The crisis impact on the development of SME’s in Russia

and antirecessionary support measures

Dina KrylovaExecutive director

OPORA RUSSIA

Kiev, 17 June 2009

Small business in Russia

(Criteria set by the Federal law)

Number of workers

Micro – till 15 employees

Small – till 100 employees

Medium – till 250 employees

Turnover

Micro – till 60 mil. rubles

Small – till 400 mil. rubles

Medium – till 1 billion rubles

Small business in Russia

1 million 137 thous. – small enterprises

3 million 400 thous. – individual entrepreneurs

Number of employees in SE – 16,7 million people or 25% of total number of employees

~ 17% in structure of GDP

Sectoral structure of small entrepreneurshipSectoral structure of small entrepreneurship

50%3%

2%

20,5%

11%

12%

1,5%

trade and mass cateringindustryconstructiontransport

science and informational technologies public health servicesother

Small Enterprises (SE)* SE +Private Entrepreneurs

*Number of small enterprises (legal persons) in sectors of economy according to the Federal service of the State statistics

50%11%

12%3%

1.5%

28%

72%

in other spheres in trade and services

2%20.5%

5

OPORA RUSSIAOPORA RUSSIA todaytoday

OPORA RUSSIAOPORA RUSSIAAll-RussianAll-Russian

Public Organization ofPublic Organization of Small and Medium-SizedSmall and Medium-Sized

EntrepreneurshipEntrepreneurship

OPORAOPORAAssociation of entrepreneurial Association of entrepreneurial

organizations of Russiaorganizations of Russia (created in September 2001)(created in September 2001)

Commissions & Commissions & CommitteesCommittees

Coordinators in Coordinators in 7 Federal Districts7 Federal Districts

EntrepreneurialEntrepreneurialregionalregional

associations and unionsassociations and unions

EntrepreneurialEntrepreneurial sectoral associationssectoral associations

and unions (125)and unions (125)

EntrepreneursEntrepreneurs

About 350 000About 350 000

80 regional 80 regional divisionsdivisions

EntrepreneursEntrepreneursApprox. 4.9 millionApprox. 4.9 million

jobsjobs

Regional dimensionRegional dimension

■ ■ OPORA RUSSIA has its divisions in 80 of 83 regions of the country

Regions where OPORA RUSSIA divisions have been set up

OPORA RUSSIA

Active participant in small and medium business development policy

Priority activities are:

• Improvement of business climate

• Independent monitoring and research conducting

•Decrease of the administrative barriers

•Own programs of entrepreneurial support

•Diversification of the small business structure and development of the support infrastructure

Crisis impact on SMEsCrisis impact on SMEs

Changes of business environment in the sphere of Changes of business environment in the sphere of credit, personnel and premises accessibility.credit, personnel and premises accessibility.

The changes in the business environment influence The changes in the business environment influence on internal processes of companies: on internal processes of companies: – sales volume is decreasingsales volume is decreasing, , – number of employees is decreasing, number of employees is decreasing, – cuts of salaries,cuts of salaries,

– size of indebtedness is increasing.size of indebtedness is increasing.

Crisis impact on SMEsCrisis impact on SMEs

The half of the respondents noted the aggravation of the situation for the last 2 months

Availability of loans (February- March 2009 )

For the last 2 month to get a loan has became…

30,5%

19,7%

1,2%

0,4%

48,2%

0% 10% 20% 30% 40% 50%

Muc hmore

diffic ult

A bit morediffic ult

Noc hanges

A biteas ier

Muc hmore

eas ier

To get a loan today is …

24,7%

45,0%

4,4%

0,8%

25,1%

0% 10% 20% 30% 40% 50%

P rac tic allyimpos s ible

Quitediffic ult

Neithereas y, nor

diffic ult

Quite eas y

V ery eas y

For the last 2 months credit interest rate has changed the

following way…

33,3%

30,2%

1,8%

0,5%

34,2%

0% 10% 20% 30% 40% 50%

S ignific antlyincreas ed

S lightlyincres ed

No c hanges

S lightlydecreas ed

S ignific antlydecreas ed

Copyright © 2009 OPORA RUSSIA together with Baumann Innovation

The main problems for business today

5%

7%

11%

15%

17%

19%

25%

31%

44%

55%

0% 10% 20% 30% 40% 50%

Requirments and inspections made by regulatorybodies

Corruption and organazied criminality (рейдерство)

Low availability of competent personell

Improvement of competition

Tax rates

Stiffening of suppliers' conditions

Stiffening of conditions and customers non-payments

Weakening of ruble and inflation

Deficit of financial resources

Decrease of product demand

*Percent of respondents who marked the problem as one of the three most important for business

*

Antirecessionary measures, which can be the most effective for SME

4%

12%

17%

22%

27%

28%

34%

40%

45%

0% 10% 20% 30% 40% 50%

Reeducation of dismissed emploees

Timely payments for the work inthe field of State-

Subsidization of expendituresconnected to creation of new jobs

Decrease of administrative pressure

Increase of government buyingavaliability

Rent price decrease of state andmunicipal property

SME crediting

"Freezing" (nonraising) of tariffs

Tax deferment or tax holiday

* Percent of respondents indicating this measure as one of the three that can most effectively help their business

*

*Percent of respondents indicating this position as one of the three priorities for their companies to the next month

Copyright © 2009 OPORA RUSSIA together with Baumann Innovation

The main priorities of businesses for the nearest month

2%

8%

11%

12%

16%

17%

25%

30%

57%

0% 10% 20% 30% 40% 50%

Assets sales

Decrease of production volume

Price-cuttings

Reduction of staff

Wage cutting

Retargeting of business

Change in the assortment

Attraction of loans

Other cost savings

*

Effect of the Governmental antirecessionary measures and efforts

3,8%

11,4%

14,4%

70,5%

0% 20% 40% 60%

I know nothing aboutit

Negative eff ec t -w ors ening the

s ituation

Z ero eff ec t

Pos itive eff ec t

Governmental antirecessionary measures

Total financial support of SME – 100 billions rubles

Increase of the crediting of SMEs through Russian Bank of Development (30 billions rubles )

Increase of the federal budget resources foreseen for the SMEs development (10,5 billions rubles)

Guarantee of the access of SMEs to the government order through government corporations and natural monopoly entities

OPORA antirecessionary measures for SMEs support

1. Increase of the demand by stimulating big companies to relay part of the government and corporate order to subcontracting for SMEs

2.2. Freezing of the tariffs of the natural monopoliesFreezing of the tariffs of the natural monopolies

3.3. Moratorium on tax inspections of losersMoratorium on tax inspections of losers

4.4. Three times decrease of the tax rate for those using simplified tax system or unified Three times decrease of the tax rate for those using simplified tax system or unified tax on imputed incometax on imputed income

5.5. Moratorium on liquidation of all forms of market tradeMoratorium on liquidation of all forms of market trade

6.6. Introduction of the mechanisms of cooperation for the development Introduction of the mechanisms of cooperation for the development of social sphere and entrepreneurshipof social sphere and entrepreneurship

7. Export promotion7. Export promotion

8. Simplification and cheapening of SMEs connections to the electricity8. Simplification and cheapening of SMEs connections to the electricity

9. The support of import substitution and export orientated companies9. The support of import substitution and export orientated companies

View to 2020View to 2020

The main principals of state regulation of SME The main principals of state regulation of SME ::presumption of superfluity of state functions presumption of superfluity of state functions presumption of taxpayer fairness, etc.presumption of taxpayer fairness, etc.

serious increase of the SME ratio in GDP (not less than serious increase of the SME ratio in GDP (not less than 40%)40%)increase of SMEs up to 10 mln. increase of SMEs up to 10 mln. decrease of SME ration in trade, while fivefold increase of decrease of SME ration in trade, while fivefold increase of ration in the following spheresration in the following spheres::

social services and healthcare,social services and healthcare,science and IT,science and IT,housing and utilities infrastructurehousing and utilities infrastructure,,education.education.

Building up to 700 business-incubators and about Building up to 700 business-incubators and about 200 200 technological clusters.technological clusters.

Thank you!Thank you!