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Experts Discuss Outlook for Small and Medium-Sized Enterprises in Far East on Eve of EEF 2019

22 August 2019
Эксперты обсудили перспективы развития малого  и среднего предпринимательства на Дальнем Востоке в преддверии ВЭФ-2019

A round table was held on the topic of Small Business of the Far East. Opportunities, Conditions, and Preferences in Moscow on 21 August in preparation for the 5th Eastern Economic Forum. Discussion participants included First Deputy Minister of the Russian Federation for the Development of the Far East and Arctic Sergey Tyrtsev, Managing Director of the Far East Development Fund Kirill Kamenev, Director General of the Agency for the Development of Human Capital in the Far East Sergey Khovrat, and Deputy Executive Director of the OPORA RUSSIA All-Russian Non-Governmental Organization of Small and Medium Business Ivan Efremenkov.

Roundtable participants noted that a major portion of investment in the Far East comes from large projects though they account for less than 15% of the total number of residents of advanced development zones (ADZ) and the Free Port of Vladivostok, with the lions share being medium and small business. In total, more than 300,000 SMEs are operating in the Far Eastern Federal District (FEFD), equal to about 5% of all SMEs in the Russian Federation.

Many small and medium-sized business entrepreneurs are taking advantage of the tax and customs incentives offered at the Free Port of Vladivostok and in the advanced development zones. According to Tyrtsev, as of 15 August 2019, 20 advanced development zones had been created in the Far Eastern Federal District, with 369 residents implementing projects for a total investment of RUB 2.5 trillion, 95 projects in the ADZ already having been implemented and more than 61,000 jobs planned.

«The Free Port of Vladivostok regime is currently being implemented in 5 Far Eastern Federal District regions. 1404 residents are taking advantage of the incentives available for a total investment of RUB 698.5 billion. 68,000 thousand new jobs are planned as part of these projects», Tyrtsev added.

The deputy minister also mentioned the recent creation of a project office in the Ministry for the Development of the Russian Far East and Arctic to work with SME representatives. The office is tasked with giving SME representatives a voice and taking the necessary actions to aid small and medium-sized businesses in successfully developing in the Far Eastern Federal District. Work is underway to staff the office, and its first meeting is planned for September.

Kamenev spoke about the Far East Development Funds work to support small and medium-sized entrepreneurs. The Fund has been engaged in this work since 2016. «The Fund has launched an Affordable SME Loan programme, and we can already speak about its first results. Over this period, we have funded 814 projects for more than RUB 18 billion», Kamenev said. The main advantages of the Fund programme, which is implemented jointly with partner banks, include: the provision of funds to entrepreneurs for long periods of up to 10 years and low interest rates on loans for small businesses  from 8.5%. Whats more, the Fund lends working capital in addition to investment projects.

A free and easy way to receive land for your business in the Far East is to participate in the Far Eastern Hectare programme. According to Director General of the Agency for the Development of Human Capital in the Far East Sergey Khovrat, about 40% of hectare recipients implement projects in entrepreneurship, agriculture, and tourism. In total, more than RUB 700 million in state support has been provided since the programmes inception. The majority of the funds  RUB 590 million  has been allocated to support entrepreneurs engaged in agriculture.

Primarily micro-enterprises are created on the hectares. «It is our opinion that cooperation helps to increase profits, reduce costs, and at the same time transform these micro-enterprises into something big. The Agency has begun to introduce a cooperative model in 8 Far Eastern Federal District regions, and 450 people are presently involved», Khovrat said.

Currently, there is a tendency in Russia to reduce the number of SMEs: on average by 4% to the number of enterprises and by 5% to the number of employees. «The figures for the Far East are generally comparable to those of the country at large: minus 3.9% to the number of SMEs and minus 5.6% for employment,» Efremenkov said. According to him, the main problems that entrepreneurs face are a decline in consumer demand, competition between SMEs and the public sector, the availability of financing, and interaction with municipalities. State support of small and medium-sized exporters, infrastructure development, particularly projects to expand the Primorye 1 and 2 checkpoints, and a review of tax-related interaction between business and municipalities can help solve these problems.

Discussion of how to improve the conditions for small and medium-sized business in the Far East will continue at the 5th Eastern Economic Forum, which will be held on 46 September in Vladivostok. The Forum business programme sessions SMEs as a Driver of Economic Growth and Preferential Regimes for Investors: Current Progress and New Challenges are specially devoted to this topic.