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Maxim Oreshkin: Small Businesses Must Be Given Chance to Develop and Grow Bigger

19.09.17

The talk given by Russian Minister of Economic Development Maxim Oreshkin at the Plenary Session of the Support of Russia Anniversary Forum.

Maxim Oreshkin: I’d like to start with a little comment. When opening this panel, we’ve fixed rigorous five to seven minutes of the time limit allowed for the speakers. And now I will give it a try in order it is met, although, in fact, it's really weird to hear this at the SBI event as small businesses embrace as much flexibility as possible.

Small and medium-sized businesses is what ensures maximum flexibility of the economy both in terms of the labor market and in terms of new solutions and innovations. Small and medium businesses are those who dare to experiment and implement new solutions, unlike major companies that are fixated on existing platforms and are unready to move forward and unready for innovations.

So the issue, which is raised, is right. Those companies that are successful, make profits and achieve exciting results must be helped. They must be given chance to grow bigger and move forward following their development thrusts.  And there is a variety of paths, and, I think, my colleagues will also give their comments concerning the fields of their own.

Now let’s see what are some of utmost importance. 

The first, of course, is related to administrative pressure. When we are talking of holidays for small businesses, as soon as the company grows bigger, it obviously attracts more attention. And the SBI auditing is largely continued to also apply to medium-sized businesses.

Therefore, the concept being expressed is the concept of the shift in the control and supervision system from punishment to prevention. The concept that is included in the new bill to be governing the control and supervisory bodies and the steps they should take in order not to harm but, on the contrary, to assist.  This also involves drafting of documents such as the White and Black Papers covering best practices of what must be done and those violations for which companies normally meet with punishments so that they could have understanding of their conduct in order not to come under administrative pressure.

Obviously, one law is not the solution. This is a long and, in fact, cultural process in the area. But what is essential is to always push it in the right direction so that no pressure could exist there.

The second issue relates to the story that has been also touched upon here today and that is the story of education. This embraces everything that is associated with business oriented information services and creation of such institutions that could provide legal and economical aid. This role can be played both by regional institutes and by commercial banks. For example, Sberbank and other banks take active steps in terms of education and services that can help companies grow and meet with new regimes.

Now the third story. This is, of course, of demand. Given the high percentage of state-owned companies in the Russian economy, it is key at this stage to ensure that SMBs have access to procurement opportunities. Alexander Arnoldovich (Braverman) is very much engaged in this matter. It was discussed at the board meeting and I think he is going to talk through the initiatives available.

The fourth story is the story of financing, with two clusters that are debt and equity financing issues. Much has been done in debt financing. We have a program that was launched by the Central Bank at the time, known as Program 6.5. It enjoys active support and is generally considered by the Central Bank not only as a measure to boost SMBs, but also as a thrust for regional banks growth. So, this is a comprehensive bank oriented program. The Government has also approved additional subsidies aimed at the program expansion, this year. However, in terms of the entire economy, lending in the area is obviously small. It is of importance that, first, such programs encourage banks to be more widely engaged with SMBs developing risk assessment practice and models. And, in fact, we see that the market landscape is changing including longer lending, a sharper focus on loans for investment opportunities, and interest rate reduction. It is true that the program offers interest rates touching some 10%; however, we can observe that the same are rapidly decreasing across the whole market, with the program interest rates being a magnet for the rest in the economy.

And the fifth story I’d like to talk about is the story of tax regimes. Indeed, small businesses can now benefit from very generous tax regimes but the problem that exists and needs to be solved in the coming years is transitioning from one tax regime to another. What is available now is a very big leap towards more complicated documentation to be maintained and accounting, and, of course, a serious increase in the interest rates. 

What matters greatly is reporting. We are now thoroughly analyzing the paths for Rosstat to take in order to enhance the work, while use of every information source that is available in the economy is undoubtedly of the highest priority. Here what we have now: Rosstat is engaged in collecting some information, with the same being collected by the tax service, banks and the Central Bank, respectively. Now, we need to analyze how these information streams can be merged together so that it won’t be enterprises, but rather government authorities that will be tasked. We should not be anchored in the government authorities’ needs in any information and every government authority should stop developing new statistical forms. We should make sure that the information that came to the government authorities is available for everyone, with no need to turn to businesses.

Such are the salient issues that should be considered and worked through for small businesses to develop, grow bigger and, perhaps, become large, in due time.

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