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11 Feb, 2009 07:36

Support for small business comes into focus

The Russian government is to slash rents by 60% for small businesses. The news comes as the mayor of Moscow promises not to close SMEs which can't PAY for their premises during the crisis.

Dolomant motherboards drive trains, satellites and even Russian missiles. It's a small company making world-class equipment, the type of economy President Medvedev says Russia must be based on. But that's not being backed by money, according to CEO Konstantin Korneev.

“We're competing with America and Europe's finest so we need state help. Innovation is expensive. If they don't fund the research centres for us, our workers will leave for Motorola and Siemens. In fact, they're leaving already.”

Small firms are least likely to get loans from the state. Vladimir Kievsky, Executive Vice President of the Association of Russian banks says that this is because of a false reputation they're least likely to repay.

“Practice shows small businesses are actually the most disciplined borrowers – only 1.5 per cent default on loans.”

Sergey Borisov, President of the Organisation of Small and Mid-Sized Businesses says that means most good ideas are dying on the vine.

“Only 36% of small businesses really use credits. We criticized our Government, that they decreased the money in a special fund devoted to innovative companies. Our specialized fund every year helped about 1,500 small enterprises on the stage of startup.”

On Tuesday Anna Popova, the Deputy Economy Minister, tried to soothe angry business owners with some important concessions.

“Companies which rent premises from the state will pay just 40% of the market rate this year, 60% next year and 80% in year three. We've submitted this proposal to the government for approval.”

Small business has been worst hit in the crisis by all sides. There are signs the state is responding.

On Monday the Mayor of Moscow claimed he won't close a single small business in the crisis. Any firm such as this one which hires government premises can have its rent carried over until the economy recovers. It's an important concessions for companies such as Dolomant, whose profits have slipped 30% since October.