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Reviving Small-scale Business
October 6, 2006 16:44

Small-scale business in Russia is still a challenge for risk takers, though the government and regional administrations take great pains to improve working conditions for entrepreneurs. Nevertheless, there is more talk than action and many significant changes lie ahead.

Small-scale business makes up quarter of employment in Russia. About 16.7 million people work for this field; it is 25% of all workers all over the country. Small business has demonstrated enviable expansion rate in production recently. Labor capacity sevenfold outran growth of labor compensation within the last five years. Although there is much to be done in small-scale business, Russian government has worked out the criteria defining the size of an enterprise. According to them, business organizations were divided into three groups: companies making busy at most 15 employees are referred to micro enterprises, small enterprises provide from 16 to 100 workers with job, and finally, from 101 to 250 people work for medium-size companies.

Now there is another initiative in the government: 94% of all artificial persons are likely to be referred to small businesses. This fact will be spelled out in a new bill covering small and medium enterprise development in Russia.

Micro and small companies use vested benefits, which soon will be introduced for medium business too, moreover, a new simplified form of taxation system and unified tax on imputed income will be considered for medium-size enterprises. The bill covers the entering of max takings limitations and asset cost. Hopefully, administrative barriers for small-scale business will be removed.Besides, all the entrepreneurs are to be provided with equal access to national resources. Small-scale business must be supported by the State, but what help the companies can count on is not clear.

Another problem that small enterprises have to face is frequently met monopolies occupying the biggest part of the market in a particular business sphere. Some steps, however, have already been undertaken to promote young companies to enter the market without being folded immediately.

The Speaker of the State Duma Boris Gryzlov believes there is a strategic significance in protection of competition, primarily for small and medium business support. Unfair competitive practices lead to unfounded prices rise and eventually ordinary citizens suffer.

Three months ago a bill covering the protection of competition was passed at the second reading. It specifies the basic issues of antitrust legislation: for instance, it suggested that market share of the economic entity should be lowered from 65 to 50%. The bill establishes standard provisions for protection of competition at product and financial markets. Besides, monopolists are prohibited to set and maintain extremely high or low prices and recall from circulation goods if it may result in increase of prices. It is not allowed to conclude agreements or commit coherent operations capable to impact prices or lead to geographic division of the market. Beyond the law is unfair competition including spread of false, inexact or corrupted data aimed at inflicting damage to other organizations.

The bill determines what should be called a dominant position at the market: a company can’t be recognized as an economic entity if its market share doesn’t exceed 35%.

Hopefully, new changes in Russian legislation will make the life of business newcomers much easier.


Olga Pletneva


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