The draft Strategy for the Development of Small and Medium Enterprise Development in the Murmansk region till 2015 discussed at an expanded meeting of the Coordinating Council on the implementation of the regional target program «Development of small business in the Murmansk region for 2005-2008» at 25 October 2006.

These are a few words about the external environment of business which development will occur.

There are currently considering a new federal law «On the development of small and medium-sized businesses in the Russian Federation», which introduced new concepts: the micro, small and medium-sized enterprises will be secured new support tools including at the municipal level (for example, funds real estate for rent at a reduced rate, etc.).

The country is preparing for accession to the WTO so it is necessary to improve the quality of products and services, introduce modern management systems, encourage entrepreneurs to enter international markets.

Administrative reform has already begun and should be used that work to improve the support mechanisms. Next year we plan to adopt the 2 Rules grant the regional budget and consulting services.

Because the commodity orientation of the basic branches of economy of Murmansk Region small business development has a limited potential for the development of productive activities. There is a need to increase the production of small enterprises in the sectors targeted for domestic consumption (as a population, and large enterprises), to extend the range and increase the production of quality food products, develop subcontracting and outsourcing. To the remaining challenges continued to include a targeted state support for small producers in the food processing, agro-industrial, fishery and forestry industries. Issues require constant attention to ensure a high level of quality products and services, compliance with environmental, health, epidemic, fire, and other regulatory requirements.

There is no competitive environment for small business development in the area of housing and communal services reform of which will occur in the coming years. The development of the small businesses adversely affected the growth of tariffs for transportation services, electricity, rental of land and premises that requires a flexible tariff policy towards all forms of monopoly ownership. The development of innovative and entrepreneurial environment is constrained by poor regional infrastructure. There is little demand for the high scientific potential of the region hence the need to systematize the work on innovative ways small businesses. Infrastructure development is also needed to address other challenges of small business - engaging in entrepreneurial activity for the unemployed: youth, women, soldiers, discharged into the reserves and their families.

There is a large number of differentiation of small enterprises per 1000 people in various cities and towns of the area. Poorly developed business in the settlements Kovdor and Olenegorsk areas; in Lovozero and Tersko areas of enterprise development is the only way to ensure employment and to maintain the viability of remote settlements. To address these challenges need to encourage the establishment in these areas of tourism, coastal fisheries and artificial aquatic cultivation, processing of wild berries and mushrooms, reindeer husbandry production; individual direction can be to restore crafts.

Given that because of the additional costs associated with the Far North the profitability of the production of small enterprises is significantly lower than the national average NWFD (respectively 3.7 per cent and 10.4 per cent) in the Murmansk region requires additional measures of protection and support of small business development including through changes in federal legislation on the provision of employment, pension and other social benefits to citizens.

Limiting factor is the development unjustified distinction wages and weak social protection as entrepreneurs or employees. Many small businesses do not meet health requirements and safety standards. As a result small business is a constant shortage of personnel (as workers, as well as professionals, managers). With the establishment of new large-scale problem of staff turnover will increase, small businesses will begin to shape human resources policy to keep training and retraining of personnel, safety, etc. It is therefore important to give particular emphasis to the development of human resource capacity of entrepreneurship, promote an enabling environment for the flow of the business workforce.

A major problem for the development of small business is lack of investment for the acquisition of modern equipment. Credit resources of banks remain out of reach for many small and above all, beginners and innovative businesses that do not have their own available funds and the required collateral. It is not possible to reduce risks through the provision of such enterprises to budget and credit guarantees: the requirements of the Budget Code of collateral is as high as in the banking sector. In addition, the procedure for adoption of the budget and decisions on financial support for specific enterprise lasted about a year, while most of the projects of small businesses continues to be valid no more than 2-3 months. To solve this problem you should use the mechanism of risk-sharing between the businessmen, bankers and government authorities through the establishment of a special warranty, collateral fund. Reducing the cost of borrowed funds is possible through grants to pay part of the interest rate on bank loans as well as through the development of a regional non-banking credit and lending system, a network of micro-credit, credit cooperatives and consumer societies entrepreneurs.

Slowly decreasing the number of entrepreneurs over the «administrative barriers». When opening a new manufacturing or retail outlet requirements «matching» authorities often went beyond all reasonable limits imposed on entrepreneurs «share» the participation in the development of municipal utilities, «sponsored events» and other forms of encumbrances, which lost the economic sense of creating a new production.

Summing up we can highlight the key issues on which decision is necessary to focus first and foremost:

- Excessive administration and high costs of entrepreneurs to pay for public services;

- Lack of access and the high cost of credit resources;

- Lack of access to immovable property, objects of communal infrastructure and electricity networks, the high cost of connectivity;

- Insufficient infrastructure business, a low level of services;

- Lack of qualified personnel, both for business and for the infrastructure;

- Low social protection of entrepreneurs and their employees.

All these problems require a software solution combining the resources and coordinates the efforts of entrepreneurs and their associations with the actions of the authorities and local self-government.

The purpose, principles and strategic directions of regional policy in the sphere of development of small and medium enterprises of Murmansk region.

The basis of any strategy represents the goals and priorities. The purpose of the public policy of the Murmansk region on the development and support of small business is the creation of political, legal and economic conditions for the free development of small and medium-sized businesses, providing:

- Improving the social performance of the small and medium-sized enterprises - an increase in the number of employees in the business sector, average incomes and levels of social protection for workers in small and medium-sized enterprises and, consequently, the formation of the middle class - of political stability;

- Increasing the pace of development of small and medium businesses as a strategic factor of economic and social development of the region,

increasing its share in the formation of all components of gross domestic product (production of goods, services, net taxes, investments), expand the scope of economic activities and strengthening of small enterprises, the formation of medium-sized enterprises sector.

By the fundamental principles of state support for SB include:

- Equal access for businesses to resources support;

- Targeted measures and efficiency in the use of means of support;

- Providing public support for actors in the SB environment of competitive selection and co-financing of projects (taking into account the relevance and/or the need for projects, products or services);

- Differentiated approach in the conduct of public policy support in respect of subjects of IP laws in the light of established priorities of public policy (local, sectoral, social).

The main directions of implementation of the strategy for the Murmansk region on the development and support of small and medium-sized businesses are:

1. Providing easures to significantly reduce the time and financial costs of small businesses to interact with permitting, fiscal and financial authorities to collect information and study on the size and scope of administrative barriers, including:

- Collect information and study on the size and scope of administrative barriers;

- Improvement and simplification of reporting forms, the development of administrative rules, techniques and procedures;

- Examination of new laws and regulations for potential administrative barriers, development of proposals to deregulate the economy.

2. Providing incentives for the inflow of new labor force in the sphere of small business, including:

Economic support and custody beginners;

- Active promotion of small businesses, stimulating people especially youth to engage in business;

- Training of start-ups and selection of staff;

- Incubation;

- Motivation for higher wages and social benefits, reduce wages «in envelopes».

3. Improving the financial and credit support mechanisms in order to increase the availability of credit and investment resources, including:

- Micro-grants and seed;

- Subsidies for small and medium enterprise credit cooperatives and entrepreneurs;

- The establishment of a regional mortgage-guarantee fund for small enterprises;

- Promotion of municipal districts and city districts to implement the measures of financial support on co-finance terms.

4. Creating a network of institutional infrastructure for small businesses, including:

• Business incubators,

• Service companies, recruitment agencies,

• Information and counseling centers,

• Marketing, sub-contract,

• Technology, technology transfer centers.

5. Promoting the competitiveness of local producers, support for export-oriented and innovative business:

- Promotion of investment in modern equipment and training;

- Reducing costs of certification, licensing, development of design documentation, business plans through a grant;

- Promote the introduction of systems of governance quality;

- The development of cooperative ties.

6. Enhancing the role of business in public life, their contribution to solving social problems of the territories

• Promote the establishment of associations;

• Involvement of entrepreneurs and their associations to develop regulatory legal acts in the sphere of economy and finance, development plans, area, regional programs, etc.;

• Involvement of entrepreneurs and their associations to organize activities and social importance projects but not through the «forced sponsorship».

Expected results of implementation of the Strategy

The result of the implementation strategy for the development of small and medium business should be to ensure by 2015:

- The proportion of small and medium-sized businesses in the GDP - 40%, the share of small and medium-sized businesses in employment - 35%;

- The proportion of small and medium-sized businesses in the total number of existing business entities, 80%.

Material provided by Borisenko

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