The authorities of the Middle Urals are calling on business to embrace their cause

10.12.2012 — Analysis

The government of the Sverdlovsk region is altering its priorities regarding the development of small and medium-sized business. It was decided that henceforth public money would be primarily spent to support industry and agriculture. The government's deputy chairman, Aleksei Orlov, explained to RusBusinessNews that it is the non-financial sector that will be able to power the economic development of this industrial region.

- Mr. Orlov, what's the level of support for small business in the Sverdlovsk region? What industries receive the most funds?

- Just between 2010 and 2011, about 1.8 billion rubles was allocated from the federal and regional budgets. I'd like to point out that the Sverdlovsk region is one of the leading recipients of federal money (1.2 billion rubles).

But the priorities for support have been different at different times. Until the mid-2000s, when an entrepreneurial environment and culture were still being cultivated, the emphasis was on providing informational-consulting services. Then for three years, we actively developed mechanisms for offering support in the form of loans. During the 2008-2010 financial crisis the Start Your Own Business program was in operation, with the intention of increasing employment figures.

With the growing trend of modernizing the economy, preference was given to small innovative enterprises, to assistance and training for businesses focusing on external markets, and investing in the renewal of fixed assets, as well as on supporting entrepreneurs who use leasing plans to upgrade their equipment.

In addition, in 2010 the Sverdlovsk region signed an agreement with the Russian Ministry of Economic Development regarding the co-financing of municipal programs at three factory towns: Nizhny Tagil, Kamensk-Uralsky, and Asbest. In accordance with the approved program, these cities received 400 million rubles from the federal coffers.

In 2012 we decided to earmark significant funds for the support of agricultural and industrial production. I am confident that it is the non-financial sector that will help boost the economy of this industrial region.

- Has there been a tangible effect from this support of small business? Can we point to a direct relationship between higher subsidies and an increase in the gross regional product?

- There's no direct relationship. The region's economy is currently largely dominated by large industrial companies. Small and medium-sized businesses contribute no more than 33% of the gross regional product - and that mainly comes from the trade and services sector. But the subsidies still have an effect: in the last two to three years the number of employees in small and medium businesses in the Sverdlovsk region has grown by about 10% (an increase of approximately 50,000 people). In addition to creating new jobs, there are other advantages: corporate revenue and profits are going up and wages are increasing.

- Entrepreneurs argue that only the state can stimulate the development of small business, by creating new niches. What niches do you think these might be? Where does the government of the Sverdlovsk region intend to focus its subsidies in the next few years?

- In 2013, we will continue to focus our support on the real sector of the economy. Our priorities were determined in part by the policy of Russian Ministry of Economic Development. The Sverdlovsk region will help companies obtain low-interest investment loans that plan to upgrade outdated facilities and take their products to new markets. Entrepreneurs will continue to receive training - especially in depressed areas.

As for the creation of new niches, support such as subsidies to innovative companies that offer new products and services has worked well. Without state assistance they find it difficult to make a go of it. And it's hard for the state to grow a competitive economy without innovative companies. So subsidies to these types of companies will continue.

- Experts feel it is necessary to change the system governing how the various public budgets relate to one another, in order to interest municipalities in the development of small business. Do you agree with that opinion?

- I do, and we’re already putting this approach into practice in our work. Between 2008 and 2010 municipalities cut their support of small business 1.5-fold, by almost 16 million rubles. Therefore, the development of the targeted regional program, The Development of Small and Medium-Sized Entrepreneurial Businesses in the Sverdlovsk Region in 2011-2015, included the co-financing of municipal programs to support small business.

In 2012, 42 municipalities expressed their desire to take part in the joint programs. Those municipalities have contributed more than 41 million rubles to support local craftsmen and develop industrial production and innovation, as well as provide entrepreneurs with consulting and training.

Fifty municipalities in the Sverdlovsk region have already applied for 2013. Because of their interest in these programs we have improved the co-financing terms. In 2012 the region allocated one ruble for every ruble provided from the municipal budget, but in 2013 the regional government will contribute an extra 52 kopecks. Subsidies just from the regional budget will amount to over 48 million rubles (total aid will exceed 80 million rubles).

Relationships between the public budgets will keep on improving. We’ll continue to support municipalities that are investing in the development of entrepreneurship.

- It is generally believed that it is necessary to reduce hidden costs, improve administration, and to build infrastructure in order for entrepreneurship to thrive. What strategy will the government of the Sverdlovsk region choose?

- Everything you listed has to do with the entrepreneurial climate, and improving that is a fundamental prerequisite for developing the economy. That's our key task. We're taking a systematic approach to this issue, and in conjunction with the Agency for Strategic Initiatives, we are introducing a unified standard to improve the region's investment climate. In order to eliminate unnecessary barriers to business in the Sverdlovsk region, as of Jan. 1, 2013 an institution to assess regulatory impact will be introduced, which will evaluate regulatory bills in terms of their effect upon the region's business activity. Public hearings and consultations are expected to be held with the business community, including to discuss unnecessary administrative hurdles. In essence, the government of the Sverdlovsk region is inviting business to help regulate entrepreneurial activity.

In the coming year, we will begin establishing multipurpose government-service centers. The centers will operate using a "single window" system, in order to reduce not only waiting time, but also the number of documents that have to be submitted.

Of course, in order to develop entrepreneurship there also has to be infrastructure available to house production facilities. We'll particularly focus on the formation of business incubators for fledgling firms, as well as technology and industrial parks that provide businesses with the infrastructure they need.