Working Day

22 april, 2009 15:50

Prime Minister Vladimir Putin addressed the meeting of the Forum of Small and Medium-sized Enterprises

Prime Minister Vladimir Putin addressed the meeting of the Forum of Small and Medium-sized  Enterprises
“I am convinced that the contribution of SMEs to Russia’s development, to the diversification and modernisation of its economy will grow in the long run. They will become more prominent not only in the traditional spheres of their operation, but also in high-tech spheres such as engineering, science and telecommunications.”
Vladimir Putin
Meeting of the Forum on Small and Medium-sized Enterprises

Good afternoon, colleagues.
I would like to welcome this representative audience. Small and medium-sized enterprises have become a substantial part of the Russian economy. Moreover, SMEs are the most flexible and mobile part of the economy, capable of quickly adjusting to the market demand. You have most likely discussed this at the Forum.

Energetic and independent people are working in this sector. Many of them started their businesses from scratch and have achieved personal success while also creating millions of jobs. By doing this, you are implementing one of the most important social tasks - the genuine creation of a large and stable middle class.

I am convinced that the contribution of SMEs to Russia's development, to the diversification and modernisation of its economy will grow in the long run. They will become more prominent not only in the traditional spheres of their operation, but also in high-tech spheres such as engineering, science and telecommunications.

To preserve and develop this creative potential, we should create the utmost favourable and comfortable environment for enterprise. This approach has been laid down in the Government's anti-crisis plan and long-term strategy until 2012.
We have implemented some of these measures. I would like to remind you that the regions have been given the right to lower taxes for small businesses. In 2009, we have increased financial assistance to small businesses considerably.

A few words on the regions. More than ten of them have used the above-mentioned right. Up to 30 billion roubles has been allocated to support small and medium-sized businesses within the Central Bank's loan programme, and another 10.5 billion has been provided from the federal budget.
The clearly excessive rights of the interior agencies to control enterprise have been cancelled. The law was adopted to protect the rights of legal entities and individual entrepreneurs during state inspections. It stipulates strict limitations for all kinds of inspections. The law was expected to come into effect on July 1, but the State Duma has decided to shift this date to May 1. This is a case when time is of essence.

I sincerely hope the law will work. I know that many people working in this sphere are waiting to see how it will be applied. We will do our best to ensure its effectiveness.

Furthermore, the anti-crisis plan has set the goal of creating additional incentives and support measures for SMEs. The Government has prepared the relevant proposals during a direct dialogue with the business community. Besides, many initiatives were advanced by SME associations.

I will now speak about what I have come here to discuss. I will begin with taxes.

First, we propose to lower the base for calculating the profit tax by excluding the funds provided to companies within the framework of regional and municipal SME support programmes. For example, if you receive a grant of 300,000 roubles, it will be deducted from the taxable base, provided the money comes from corresponding budgets.

The companies whose annual revenues do not exceed 30 million roubles may use a simplified system of taxation. Many proposals have been made to raise this ceiling, but there are certain problems with that, as you well know. We have discussed this issue more than once at meetings with the leaders of your associations.

What are these problems I mention? One of the problems is a considerable profit shortfall in the budget. According to the Ministry of Finance, it exceeds 100 billion roubles. Another problem concerns the threat of splitting businesses. Still, I believe we should do this to allow companies with revenues of up to 60 million roubles to use a simplified taxation system. United Russia has raised this issue more than once. However, let me warn you that there will be no subsequent indexation.

Why is this the case?

We view this decision as an anti-crisis measure that will allow us to ease the tax burden on a considerable part of small businesses. As the saying goes, proper timing is everything. This is why we believe we can provide this effective assistance now, at this difficult time; at least, this is our standpoint and representatives of your associations agree with us. It is true that without indexation this measure will gradually lose its effectiveness. But we will consider this problem again some time later.

In addition, we believe that this measure will partially compensate the companies' spending on the transition from the Unified Social Tax to insurance principles and increased rates in 2011. I would also like to remind you that we will stipulate a grace period for transition from the UST to insurance principles for some small businesses, including those working in the real sector.

I believe we should return to the issue of taxation of small businesses after three years.
The general logic of improving the taxation system should be aimed at preventing non-transparent schemes, preferences, and general mayhem, which are breeding corruption.

Next, the businessmen who pay the imputed income tax should be allowed not to use cash registers.
Cash registers sometimes cost more than the products a company sells. These taxpayers use some 2 million cash registers, each worth about 15,000 roubles. The aggregate spending is 30 billion roubles plus 10 billion roubles spent annually on maintenance servicing of these registers.

I agree that the imputed tax does not take into account actual revenues, which is why this measure is grounded. At the same time, I would like to draw your attention to the need to ensure unconditional respect for the interests of consumers. This means that you can, and will be able to use simpler equipment, or just write receipts if the buyers ask for them. But this possibility should be carefully considered, and the system elaborated.

The draft law on this issue was adopted in the first reading 18 months ago. We will try, working jointly with the State Duma, to complete work on it by July 1, 2009.

Another major package of issues concerns SMEs' access to state and municipal orders. It has a special significance in conditions of the crisis and decreasing loans.

I think we should speed up the introduction of the procedure for the placement of state orders through electronic auctions. This will allow us to ensure the businesses' fully transparent and public access to trading.

We are preparing to start pilot online auctions in May 2009 set up by the Moscow City Government, the Cabinet of Ministers of Tatarstan, and Sberbank - you have probably discussed this at the Forum.
Next, we will lower the required ceiling for small businesses' bidding at auctions and tenders from 5% to 2%. Analysts say this will allow small businesses to save up to 24 billion roubles. We believe that it would be unwise to deprive the money of its life force by stocking it up in the current conditions.
We will review the acquisition standards of natural monopolies and state corporations, giving preferences to the suppliers of Russian-made goods. Large companies taking part in tenders and auctions will also be obliged to use transparent and generally accepted rules.

Third, we will resolve the issue of premises and other immovable property availability for small and medium-sized enterprises. This is a major expense item for companies, and we are aware of this. We will conduct an inventory of business premises. Yesterday we discussed this issue well into the night ahead of the Forum. It would not suffice - and it would be most likely ineffective - to issue orders to state unitary enterprises and organisations. It could even have an opposite effect, with these enterprises and organisations trying to elbow out small businesses to prevent them from receiving preferences. So we should proceed carefully in this sphere, like in medicine where "Do not harm" is the most important principle.

However, as I have said, we will conduct a scrupulous inventory of the premises, which federal structures and unitary enterprises are not using efficiently. Whenever possible, we will assign them to small and medium-sized businesses at affordable rates.

Yesterday I also signed a resolution on improving the process of connecting to the electricity networks. This sets out the simplified procedure and reduced tariffs for connection. Connections of less than 100 KW will only require the advance payment of 5% of the service cost, and also include the option of extending repayments for up to three years. I also suggest that the connection term should not exceed six months.

And finally, one more key issue: access to loans for small and medium-sized enterprises. Of course this is one of the most crucial issues, and not just for small and medium-sized enterprises, but I would say, for today's economy as a whole.

For small and medium-sized enterprises, the credit problem is to a great extent connected with the shortage of collateral. In order to find a solution to this problem we need to develop regional guarantee funds more actively. We have already set aside 3.5 billion roubles as part of the Federal Support Programme for entrepreneurship, to top up regional guarantee funds. I can tell you that we have decided to allocate 15 billion roubles in additional resources to these ends. In the final analysis, we need to build up a comprehensive system of financial support for businessmen, ranging from grants to bank loans.

Grants for start-up businesses have begun to be issued for the first time this year. These free subsidies are open to anyone who wants to start their own business. According to preliminary data, in 2009 about 15,000 start-up businesses will be supported in this way, each receiving grants of 300,000 roubles.
The logical continuation of issuing grants to support start-up businesses is developing microfinancing - loans up to 1 million roubles. In 2009, no less than 20,000 such loans should be given, with the support of the federal and regional authorities.

Simultaneously we are speeding up our work to pass laws on credit cooperation and microfinance organisations.

This year, more than 1.5 billion roubles have been allocated to subsidise interest rates on loans extended to small businesses.

As I have already said, the Vneshekonombank (VEB) programme offering up to 30 billion roubles in loans to small and medium-sized enterprises will be initiated.
In addition, the VEB programme makes provision for the financing of non-bank infrastructure support for small businesses, including credit cooperatives and microfinance organisations, as well as leasing and factoring companies, which work with small businesses.

We will strictly link budget support to banks to their commitment to issue loans to industry, including small and medium-sized businesses.

We also have a good understanding of the circumstances and are in a position to evaluate the situation in the banking sector. We know there are problems with non-payment, and other adverse trends. We will monitor the situation and give our assistance whenever we can. But we have to act more strictly with those banks which receive state resources, and link our assistance with their direct involvement in offering credit to real economy, including to small businesses. Today we are working to finalise these rules.

Of course, we think that all the support measures I have mentioned here will find their development on the regional and local levels as well. Naturally, local opportunities will be taken into account. But I am certain that, in the end, those regions and territories of the Russian Federation, which work actively today with small and medium-sized enterprises, and which do not invent bureaucratic obstacles, or measures impeding access to the market, but on the contrary, create all necessary conditions for their development, will meet with success.

I would like to thank you for your attention, and wish you every success.

If you have any questions or requests, you are welcome to go ahead.

* * *

Igor Shuvalov: Mr Putin, if you give me this instruction, I can stay here and answer whatever questions there may be. All that I can tell you is that in the first half of the day a lot of questions were raised concerning electricity tariffs that are currently payable by small and medium-sized enterprises. I can disclose the most up-to-date information that we in the Government have. We are now preparing the documents for signing.

Most questions concerned the credit resources for small and medium-sized enterprises that are very limited at present. I know you will hold a meeting on this issue today, and certain decisions will be taken there accordingly. But this is the most pressing and crucial issue at hand. When I talk to my colleagues, we constantly return to those decisions that you took in autumn, about how those banks which are receiving state support must set aside particular amounts in their credit portfolio for loans to small and medium-sized enterprises.

Yesterday, the President of Sberbank (German Gref) reported to you. We are also working with VTB-24. If you look at the overall credit portfolio, you will see it has grown considerably. But the information we are receiving from those places, from those departments which work with small businesses is not comforting.

We have also tried so-called control purchases. Banks with state involvement, and others which previously ran support programmes for small and medium-sized enterprises, refused even to speak to the entrepreneurs who asked them for loans. They were simply sent away and told that there were no free resources. We will also discuss this subject a little later, and, perhaps colleagues will suggest some measures to stimulate this work.

Vladimir Putin: I have already spoken about the collateral. We will try to replace it with state guarantees. I have told you that we have made the decision to increase financing for regional guarantee funds.

I also spoke about the banking system. We need to be very accurate here. Today we are not confronted by any problems that we cannot solve by working with the banking system, but we do need to be on the alert, because as you know, the sum of unpaid loans is growing. True, the banking system should not have operated like this, should not allow terms of crediting to raise this problem again and again. If the banks hand out loans under interest rate of 25% and even more, proceeding from the fact that they will never see them paid back again, then why are they giving them out in the first place?

This problem can be solved in a variety of ways - with the help of subsidies, guarantees, and subsidised interest rates. It is more difficult to do with respect to small and medium-sized enterprises, because we provide loan subsidies for so-called strategic enterprises. If they are included in the priority support list, then they receive subsidies, but all small businesses cannot be included on the list.

I won't race ahead now. I assume that when the second level capital is handed out, when subordinated credit is distributed, attention will be paid to how the banks work with industries, including how they extend loans to small businesses. And we will not simply give our attention to this; we will start by formulating the conditions for this credit to be offered.

But we should understand that subsidised credits are state resources used to support the banking sector. We need to find the golden mean, in which the banking sector will be supported, and the money will get to the recipient. We will look for the most effective of solution to these problems.

Thank you very much. I wish you success.