15.02.09

According to the director of the Ministry of Economic Development and Trade, Andrei Sharov, 300,000-400,000 new jobs must be created in 2009 as part of a support program for small business. The small business stimulus comes in the form of tax exemptions and grants provided to Russians laid off during the crisis. Experts do not believe that these measures will make entering small business more attractive because administrative barriers still exist, credit is inaccessible, and rents are still high. Furthermore, corruption may negate all measures of support for business owners.

The state is unable to hire all the unemployed and anticipates that small business will assume part of this social burden. Yesterday Mr. Sharov reported that 10.5 billion rubles have been allocated in support this year alone. Vnesheconombank has increased its credit financing budget for small and mid-sized business from 9 to 30 billion rubles.

The Ministry of Public Health and Social Development proposed that the grant to those unemployed who wish to start businesses should given as a one-time payment equal to the annual unemployment benefit. Yesterday, the chairman of the State Duma's Committee on Social, Labor and Veterans' Affairs, Andrei Isaev, proposed giving a tax holiday to those who have lost their jobs and decide to open their own business. The head of the Federal Antimonopoly Service, Igor Artemyev, proposed that the government assist small, low energy consuming enterprises in connecting to the electrical grid. He declared that such enterprises “would have a consistent ruble rate which is, in reality, ten times lower than previously approved.” Mr. Artemyev did not specify what constitutes “low energy consumption."  

An increase in the number of small enterprises is expected to create additional jobs. But not all agree with this. “Small business is not a conveyor belt of ready-made businessmen,” noted the president of OPORA Russia, Sergei Borisov. State support currently provided to small business is unprecedented on financial scales, but money is not everything. “We must enter a moratorium on any tightening of business regulations. Rental rates should be frozen, credit increased, and markets kept open,” Mr. Borisov enumerated. Furthermore, OPORA Russia suggests that the state return taxes paid by small businesses in 2008. Additionally, companies chosen to receive state support should be chosen “manually.” The state should give precedence to industrial and innovation companies that can replace imports as the ruble weakens.

In addition to allocating significant means of support to small business, the state must continue to struggle with its long-time problems of bribery and corruption. “Otherwise, the effectiveness of state support programs could be ‘divided in two’” declares Mr. Borisov. Judging by a poll conducted by OPORA with small business owners 40 regions during the autumn of 2008, small business owners do not consider corruption to be the main problem. Nevertheless, 25% admit that they pay bribes to officials on a regular basis. Apparently, they have become accustomed to such behavior.

Meanwhile, several small business support initiatives may create an array of new problems. For example, granting a tax holiday to “new” business owners may lead to abuse by large and small companies already in operation. In order to take advantage of the benefit, they may dismiss employees and re-register.

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Source: Rbc