Business of the Sverdlovsk Region Sinks in the "Byzantine" Sea

16.06.2010 — Analysis

The appointment of Alexander Misharin to the office of Sverdlovsk Region's governor inspired hopes of the local elite for the early diversification of economy. Addressing the deputies of the regional parliament in November 2010, the new head assured them that he would place a priority on development of small and medium-sized business. This sector was expected to haul the Middle Urals out of the crisis depths and to create new jobs. Half a year has passed, but the things haven't budged an inch. The governor team gives no response to entrepreneurs' initiatives and has no willingness to have any contacts with them. Evgeny Artyukh, the executive of the "OPORA Rossii" regional department, analyzed the half-year results of A. Misharin's governance in his interview to "RusBusinessNews".

- Evgeny Petrovich, how did entrepreneurs of the Middle Urals receive the news that Alexander Misharin was appointed the governor? What hopes did they pin on the Muscovite outsider who appeared on the regional political Olympus?

- Entrepreneurs were prepared for the change-over in governors. I would even say - they longed for political changes. By the autumn of 2009, the region featured not the best conditions for business. The government seldom or never gave a helping hand to companies hit by the crisis, the law on small-scale privatization was neglected, numerous inspection agencies were rampant, and corruption was thriving. The business elite did not care who would be in charge of the region - Ivanov, Petrov or Sidorov. Any new person would be welcomed but Eduard Rossel who they were cloyed with over his 19 years in the governor's office.

Therefore, the arrival of A. Misharin was greeted and cheered. Very few people knew the new governor personally; however, he was given a vote of confidence and swayed minds and hopes of many residents of the region.

- Half a year has passed since then. Has A. Misharin lived up to expectations that were pinned on him?

- Half a year, of course, is not a long period. But it was sufficient to bring the public down to earth. The power change-over has not met the expectations so far. 

In fact, in some areas the situation has taken a turn for the worse. Take a look at the "architecture" of the regional government authorities and the efficiency of the related administrative systems. E. Rossel's team had all the administrative links well established; all operating contacts and responsibilities were clear. The new governor and his team favor the "Byzantine" management style. The new head of the region shook up substantially the government and administration. However, the operating principle these authorities follow is absolutely unclear. Sometimes doubts arise whether they work at all.

- How does it manifest itself?

- Let's take a particular case. After the new government was formed, the regional department of "OPORA Rossii" (Support of Russia) came forward with the proposal to arrange a meeting and sent the respective letters to all the ministries. We intended to discuss issues of social and economic regional development as well as small and medium-sized business development with responsible officials. 

Russian President Dmitry Medvedev set the task to involve 60-70% of the economically active population in small business by 2020. Following this task, "OPORA Rossii" developed a concept named the "Road Map of 2020". The document specifies that at the moment there is no sense in increasing the number of small retail firms. They are sufficiently represented. Opportunities should be given to entrepreneurs to fill other vacant areas. It can be possible through development of public and private partnership as well as through delegating some of the government's functions to business community.

Pursuant to the legislation, the ministers were to reply to our letters within 30 days. However, most of them ignored the received letters. They, at least, could have sent some formal replies, wire the word "OK" or "Agreed", or, at the very outside, simply confirm the receipt of our mailings. However, even this was too difficult for them.

We have the same situation with the numerous inquiries that we send to the governor's office.

- Recently, a lot has been said about maximum openness of the executive government bodies and about the countrywide establishment of "electronic governments". Does it mean that in the Sverdlovsk Region they make no sense?

- What "electronic government" can we talk about, if the government is reluctant to respond in the duly manner prescribed by the law? In the near future, we are going to make a registered list of all the unattended letters and inquiries; we are also considering whether we should submit the matter to the public prosecution office, requesting to hold officials accountable.

I know that the government executives demonstrate the same attitude not only to "OPORA Rossii", but also to most of the other similar institutions of the region. I admit that Alexander Misharin took office in order to sweep the region with a "new broom". Indeed, he can "stir up" some local elite and shake up the ranks of officials. However, even the toughest government executive should understand that his support lies in public organizations, which, in fact, owe nothing to the authorities in power. These organizations turned out to be no longer required to the team of the governor in office.

- What ministries agreed to cooperate with "OPORA Rossii"?

- The Ministry for Administration of State Property responded to our letter, but in a peculiar way. They requested information about the contents of the forthcoming discussion. We answered in detail that we planned to discuss the ongoing implementation of the federal law on small-scale privatization as well as possible reduction of the land cadastral value that increased substantially and material support that could be offered to small business. Since that time several months have passed. Not a word has been sent to us from the department so far.

Only executives of the Ministries of Trade, Foreign Economic Relations and Agriculture responded to our inquiries properly and met with representatives of "OPORA Rossii". 

- What ideas can "OPORA Rossii" offer to the regional government? 

- We have prepared a draft amendment to the small and medium business law. The amendments provide for extending the payment period, within which business people can buy out offices, warehouses and production facilities, from 5 to 15 years. We think that the crisis is not over and it is difficult for entrepreneurs to buy premises at the price equaling to millions of rubles. 

We offered some of our initiatives to the Cabinet of Ministers late 2008 when E. Rossel held the governor's office. It was in the midst of the crisis; everybody feared the forthcoming increase in unemployment, economic and subsequent social shock waves. To prevent this scenario, the RF government came forward with measures aimed at creation of jobs in small and medium-sized business. During this challenging time, we, on behalf of "OPORA Rossii", prepared and submitted to the ex-governor the program for development of public and private partnership in social services. However, no response was received.

The new governor came. Over the past half year, we once were informed that there were plans to hold a meeting on the matter of concern. But the preparation of the meeting went through bureaucratic hurdles and it did not take place. What Alexander Misharin and his team are doing is not different from the behavior of their predecessors. We are being told "ok-ok", but we do not see any actual doings in this respect. 

At the same time, the regional officials are developing quite peculiar documents behind the back of the business community. For example, the Ministry of Economy of Sverdlovsk Region submitted to federal authorities a program for competition development. The RF government asked us to assess this document, and we found out that it was rather superficial. The Misharin team members gathered information prepared by enterprises in relation to oncoming capital investment in production and submitted it to the "top" authorities as some policy document. I would understand if the regional authorities allocated money for development of these enterprises and took credit for it. However, enterprises grow solely through private funds, including bank loans taken by manufacturers.

- What impact does this policy have on the economic situation in the region?

- Quite a grievous one. First of all, we are missing an opportunity to increase budget revenues. Look, for instance, at the law on small-scale privatization. We have estimated that its proper and planned implementation will result in 7 billion rubles coming to the treasury. However, E. Rossel's team was not going to do it. The arrival of A. Misharin has not changed the situation - as of today, only 12% of the facilities that fall within the scope of the law have been sold to small and medium-sized enterprises of the region.

- How can you describe the most efficient form of interaction between the government authorities and business community?

- President D. Medvedev on repeated occasions emphasized the necessity to create a new support ideology in terms of Russian entrepreneurship and involvement of representatives of small and medium business who could help in developing a government policy in this field. He is absolutely right. It is the only way that can ensure that many social and economic conflicts can be solved and market collapses can be prevented. 

How can this interaction be established? We cannot just summon all entrepreneurs on Red Square in Moscow or on square of 1905 in Ekaterinburg, addressing them with the question: "People, what do you want?" Here we need help from public organizations. At the federal level, within "OPORA Rossii", councils, commissions and committees are being created industry-wise, where representatives of small and medium-sized business communicate with industry-specific RF ministries, unite with them in working groups and develop draft solutions.

Individual members of the regional government do not seem to understand and accept this ideology. The spectacular example is the paralysis that is observed in operations of the Council for Development of Small and Medium Business in the Sverdlovsk Region. The Council is to be responsible for expert examination of regulations adopted in the region and affecting interests of small business. Acting as representatives of "OPORA Rossii", we continuously send Mikhail Maksimov, Chairman of the Council, Vice-Premier of the Regional Government, letters, requesting to consider this or that legislative draft. And we continuously do not receive any response. 

A lot of criticism is deserved by the solution to wind up the regional committee for support of small and medium business. It resulted in loss of the professional team that worked for many years and achieved some measurable results. There is a question now concerning further activity of the regional and 40 municipal business funds. 

The situation is especially distressing at the time when federal tranches for single-industry towns must be received. Part of the money is earmarked for small business development. How successfully this money will be assimilated? The question remains unanswered.

- Is there any reasonable explanation of this attitude?

- We think that we deal with an administrative problem that stemmed from the attempt to implement some unsubstantiated strategy. The A. Misharin team members may think that they are technocrats and public organizations distract them from their job. This assumption is proved by the governor's actions - he came to the bottleneck town N, ordered to switch heating of houses and left the deputy minister to monitor his order. This is a bureaucratic style of the manual control. Where are system solutions that can be applied in other towns and cities of the region in case they face the same problems?

During the crisis, the governor and the government could rely on business entities and public organizations. For example, we are ready to offer the Ministry of Culture projects for development of domestic tourism, enhancement of regional appeal to residents of other regions. For example, neighboring Perm is making its way to become a cultural capital of Russia. How can it be? There is Marat Gelman, a cultural "lobbyist", and there are festivals that are visited by well-known representatives of art. We are talking about sizeable investment. Our Ministry of Culture repairs roofs of community centers and installs vinyl windows. It is also important, by all means. But what about advanced and promising projects? They do not exist.

Let's look at the Ministry of Education. We have a number of suggestions on development of intellectual classes and games at schools. However, we are not able to get our ideas across to the government. Ministers, like snails, are sitting closed in their shells, being afraid to communicate with the public. 

- How can these problems be solved?

- It can be done through development and through promulgation of a distinct program highlighting the objectives and actions of the governor and the regional government. Then it will be clear where we are and where we are heading to. Then, at every specific moment we will be able to assess objectively the performance of all the representatives of the regional authorities.

However, unfortunately, Alexander Misharin, who at the time of assumption of office promised that he would stick to project approach, has not taken any appropriate steps so far. The promised projects are either non-existent or unknown to the public.

The Interview was prepared by Konstantin Dzhultaev