Putin Regime wipes out Small Business in Russia

One of the editorials in our last issue focussed on Russia’s appalling failure to create an appropriate regulatory environment for small business, leaving it ranked #24 out of 27 nations in its region.  The Moscow Times lays out the horrific consequences of this failure in practical terms:

Only 3,000 small businesses opened with state assistance in the first half of the year, far short of the number that the government had hoped would open under a federal program meant to rejuvenate the economy, a senior Economic Development Ministry official said Monday.

But Andrei Sharov, who heads the small and midsize businesses department at the ministry, refused to say that the federal program had failed.

He said the program had seen huge demand in Bashkortostan and Tatarstan, where the number of applications exceeded the number of grants “by four to five times.”

“We are now planning to have at least 7,000 people opening their own businesses by the end of the year,” he said on the sidelines of a conference.

Sharov said the most popular sectors among the small businesses were services like party planning, as well as transportation and meat and milk production. He said the state planned to maintain financing for the program at least at this year’s level in 2010.

The government allocated 10.5 billion rubles to help unemployed Russians open their own firms this year. The program involves training seminars and grants of 300,000 rubles ($9,700) to each entrepreneur who presents a realistic business plan. Separately, the would-be entrepreneur also can claim 12 monthly unemployment payments, or 60,000 rubles, from municipal authorities to keep a new business afloat. The state had hoped that a flurry of small businesses would provide new jobs and help pull the resources-dependent economy out of recession.

Deputy Health and Social Development Minister Alexander Safonov said at the conference that the ministry had expected at least 12,000 Russians fired from industrial enterprises to become self-employed through the program.

A senior Sverdlovsk official, Vitaly Nedelsky, said his region has seen a jump in small businesses, although they were not all leaning on federal grants and municipal assistance.

“The number of small businesses has increased by 10 percent, or by more than 15,000 firms, in the Sverdlovsk region for the first half of the year,” Nedelsky told the conference. “We consider this to be very cool.”

He could not say how many of them had received state support.

Sverdlovsk, the cradle of the Russian metals industry, has been one of the regions that has suffered most because of the crisis and has one of the highest levels of unemployment.

Small and midsize businesses have turned out to be more resilient to the crisis than the huge commodity-extracting and refining companies. But federal subsidies and guarantees still do not seem to be very accessible.

An informal poll of the 30 owners of small and midsize businesses who showed up at Monday’s conference found that 29 percent had received all the government support that they needed, 14 percent had received only part, and 57 percent had not received any.

2 responses to “Putin Regime wipes out Small Business in Russia

  1. I think that most of those firms are false. I make unreal businesses plan (“party planning” :D) and go to government offical and say “Let`s spilt 10k$ 50/50 and businesses is done!”

  2. I must agree with AB. Most of these firms are not true, they just make unreal plans.

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