Small Business – Big Strength

6 September 2022

Small Business – Big Strength

The Small Business – Big Strength panel session took place on 6 September at the Eastern Economic Forum 2022. Government and business representatives discussed what needs to be done to improve the business environment in the Far East and Russia as a whole.

Participants included Pavel Volkov, State Secretary, Deputy Minister for the Development of the Russian Far East and the Arctic, Vladimir Gruzdev, Chairman of the Board, Association of Lawyers of Russia, German Zverev, President, All-Russian Association of Fisheries Enterprises, Entrepreneurs and Exporters, Aleksandr Isayevich, General Director – Chairman of the Management Board, Russian Small and Medium Business Corporation, Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA, and Elina Sidorenko, General Director, Platform.

The participants concluded that small business needs to play a bigger role in the Far East and in the country as a whole. Given the existing defects in legislation, and local enforcement practice concerning small businesses, wide discussion of issues relating to improving the legal and economic knowledge of officials, better motivation, and diversification of the methods for calculating KPE for the development of small business, need to be discussed.

At the same time, improvements in financial support programmes and a more favourable approach to providing state financing may help make entrepreneurship more attractive.

KEY CONCLUSIONS

The role of small business is growing in a changing world

“A restructuring is underway, and not only in the Russian economy. A global restructuring. The role, employment, and share of small business is objectively capable of growing. Especially in employment, the new markets opening up. Small businesses are more flexible and are not covered by sanctions. Sanctions against small businesses are not possible, because it is billions around the world”, said Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“We are always talking about the potential for growth, although we never seem to find the right key to start the motor… As a government, we have been reacting faster to these (sanctions – ed.) challenges, but I think that time will do it faster, and entrepreneurial initiative. Give people the chance to work and reap the benefits, so that they adapt our economy to today’s challenges, today’s conditions”, said Pavel Volkov, State Secretary, Deputy Minister for the Development of the Russian Far East and the Arctic.

Work with officials to improve the situation for small businesses

“We have KPE for the development of small business for administrations, but it is only defined for employment, and only at a regional level. What about municipalities? We need to tie KPE to the investment activity of small business, or to contribution to the regional domestic product. If a responsible official working in the economic sector achieves serious economic growth, he should legally receive serious economic bonuses, then we will work as a single team heading in the same direction”, said Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“I think we need a legal and economic educational program for our officials. Not business, but lower and mid-level officials, they really need to learn. They still look at entrepreneurs as sheep that need to be sheared to the bone. And you and I know that if you want your cow to give milk, or your chicken to lay eggs, you need to feed and water them first, then they will give you what you need”, said Vladimir Gruzdev, Chairman of the Board, Association of Lawyers of Russia.

“I think only Opora and regional leaders working together, in seven or eight coastal regions, to change the regulatory framework for the (fishing – ed.) sector will provide results”, said German Zverev, President, All-Russian Association of Fisheries Enterprises, Entrepreneurs and Exporters.

“We would probably like to see more attention from the government for the business community. And we are willing, for our part, to provide quality feedback. As for financial support, to be honest, it is not always effective, and we would like to see better industry representation, feedback from small businesses. We are ready to help”, said Vitaliy Gumenyuk, General Director, Stroyinter; Co-Founder, Ginkgo.

PROBLEMS

SMEs are experiencing a shortage of affordable financing

“The biggest issue (for business – ed.) is a lack of cheap, long-term funding. Or access to it. Everyone is talking about programmes. I have read all those programmes. Only those with the best accountants and the ability to pay for access can get into those programmes. They are practically the same as bank financing”, said Pavel Volkov, State Secretary, Deputy Minister for the Development of the Russian Far East and the Arctic.

The process of decriminalizing small business is still lacking

“All the efforts of the state to protect entrepreneurs from criminal prosecution have gone nowhere, unfortunately. Special offences were introduced for entrepreneurs under Article 159, but businesspeople were arrested and held in detention, and they continue to be arrested and held in detention. Despite all the President’s calls, Supreme Court decisions, law enforcement at the mid-level, judicial level, continues to be poor”, said Vladimir Gruzdev, Chairman of the Board, Association of Lawyers of Russia.

“Small businesses today are not looking for state handouts. When we talk today about cases opened in the Far East, which are on Platform, I can say with certainty that 90% of the cases today that are related to fraud are in one way or another cases relating to state contracts. So, when we discuss decriminalization, we need to understand that element… It is a problem that we should not have. What we have, colleagues, is the demonization of state money in the absence of available funds that could go into the economy, into small businesses, today”, said Elina Sidorenko, General Director, Platform.

Municipalities need motivation to work with small businesses

“Honestly, it is a shame for the Far East that people are leaving. There are great projects, do you know where we get stuck? The municipalities are absolutely uninterested… Let us create incentives for municipalities: first – fiscal, second – administrative, so they get up and do the work”, said Sergey Dudnik, General Director, SPAR Far East.

SOLUTIONS

Develop tools to incentivize small business

“Our tools for incentivizing investment are mainly aimed at big business… we need to realize that we have around 6 million SMEs in Russia. If each SME spends just a million a year on equipment, buys a Gazel, or a small office, that is 6 trillion in direct investment. That money is there, sitting in bank accounts… But there are practically no tools for incentivizing investment”, said Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“There is the so-called Kurils regime. You can go there now, you are not a long way away, in the Kurils. Register any company there, it does not have any special requirements, no business plan, nothing. And you are covered by the special regime, without making the corresponding application to apply the so-called regime. And you are released from the main corporate taxes for 20 years... And in my view, it is the best regime the Far East could have for projects to start and survive. Because we consider that here, in the Far East, I have said many times, it costs 1.5–2 times as much to launch a project and make it work. Reaching the client costs a lot more here”, said Pavel Volkov, State Secretary, Deputy Minister for the Development of the Russian Far East and the Arctic.

Special organizations are needed to support small businesses as well as the authorities

“Let us determine the sectors and instruments that we consider a priority, both business and government. And if we agree, they let us concentrate forces. Not only financial, but legislative and administrative, to remove the barriers to these markets, adopt antimonopoly measures for those markets, and so on, and so forth”, said Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“It is important, I think, besides everything else, we hear this everywhere, to not leave businesses alone to face the bank... We have created a competency centre based on the МСП.РФ digital platform to help businesses structure transactions, help entrepreneurs communicate with their banks through us, and, if necessary, find another bank,” said Aleksandr Isayevich, General Director – Chairman of the Management Board, Russian Small and Medium Business Corporation.

Small Business – Big Strength

Read more