Entrepreneurs need support: an interview with "Opora Rossii" about a critical year for business
This year was almost as difficult and difficult for business as the year 2020. This time, almost everyone felt the severe consequences of the pandemic. Work restrictions, costs, tangible increases in raw material prices, supply disruptions, difficulties with exports, new obligations related to labeling, and other factors - put not only the service sector, small businesses, but also medium and large enterprises in a difficult situation.
Business has attracted unprecedented attention from the public, the media and the authorities, which has brought about serious changes and the need to reconsider the conditions for the development of entrepreneurship in Russia.
The editorial staff of Made in Russia spoke with Andrei Shubin, executive director of the business association Opora Russia, about the year 2021. Read in this interview what changes are ripe for business in the country and what the business community will remember this year for.
Tell, how many the enterprises and individual businessmen were registered in leaving year?
If we talk about small and medium business, according to data as of October 31, 873,605. This includes both legal entities and individual entrepreneurs who were registered. But many were also closing. "Delta" at the end of the year - plus 96,000 SMEs.
What spheres of business have been opened more often this year?
According to the structure - trade prevails (more than 35%), activity of automobile and cargo transport (16%), construction of residential and non-residential buildings and rent, property management.
Which regions were leaders in new business registration, and which were in the anti-rating?
In absolute numbers, Moscow is in first place. They registered 120,981 new "businesses" as of October. Moscow region is second, and St. Petersburg is third. This is largely due to the overall population of the regions. Dagestan (plus 10.9%), Kalmykia (plus 8.3%), and the Moscow Region (plus 7.3%) are the leaders in terms of the SME growth rate. The anti-ranking regions are the Republic of Adygea (minus 5.1 percent), the Magadan Region (minus 3.1 percent), and the Komi Republic (minus 2.7 percent).
In your opinion, what prevents the regions that find themselves in the anti-rating, to actively develop the sphere of entrepreneurship?
There are few people there, there is less economic activity. But, first of all, it is remoteness, and secondly, the economic development. The economic activity is also affected by the outflow of population in the regions-outsiders. Without systematic measures to preserve the population, economic activity is impossible.
Everything is preconditioned exactly by the economy. If we look at Moscow, the Moscow region and St. Petersburg, these are huge agglomerations with a clear market and a large number of residents. In these regions, there are no such conditions in principle. Narrow spheres are divided, and although there is competition, there are fewer opportunities for development. Local entrepreneurs are limited by logistics. That is, the reasons are quite objective, which affect both small and medium-sized businesses, and the economy as a whole.
Tell me, what problems of small and medium-sized business were solved with the help of "Opora Russia" in 2021?
It has been quite a busy year. The key story, of course, is the pandemic and measures to support business, which was in the most difficult situation. Since that year, we have been holding regular meetings and meetings within the framework of the Business Protection Staff headed by Andrei Removich (Belousov - ed.) together with the Ministry of Economic Development, analyzing and collecting feedback from entrepreneurs in all regions.
The second big task we were engaged in was monitoring the support measures: how they work, how they are launched, how they are handed out. Something we changed, we corrected work of banks and an infrastructure of support. It is also the development of solutions themselves and a competent approach, related to the maximum permissible business: that not to close, and if closed, to provide at least some opportunities for compensation.
Since our branches are in all the regions of the Russian Federation, we did a lot of work on the ground, in the regional branches, where we analyzed our experience and, together with the governors, we made various decisions together.
The moratorium on business inspections is also a very important and correct development. And this decision showed that nothing terrible has happened. The requirements and the number of inspections which used to be in place can be reduced, and there will be no problem in this regard, no disaster. This is a very important conclusion which allows us to fundamentally revise the system of control and oversight over entrepreneurs. All this has resulted in a law on control and oversight activities and automatic renewal of a number of licenses. That is the year was good in terms of liberalization of requirements for checks.
In addition, we have long raised the issue of the possibility of self-employed people renting apartments. Now this is still impossible, but at the last meeting of the Small Business Legal Commission under the leadership of Mikhail Mishustin, we voiced this topic, and it was supported by the Prime Minister. Now we are preparing a corresponding bill. There are many apartments, they have owners, and to whitewash this market, we need to introduce this type of business. We are not talking about commercial apartments, only personal apartments.
We've had a long discussion with entrepreneurs who are involved in agricultural development about a ban on building housing on agricultural land. We initiated this amendment, and legislatively this opportunity has already been given - now farmers can build housing for themselves. Of course, limited by the square footage, but nevertheless, now there is an opportunity to be housed and live there. Also at the end of the year a bill was adopted allowing farmers to sell agricultural products they produce on agricultural land.
Our colleagues spoke at the World Economic Forum this year, and they asked us to lower VAT for the tourism industry, following the example of restaurateurs. Now we are working on a corresponding presidential order. Also, we are now working hard to reduce the level of penalties for businesses, depending on the level of business: micro-small, medium, and large. We want small businesses to be equated with private entrepreneurs. We will reduce the penalty up to ten times for many articles of criminal law. This is the experience of Kazakhstan. Of course, we are not talking about cases where harm to life and health and the environment. We are talking about standard norms.
You touched on the moratorium on business inspections. Not so long ago Minister of Economic Development Maxim Reshetnikov said that inspections of businesses have been reduced fivefold. Does this coincide with the data of Opora Russia?
Yes. There has been a five-fold reduction in the number of inspections from 2019 to 2020. But in the first half of 2021, there was a significant increase in inspections because of the easing of the moratorium that was in place last year. Still, the number of inspections is lower than it was before the pandemic. We very much hope for the new law on control and oversight activities, which gives priority to preventive measures over control ones.
As for support measures for businesses affected by the pandemic. Restaurateurs, tourist industry, beauty-industry and organizers of public events previously complained to the media that they could not take advantage of the anti-crisis support promised by the state under the program "FOT 3.0". Banks wouldn't give them loans, imposing additional conditions. Do you receive complaints from entrepreneurs?
There is a government decree that specifies the requirements for obtaining support, and there were different nuances on which the entrepreneurs appealed. For example, that a business had to participate in last year's FOT 2.0 program in order to receive FOT 3.0. The second criterion is that the OKVEDs that were put on the most affected list were different from last year. And the third nuance is related to the economy - if the company is completely bad in terms of the economy, they could refuse against this background. We work with the banks to solve all difficult situations and we are consulted.
Last year we established a dialogue with the Central Bank, and if we receive complaints and applications concerning certain banks, we work on these issues. So if you have problems with working with banks, contact "OPORA".
How is business feeling during the pandemic? What measures are still needed to help entrepreneurs get back to business?
The situation right now is quite interesting. Statistics, figures and receipts show that turnover is increasing and the situation seems to be getting better. Tax revenues are also telling us that it's going up a lot. But when we discuss this issue with entrepreneurs, the situation varies from region to region. The regions impose restrictions, and the flow decreases. At least everything related to services has definitely not recovered, and it's a long-running issue, it's a matter of removing all restrictions.
Trade is growing. But it depends on which industry. For example, entrepreneurs who were able to switch to online in time, to start their promotion on the Internet, cooperation with marketplaces, have grown many times over. All the online services in the pandemic grew several times over. And if you look at furniture manufacturers, who had a rush of demand that year, they are experiencing a decline in revenue. The cost of exporting furniture has skyrocketed, prices for raw materials jumped by 300%, and the Federal Antimonopoly Service even prosecuted chipboard and particle board manufacturers. Plus there are problems connected with transportation: huge lines at the EU border, reduction of vehicle quotas in the EU. Therefore all those, aiming at export, incurred higher costs. Plus inflation has gone up, and we are becoming uncompetitive compared to Poland even. We also have to look at the global situation, and here is a very complicated story.
What should we do? We have to restore demand. The service sector needs support with tax breaks, and the shopping malls, where there are restrictions on visits, need tax breaks. In restaurants, where QR-codes were introduced - there is a sharp decrease in the flow of people, and the costs were, and still are. So we can't say that everything has recovered. But the fact that there is growth in the online segment is a fact. And that is what has pushed the government and business towards digital transformation.
On top of everything else, there is also an obligation on business to mark it.
Labeling is also an issue which needs to be worked out thoroughly. We will be doing research on labeling, especially for the self-employed, who, for example, sew shoes. They can not label their own goods, because you need equipment, a system of paperwork, reporting. So we need to look at what costs are and how they can be minimized.
What other initiatives are you planning to come out with in 2022?
We have a big work plan. We will deal with the reduction of tariffs for business entities for electricity. We plan to finish the issues on which we have instructions, such as apartments and reducing fines for small businesses, which we talked about above.
We can also add here a story about mandatory warnings for small and medium-sized businesses for first-time offenses, unless they involve causing or threatening harm to health and life, the environment, and property. In this case, instead of a fine, there should be a warning with a normal term for execution. We want to work in the regions on the issue of tax on the cadastral value, which in the maximum is 2%, but in the current environment it is very difficult and painful for entrepreneurs. We get such requests from all the regions. We are in touch with the governors and we will also do everything to ensure that the desire to collect as much tax as possible to the detriment of the development and preservation of business does not prevail on the ground.
Much work will be done to return to the article of the Criminal Procedural Code the procedure of initiating proceedings for tax crimes based on the materials of the Tax Service. Now it can be done by law enforcement agencies themselves, even if there are no claims to the entrepreneur from the tax authorities. Still, the tax authorities have all the tools and resources to check, so we believe that the tax should be involved immediately.
There is a theme related to joint and several liability in cooperatives. This is the responsibility of all members of the cooperative for each other, for example: there are fifty of you, someone made a mistake, and all the responsibility falls on everyone, you can be charged, as well as anyone else. It seems to us that this approach must change. Because of this, the level of trust is decreasing and cooperative movements are not developing, although in fact cooperatives are a very good tool.
There is a platform called "For Business" which deals with appeals from entrepreneurs. It is connected directly to the central apparatus of the law enforcement agencies: there are the Interior Ministry, the Investigative Committee, the Federal Security Service and the General Prosecutor's Office but there is no Customs Service and we are for bringing it in. Recently there have been a lot of appeals from businessmen about customs, so it is important to establish communication, so that they would be quickly considered.
A long-standing theme is the law on mobile trade. We intend to work through this bill to the end, so that the development of stationary mobile trade and small businesses will take off. This is a good initiative, and it is supported by everyone. We and the Ministry of Industry and Trade have eliminated all contradictions, so next year we have to go out with him and still pass this bill which was also in the plan of the national project on small business.
What trends in business development are emerging in 2021? Which, in your opinion, will be the main ones next year?
The main trend is digitalization. Digitalization is leading to the whitewashing, and business has a demand for this. The second trend is the development of services for business. There is already a service for online lending and support measures. The SME Corporation is also building a digital platform for small and medium-sized businesses, and it includes absolutely different services.
It is impossible to make any predictions today, everything is unpredictable. We do not know whether there will be another wave of the coronavirus, whether there will be collective immunity. So far, all the forecasts that were made before have not come true. But we want to believe in the best.
As for business development, it is clear that restructuring should go in the direction of "numbers", but not everyone can afford it. Not everyone has made the switch to shipping.
Plus there is a trend towards business consolidation: digital platforms are developing, sucking in more and more resources and gaining economic power, which will then dictate terms. Therefore, small and micro businesses here need to learn how to work with these platforms. It is also important for the state not to regulate, but to develop general rules of non-discriminatory access.
You mean ecosystems?
Yes, ecosystems, digital platforms. It is important to make sure that there is no abuse. I am talking about some kind of general set of rules, not strict regulation, because it is clear that everyone has his own business.
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Author: Karina Kamalova