov, Mr Yenyutin's long-time friend and second-in-command at the plant. "Very soon we realised that meant one out of every 50 applicants."

Drink has become one of the biggest health problems for Russian men who have been downing increasingly large quantities of hard liquor since the Soviet Union collapsed in 1991, pushing millions into unemployment and poverty.

"It seemed staggering at first, but not anymore," said Mr Yenyutin. "Spend a couple of months here, get a taste of local life and you will see for yourself that somebody who lives here and does not drink is an aberration."

Maksatikha, home to Mr Yenyutin's mill, is a typical small Russian town that developed during Soviet times - a cluster of low-rise apartment blocks and private houses amid the wilderness. Four lonely roads lead into it. Jobs are scarce.

Scattered across Russia's 11 time zones, such places are still known by their ungainly Soviet-era nickname of "town-like settlements".

"In winter, the place plunges into darkness with nightfall at about 4 p.m. People stay indoors and all they have is two TV channels and a bottle of samogon (home-distilled alcohol)," Yenyutin said. "Guess what they end up doing."

Russia's top businessmen have warned that a shortage of qualified labour is one of the country's biggest problems and could start to place severe constraints on small and medium-sized companies.

With the economy powering ahead at nearly seven per cent in 2003 and President Vladimir Putin's urgings to double the size of GDP over the next decade, Russia's limited pool of skilled labour may prove a stumbling block for further growth.

The Kremlin is hoping that smaller companies will help wean Russia off its heavy dependence on energy exports which account for most of the country's heady economic growth.

But many Russians appear unwilling to embrace the market economy. Opinion polls show that the number of Russians wanting to start their own business has stayed at just five percent for the past 10 years, far below the West.

And in December's parliamentary election, more than 35 per cent of votes went to parties preaching nationalisation or the redistribution of property and Soviet-style social equality.

In Maksatikha that figure stood at over 40 per cent. Liberal parties combined won less than four percent of the vote there.

A sleepy town tracing its origins to the 16th century, Maksatikha's swaths of thick forest some 250 kilometres northwest of Moscow mean it always relied on timber.

The Soviet Union attempted to diversify it into textiles but that industry, which employed many of the town's 20,000 people, all but collapsed with the demise of central planning and state subsidies.

Today the only sound disturbing the rural calm is that of chain-saws in small makeshift sawmills which have proliferated on the fringes of the town to process timber, most of which is logged without licence in nearby forests.

Supplying logs - "stealing wood" as the residents call it - to the sawmills is a thriving business.

It also gives Mr Yenyutin one of his biggest headaches, spiriting away able-bodied men resentful of his attempts to instil some company discipline.

"Yevgeny, you are a great guy, but you hate me drinking at work and you make me work shifts. I would be better off stealing wood," is a phrase which the 38-year-old entrepreneur says he hears far too often from his departing staff.

"It is really hard to motivate people who stop caring about things once they get enough money to buy a bottle of vodka," he said with a sigh.