The South Ural business and authorities have found a common language

04.12.2012 — Analysis

The National Institute of System Research of Entrepreneurship Problems has published its report on development of small business in Russia. The list of leaders welcomed the Chelyabinsk Region that increased the number of small companies and, consequently, the number of employees over January-June 2012. The investment in fixed assets of the "little ones" more than tripled as compared to the first half of 2011. As the RusBusinessNews columnist has found it out, this increase resulted mostly due to the mutual understanding between the regional authorities and entrepreneurs.

As of the first of January 2012, the Chelyabinsk Region had 144.1 thousand small and medium sized enterprises. By the end of this year, their number is expected to reach 145 thousand. More than half of small businesses and sole proprietorships operate in the retail and real estate sectors, being focused on fast payback transactions, while mid-sized companies are more interested in manufacturing. In the first six months of 2012, the number of service companies increased by 34.6%, while the number of manufacturing companies went up by 21.8%.

The South Ural authorities have already launched five regional Programs for Business Development. Over the last three years, more than 930 million rubles have been allocated to priority areas. In 2012, the region started implementing the Program for 2012-2014, having earmarked in total 540 million rubles that will come from the regional and federal budgets. The priority is placed on manufacturing, innovative operations, agriculture, folk and art crafts, education, healthcare and domestic tourism.

In 2012, about 180 million rubles, including financial support from municipal entities, have been allocated for business development. The forms of support that are most sought-after by business owners are subsidized interest payments on loans and rentals, compensation of costs related to implementation of business projects. The authorities provided assistance to innovative as well as export-focused companies and supported projects in youth, women and family business. In addition to financial assistance, the Program is aimed at property, information and advisory support given to business entities and at development of the adequate infrastructure.

The mainstreams of the government policy in business support include elimination of administrative barriers and alleviation of the tax burden on businesses. Since 2011 the companies making production-targeted investment of at least 8 million rubles and implementing investment projects in the Chelyabinsk Region have been eligible for a 4.5% decrease in the profit tax rate and for reduction of the property tax by half.

The regional authorities have introduced a preferential tax rate (10%) based on the simplified tax system (revenues – expenses) for eight priority types of business activities. About 2,500 micro-enterprises (mainly, companies providing services in motor-vehicle transport, education, public catering, furniture manufacturing, repair and construction of houses and apartments, etc.) have started using the patent-based taxation system. Starting from January 1, 2013 the patent will become an independent tax regime, along with the simplified taxation system and the unified tax on imputed income. The Chelyabinsk regional authorities have already adopted the law applicable to this regime. Entrepreneurs took an active part in its preparation.

According to the regional law, the patent system is applied to 61 types of activities, whereas the entrepreneur’s revenue must be within a 100 thousand - 10 million ruble range, depending on the number of employees, transport vehicles and real estate properties. Elena Murzina, the minister for economic development of the Chelyabinsk Region, thinks that the new tax regime will give a serious impetus to small business growth, as the funds received from patent sales will be channeled to municipalities.

According to Arsen Unanyan, the chairman of the Board of Directors of the Companion Group of Companies, the dialogue between the government authorities and business is changing for the better. For example, in September 2012 the group of entrepreneurs asked Sergey Davydov, the city manager of Chelyabinsk, for assistance in converting residential space into non-residential premises. The city manager assigned a representative of Opora Russia, a public organization, to work in the specialized commission dealing with the conversion, and the issue took a favorable turn. The procedure for conversion of premises into non-residential space was simplified, and the commission helped the entrepreneurs with the required documentation.

A. Unanyan says that the authorities’ understanding of entrepreneurs’ concerns is very important for building of a favorable environment. As a result, the amount of investment in fixed assets is increasing. The businessman states that the most substantial growth can be observed in the business operated by competent managers. Instead of blaming the world crisis and legislative or technical obstacles, they do their job to get things done.

The government of the Chelyabinsk Region knows very well how much the active operation of small and medium-sized business is worth. Through their 10-year support given to entrepreneurs, the authorities reached the level when the contribution of such businesses to the gross regional product increased 2.5 times (from 11 to 27.2%), while the percentage of tax revenues to the regional consolidated budget increased more than five times (from 3.3 to 17%). Today, small and medium-sized businesses account for more than one third of all the working population of the South Urals.

The regional ministry for economic development speaks about the positive dynamics in the local economy. In 2011, 11 manufacturing mid-size businesses moved into the category of large companies and 12 small businesses moved into the category of medium-sized enterprises. In 2012, more than 70 small retail companies grew into the medium-sized entities. This fact is indicative of the qualitative growth of the companies and their transition to a higher and more civilized level of business activity.

At the same time, the regional authorities acknowledge that the development of small and medium-sized business both in the region and in Russia has not reached the European level so far. President Vladimir Putin set the task to increase the percentage of small and medium-sized enterprises operating in the economic sector to 50% by 2020. The similar local-level task was set by Mikhail Yurevich, the governor of the Chelyabinsk Region. The regional special-purpose program outlines the main parameters of business growth: the increased number of small and medium-sized enterprises, jobs and amount of business. The authorities intend to achieve the set task through further improvement of the business climate, which is essential for steady social and economic development of the region.