Government steps up small business support

Development of small and medium size business in Russia's regions may become one of the anti-crisis solutions. The government is calling the regional authorities for practical support, including more state orders for small entrepreneurs.

Small and medium size business in Russia are likely to be among the first casualties of the current economic crisis. Small business currently makes up about 12% of Russia's GDP – a fraction of that in most developed economies. It needs more help and more incentives to grow according to Shani Kogan, Managing Director of Otkritie.

“The question is not about aid, but about stimulative packages – and I mention one of them – red tape and regulatory environment – and the second one is probably access to finances, where the government should help by providing certain guarantees.”

Access to loan capital is one of the biggest problems facing today’s small and medium business as banks, especially in the Russian regions, refuse to grant them. On a recent visit to the city of Lipetsk, Prime Minister Vladimir Putin called for more regional support for small enterprises.

“The logic of our actions should be in stimulation of internal demand, recovery of normal credit for enterprises and selective measures to support the domestic market. We will allocate around 30 billion rubles for small business that will be at the disposal of VEB bank. 10 and a half billion rubles of budget funds will be spent on development of infrastructure of small business. We will co-finance micro loans and support guarantee funds.”

But even during the crisis there are some small businessmen who have something to boast about. There were no signs of a crisis to see at this small factory near Lipetsk.

This plant which produces housing materials was built just a year ago, but it has already seen return on its 10 million euro investment. Orders both from Russia and abroad keep coming even in turbulent times. The owner of the factory says his anti-crisis solution is in diversified production.

Apart from this site, Vladimir Pokhunov, President of the Sandwich Panel Plant and his business partner run several more small enterprises.

“Of course we are affected by the crisis. But we work in several directions. We also have another plant which makes roof tiles and a steel processing enterprise. This helps us overcome the worst of the crisis.”

In crisis or not, most entrepreneurs hope that the aid the government has promised will arrive sooner rather than later.