Working Day

28 january, 2010 14:30

Prime Minister Vladimir Putin meets with Economic Development Minister Elvira Nabiullina

Prime Minister Vladimir Putin meets with Economic Development Minister Elvira Nabiullina
“Last year we quadrupled financial support for small and medium-sized businesses. I would like to stress that we must continue this policy because, as the available data suggest, it has created about 200,000 new jobs. At the same time we are gradually passing into a new stage, that of post-crisis development. Here we should pay more attention to the structure of small and medium-sized businesses and extend support to high-tech enterprises.”
Vladimir Putin

Transcript of the beginning of the meeting:

Vladimir Putin: Ms Nabiullina, today I would like us to discuss the development of small and medium-sized businesses. We have been paying much attention to these problems recently. We should study the results of our decisions taken in 2009 and plan what to do in 2010.

We made several important decisions in 2009 but one of the most far-reaching ones was to reduce the kinds of mandatory inspections, their number and procedure. As we know, unscheduled audits now have to be submitted to the Prosecutor General's Office first, and as a result, 48% of applications for unscheduled inspections submitted by government agencies have been denied. This is a good result in itself. A new procedure for scheduled inspections came into force on January 1, 2010. According to this procedure, government agencies should make a plan beforehand and present it to the Prosecutor General's Office, which will post it on its web site. So government agencies will not be able to change their plan independently.  As for unscheduled inspections, the procedure established in 2009 remains valid, i.e. unscheduled inspections should be agreed upon with the Prosecutor General's Office. I would like you to monitor the situation in this area and study all related issues through government agencies.

In 2009 we took another important decision after a meeting with small business entrepreneurs: to make the use of cash registers non-obligatory for those who pay tax on imputed income. Do you think this measure has worked?

Elvira Nabiullina:  This measure is really very important. It was under discussion for several years, and received support from the business community. It was finally approved, and, according to preliminary data, it will produce positive results, because this year, for the first time, the number of governmentally controlled cash registers was lower than the number of non-controlled cash registers, i.e. 60,000 more cash registers were removed from government control than put under it. This is a crucial trend. We will continue monitoring the situation because it is important for small businesses which are engaged in the most popular activities.

Vladimir Putin: In addition, we have made the decision to introduce easy terms for connection to the power grid and an automatic extension of the lease or granting small and medium-sized companies the preferential right to purchase the premises they have been occupying for the past several years. Are these measures working?

Elvira Nabiullina: These measures, in our opinion, have already started working.  

As for connecting to the power grid, there are two options: small companies that consume up to 15kWt pay a fixed price of about 550 roubles. Those who consume from 15 to 100kWt pay in installments. We try to ease the pressure on the businesses. This measure has been in force since May 2009, and according to the end of the year data we have about 23,000 of such agreements signed in the period from May to December 2009.

Vladimir Putin: We have never seen such a large number before.  

Elvira Nabiullina: That's true. The measure stipulating the privileged right for small businesses to buy and rent premises has also started working. As you may remember, we made amendments to the legislation to improve this measure. We defined the term "bona fide tenant", who has the privileged right to buy premises. At the present moment, according to the Federal Registration Service, the number of contracts offering privileged conditions for small business tenants who have been renting premises for two years is 6,200. We hope that this measure will continue working. It is very important that it had an effect even during the economic downturn, when small businesses suffered from a shortage of funds. Small companies often want to be owners of their premises to be able to improve them. We think this is a positive tendency.

Vladimir Putin: And what about the notification-based procedure of starting up a business?  

Elvira Nabiullina:  We introduced it in the middle of 2009 for 13 most common types of activities, such as catering, various services and hotels. Before we introduced this measure, a company had to get together many certificates to start a business, but now it is only required to send in a notification and start working. 10,000 companies have already sent notifications concerning their new businesses. These are not always new companies, but it is required that they start a new type of business.

We are planning to expand this list of activities. Ideally, the notification-based procedure would apply to all types of activities with few exceptions. We want to make it a general rule. We will oversee the process because we already have some problems in the regions. Some [local authorities] still demand certificates saying that companies started their business illegally, although it is their legal right. We will monitor the situation.

Vladimir Putin: We have to assist business in this matter. Last year we quadrupled financial support for small and medium-sized businesses. I would like to stress that we must continue this policy because, as the available data suggest, it has created about 200,000 new jobs.  At the same time we are gradually passing into a new stage, that of post-crisis development. Here we should pay more attention to the structure of small and medium-sized businesses and extend support to high-tech enterprises. What do you plan to do in this regard?

Elvira Nabiullina: Your decision to increase the financial allocations was highly important for small business during the economic crisis as small businesses were more affected by a shortage of money than other types of companies. It is very important for small businesses to receive our support, be it in the form of interest rate subsidies, guarantees for loans they take out, or grants for start-up businesses. We did provide considerable financial backing for those businesses last year, and in combination with the other measures, it may have resulted in more small businesses and sole proprietors appearing on the market despite the economic crisis.    

Currently, we are planning ways to provide financial support this year. We would like to give a quota out of the sum to be provided to small businesses to support innovation and industrial production. As we know, at present businesses engaged in trade and services make up a large part of the market. Last year we needed to support all types of business activity, but now we should focus on industrial and innovative businesses. We are going to develop special programmes, for example for leasing equipment, where small enterprises will purchase equipment for manufacturing. Another area could be for the government to co-finance licensing.  When a small business invents something, we could assist it in receiving a patent and protecting its intellectual property rights. We also plan to co-finance the construction of business incubators, including the projects implemented in single-industry towns. That way we can put together two of our priorities: to support small businesses and single-industry towns.    

Vladimir Putin: This should be done both through development institutions and the regions.

Elvira Nabiullina: I agree. Coordinating these activities is very important for us, as this is not just a matter of finances but also of spending the money efficiently together with the regions and development institutions to support such projects. Soon, we will develop a programme to define our priorities and determine our financial resources, and then we can start implementing it in the regions.

Vladimir Putin: The situation with small and medium-sized businesses is only a part of the overall investment climate. What measures are you planning to improve it?

Elvira Nabiullina: We are implementing your directive to develop a package of efficient measures to improve the investment climate. We are aware that this is highly important for modernisation. At a recent government meeting we discussed the procedure for obtaining construction permits, and the overall situation today. We are working together with Russian and foreign investors to gain a deeper understanding of their concerns. We are focusing on several priority areas where we believe it is particularly important to achieve success. This includes the procedure for obtaining permits to implement new investment projects in construction.

We would like to offer measures that would make it easier to obtain land plots along with their infrastructure and coordinate construction projects. For example, we have adopted a new regulation that makes construction projects easier to manage: construction plans for standard buildings need to go through state expert examination only once. Yet, amendments to the legislation were adopted in such a way that the law doesn't work. They define standard construction plans in such a way that they are treated as non-standard.

The legislation should be thoroughly reworked. We have already analyzed it and made proposals on the exact changes it needs. Here our experience of developing small businesses has proved to be useful, as a system can work only with defined costs and properly made agreements which cover all the rights and obligations of the parties.

Vladimir Putin: And what about putting a business into operation?

Elvira Nabiullina: As for putting into operation, we have the same system. 

Vladimir Putin: It takes half a year, or even a year, to gather all necessary documents.

Elvira Nabiullina: Yes, to launch a new production. This is very important.

The second direction of our work is adjusting the migration law to the needs of modernisation. We would like the migration legislation to include elements pertaining to attracting highly skilled labour force which we need in our high-technology, modernised production, where our own competence is at times not sufficient. We will, of course, work on education programmes, but we will also try to get the best human resources available.

Before the crisis we had complications with salaries growing more rapidly than productivity. That was the reason why many companies had problems with hiring labour.

The third direction is also connected with administrative barriers. My suggestion is to increase the implementation of market instruments such as insurance instead of permits.

That means that if there are any risks, it would not be necessary to obtain special permits from government agencies; instead companies could use insurance. In this case, the insurance company, which has a financial interest here, would check the company's compliance with fire safety regulations, and so on, because if something went wrong, the insurance company would have to pay up. Such situation would help create real rather than fictitious control over compliance with certain regulations.

Finally, following your directive, we are preparing a proposal jointly with the Ministry of Finance on fine-tuning the tax system. An important aspect of this work is to work out precision measures for the support of innovative projects. At the same time we must avoid shortfalls in budget revenues and keep the budget balanced. We believe that it is possible to develop such measures and, as promised, we will prepare the proposal by February.

Vladimir Putin: I'm happy to say that during the economic crisis in 2009 the Ministry worked very hard and in coordination with the economic block of the government and other agencies.

I hope that you will deal with all the problems that have remained as a residue of the crisis just as efficiently. We must work, as you have said, on support for small businesses and other activities to create favourable conditions necessary for post-crisis development.