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Small Business as a National Project forum

October 23, 2018, VDNKh, Moscow

The President spoke at a plenary session of the All-Russia Non-Governmental Organisation of Small and Medium-Sized Businesses OPORA Russia’s Small Business as a National Project annual forum.

Before the session, Vladimir Putin visited the technical workshops of Moscow’s Technograd recreational and educational complex, which opened at VDNKh in September.

This complex is aimed at educating children aged 11 and older, and providing further education and training for adults and students. Various master classes and courses on digital and creative technologies, urban infrastructure and industrial vocational and service fields provide citizens with the opportunity to train in 42 professions that are in greatest demand in the city.

* * *

Speech at the forum’s plenary session

President of Russia Vladimir Putin: Good afternoon, friends, colleagues,

First of all, I would like to congratulate Alexander Kalinin [President of OPORA Russia] on his re-election to a second term and wish him success.

I also want to thank the All-Russia Non-Governmental Organisation of Small and Medium-Sized Businesses OPORA Russia and Russian business representatives for your participation in the country’s most important development projects, for your joint work to improve the business climate and in the long run to improve people’s wellbeing. The result of our joint efforts provides new opportunities for work and personal fulfilment.

Let me remind you that in my Address [to the Federal Assembly], and then in the May Executive Order I set a goal to provide not just progressive, but quality development of small and medium-sized businesses. And this means that both the activity of your companies and state policy to support entrepreneurship should become substantially more efficient.

In the next six years, we must make the contribution of small and medium-sized businesses to the country’s GDP exceed 30 percent, and then reach 40 percent (it is some 20 percent now). To that end, we will create some 6 million jobs and significantly improve the export potential of small enterprises and companies.

At my instruction, the Government together with OPORA Russia and other business associations has developed a concrete action plan, a national project to support small and medium-sized businesses.

Today there are 1,200 people sitting in this room – and this is a very large room. Mr Kalinin said that there have never been such big events before. And I would like to outline some directions and principles I believe to be priorities in front of you.

First, we often talk about this, almost all the time, but we have to go back to this, and we will do so until we make significant progress. I mean we must simplify all the procedures for establishing and operating businesses as much as possible, to make them easy to bear and entrepreneur-friendly, while at the same time, naturally, preserving the balance between the freedom of business and the interests of people, society and the state.

In order to create such a comfortable business environment, we need, among other things, to make the most of the opportunities provided by digital technology; we have also discussed this a lot recently: to expand the use of advanced cash registers and equipment. Everything that will help companies avoid a load of paperwork.

I also ask the Government to issue a separate legislative act stipulating the full list of financial reports for small businesses, so that officials, or, I will misspeak, some officials, are not tempted to use various instructions and orders to burden businesses quietly by introducing new forms of reports. Unfortunately, this happens every day. Frankly, sometimes we do not even know what to do with this. Together with you, we will work on new ways to crack down on this.

Second, we need to allow small companies’ products to access the Russian market more easily. In this sense, I would like to note the focused and effective work carried out by the Corporation for Developing Small and Medium Businesses. There also are good results there. Sometimes, when we join our efforts, we can achieve something. In this case, we can speak about certain progress.

In 2015, when the Corporation only began its operation, partially government-owned companies purchased no more than 100 billion rubles of goods and services per year from small and medium-sized businesses, while this year, according to preliminary estimates, the sum amounts to over three trillion rubles.

Now the Corporation for Developing Small and Medium Businesses and businesses will have to reach the next level: to increase this volume to five trillion rubles by 2024. It can be done.

What is particularly important is that the share of high-tech products and services is growing and now stands at almost 70 percent of all purchases. It is imperative to keep up such dynamics both in the medium and longer term. To do so, it is important to build a systemic mechanism and “grow” high-quality suppliers, if I may put it that way, so that small companies could improve their technological and managerial skills and the competitiveness of their products. I assure you that I discuss this constantly with my colleagues and heads of major Russian companies.

Hence, my third point. It is necessary to improve and expand the toolbox to support small and medium-sized businesses, especially in the most significant areas. These include small high-tech companies and start-up businesses, farms and agricultural cooperatives, as well as social entrepreneurship.

By the way, last summer, at a meeting with NGOs in Petrozavodsk, we agreed that the law On Social Entrepreneurship would be adopted by late 2017. That was in July 2017. 2018 is drawing to an end, and things have not budged. We wasted a year.

I would like the Ministry of Economic Development to focus on the need to put aside all disagreements and work closely with the parliamentarians and the business community through all the issues that so far have not been agreed upon in order to pass the law as soon as possible.

I also want the Agency for Strategic Initiatives to streamline the mechanism for promoting the best practices of supporting social entrepreneurship in the regions.

Also, we see our people becoming increasingly interested in physical fitness and sports. We have plans, benchmarks and standards, which we must attain in the near future. The demand in this sector is large, and small businesses are ready to do even more in this regard. It is necessary to provide them with actual support.

I would like the Corporation for Developing Small and Medium Business, in conjunction with the Ministry of Sport, to focus particularly on this area.

By the way, there is certain progress here as well. Look, the volume of purchases from small and medium-sized businesses in the sector of physical fitness has increased from 200 million rubles in 2017 to 1.7 billion in 2018, which is an eight-fold increase. These things should be emulated.

I would also like to speak today about the work of supervision agencies. We constantly speak about it, I know this too, but, like in the first case, we will keep coming back to it until there is a real breakthrough. There is certain progress – I will talk about this in a minute – but, of course, there also are problems.

We have made important, necessary decisions in previous years. The situation is gradually changing. But there is still a lot to do, and the main criterion of our efforts’ effectiveness is the comfort of entrepreneurs and the guarantees that protect them from pressure and illegal actions.

As you know, the Prosecutor’s Office works. I know, because I do not only meet with those present here in such halls, but also in a more business-like atmosphere, at various meetings. I know there are problems.

But still, look here. When prosecutors were drafting the 2018 General Plan of Scheduled Inspections, they excluded 62,000 checks of the 412,000 suggested by supervision agencies. In the 10 years that the plan was being drafted, a total of 4 million checks out of 8.8 million proposed by inspectors were turned down. Almost 50 percent were rejected by the Prosecutor’s Office. Last year, prosecutors declined more than a half, or 58 percent, of the snap inspections out of 35,000. But it turns out that this is not enough either.

Nevertheless, it often happens that it is more profitable and easier for small studios and freelancers to work without any registration at all, because everyone knows that when you work illegally, inspectors do not visit you, and if they suddenly do, there are various options of how to build relations with them. It is unclear who profits from such work, from making people work in the shadows. One thing is clear: it is not the state, not businesses, not people.

I believe that our common fundamental task is to provide for maximum transparency of the supervision agencies’ activities. Let me repeat: today, in the age of digital and information technologies, this is a crystal clear, understandable and easy-to-solve task. And, of course, many things will depend on businesses’ readiness to join this common work.

This is what I propose, in this regard. We already have the so-called Audit Registry, and it has really helped increase the transparency of audit activities to a certain extent. However, now – and you are well aware of this – the auditors are filling the Registry themselves, and are doing so without any formal rules, however they want. This is often at odds with the interests of the businesses and the state. Here, of course, it is necessary to bring things up to standard and provide clear regulations on the maintenance of this Registry. However, this alone may not be enough. And then, there is always the question: how do we make this happen?

There is a way to deal with it. The entrepreneurs should be able to post information about the auditors, the purpose of their visit, the audit results, the actual results – that’s important – obtained during the audit, and how the audit affected the entrepreneur’s business activities.

To do so, you can, for example, use the Business Navigator digital platform operated by the SME Corporation. By the way, our colleagues from Italy, Azerbaijan and Japan have already asked us about this product.

In the future, both systems – the Audit Registry and the Business Navigator – can and should be docked with each other to ensure data exchange. And if these data do not match, it will be a red flag both for the Prosecutor General’s Office and the public in general.

We will be able to spot the companies that the auditors focus on, and which sectors and entrepreneurs they overlook and turn a blind eye to the problems.

I want the General Prosecutor’s Office – we have already held preliminary consultations with them – in conjunction with the Corporation for Developing Small and Medium Businesses to work out such a mechanism as part of a pilot programme.

Please note, there are two important goals: to increase audit transparency, to protect businesses and to be able to clearly see the sectors in which proper control does not exist and what risks this might pose.

I would like to mention another relevant and important issue. This December is the end of the three-year moratorium on scheduled inspections for most types of state control over small businesses. This measure applied to over 500,000 entrepreneurs, helped support business and reduce their expenses.

To be frank, the public, the government and the business community took lessons from this so-called temporary oversight exemption. I will be honest with you, and the analysis showed it, that some people learned to cunningly use and manipulate the provisions that we adopted and use them as a cover-up, not for the public’s benefit but for their personal benefit, for deceptive purposes.

Experience has shown that there are areas that require constant and tougher control. This mainly concerns companies with so-called high-risk profiles, whose activities directly affect the lives and safety of people, as well as companies involved in specific areas and sectors, for instance, distribution of precious metals and stones. As regards other small companies and for self-employed individuals, I propose extending the temporary oversight exemption for another two years. I ask the Government and the State Duma to make the relevant decision fast.

This step would be further evidence that the government and the public trust business, count on its being responsible and believe that the vast majority of entrepreneurs value their own business reputation.

And, of course, we must further improve our legislation and law enforcement practices, including those related to law enforcement agencies’ activities in the economic sector.

I know that members of the business community have a large number of substantial proposals. I ask the Working Group on Monitoring and Analysis of Law Enforcement Practice in Business to consider all these questions – actually, we will engage in this together – and come up with legislative initiatives.

Colleagues, friends, I am strongly convinced that Russia's development depends on private initiative and the success of aspiring, ambitious and persistent people like you and those working with you.

We will further expand the space and opportunity for small and medium-sized businesses, and we are sure to be successful if we work together, like we have in previous years.

Thank you for your attention and I wish you success. Thank you very much.

October 23, 2018, VDNKh, Moscow