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Battered SME’s look for government support

The Russian government is pledging more than $300 million in state support for small and medium-size business in 2010. It’s looking for a more diverse and flexible economy, in the wake of the downturn.

Big stakes for small business… Andrey Ermakov and his family have been running this printing-house for 16 years. The enterprise employing just 30 people prints everything from cards to books. Advertising used to make up the bulk of all contracts, but not any more. During the crisis companies cut spending on advertising and Andrey felt the impact immediately.

“Before the crisis we had a lot of orders to print booklets or posters – about five or six a week. Now we’re lucky if we have one or two orders a month. But it doesn’t mean we’re short of work. We had to switch to more complicated production, like books. It takes much longer to print a book than a poster, but the expenditure is the same.”

A recent survey shows that the downturn has hammered the Russian small business sector, with numerous small employers going bust. Andrey says that in 16 years his employees became a part of his family, so he just couldn’t fire them or cut their salaries. But they have to work much harder for the same money.

The work didn’t here even in the most severe period of the economic downturn. But the owner says printing business is not profitable anymore because of the sky high rent and increased tax burden.

Small business is seen by the government as the backbone of future diversification. However the business people complain that the state is not coming through with sufficient funding, according to Mikhail Mamuta, Head of the Russian Microfinance Centre.

“In 2009 the government spent about 10 billion Roubles to support small businesses. With that amount you can reach only 1-1.5% of the overall number of SME’s. This is not a criticism based only on corruption, this is also a criticism based on insufficient funding for SME’s. But the government is working on it. As far as I know in 2010 governmental support will be increased two times.”

But that may not happen. According to the Russian Minister of Economic Development, small businesses will get the same support from the budget next year as they did this year. However there are some encouraging signs. In particular, the effort to reduce the red tape which ties down many entrepreneurs and has prevented a good ideas from becoming a profitable businesses.