Better life in the horizon for the SMEs
Hearkening to President Medvedev’s plans to easy life for the small- and medium-scaled enterprises (SMEs), the Cabinet has finally drawn up the long-awaited measures that will create a more business-friendly environment for the SMEs. As Prime Minister Putin noted, the ultimate aim is to radically change the ideology of state regulation of the SMEs by clogging the loopholes in business legislations and minimizing the number of mandatory inspections, which dishonest government officials traditionally use as leverages for extortion of bribes from companies. Other measures include the simplification of the business registration procedures, outlawing selfishly motivated excessive SME oversight by dishonest officials and mandatory court or higher-ranking prosecutors’ sanctions to initiate inspections of businesses.
Indeed, the losses resulting from the current business regulation policies are enormous to both the state and businesses. Thus, according to official data, over 20mln inspections of the SME are conducted annually by different state agencies at a cost of over $7bln. The non-financial losses elude computation, but the manpower spent on these superfluous inspections means that some other vital government functions are left unattended to by the officials on bribe-extortion sprees. Similarly, the non-business-related losses, the euphemism for the expenditures used by businesses to oiling the bureaucracy, according to the Indem Foundation, total $300-500bln per year, a sum several times the federal budget and about 30% of GDP. More telling are the data offered by the Investigative Committee, which put corrupt bureaucrats’ unofficial revenues at 30% of the national budget, with most coming from the over $33bln spent by businesses annually on bribery. Indeed, going by this amount of corruption and the unassailable red tape in government agencies manned by people without the required knowledge on the functioning of modern business in a free-market economy, it is a miracle that private businesses, especially the SMEs, are still functioning today in the country.
Against this background, and despite its belatedness, the new government’s move should be seen as the dawn of a new era, not only just for the SMEs, but also for other businesses, which depend on the SMEs for their operations. The ongoing fight against corruption might be not successful, but clogging all the gaping loopholes in the business regulations that will deprive the bureaucrats of the “legal and pseudo-legal grounds” to continue to extort bribes from businesses, will help create a civilized business environment. This, undoubtedly, will boost the level of small-and medium-scaled entrepreneurship in this country.
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