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Does Small Business Have a Place in Exports?

16 February 2018
The final day of the Russian Investment Forum featured the discussion ‘Does Small Business Have a Place in Exports? A View from Entrepreneurs’ moderated by Acting Vice-Governor of the Primorsky Territory Konstantin Bogdanenko.

Bogdanenko laid out the issues to be discussed, including the search for sales markets, the refund of VAT on exports, pre-export financing, non-tariff regulation, and support when launching exports. The moderator stressed that SMEs are becoming more export-oriented. “In 2017, 29% of all emerging SMEs were initially created for export”, Bogdanenko said.

Energoservis General Director Nikolay Dunaev was adamant in his speech: “In my view, small businesses have no place in exports”. He argued that 70% of the market is unfortunately in the hands of the Russian state and it is difficult to get into this sphere. He said there are two components that serve as incentives for exports: the existence of a cultural window (e.g., exports to countries where there are no language barriers, such as Belarus, Kazakhstan, or Kyrgyzstan) and a surplus of companies working in a single sector in the country. Dunaev cited non-tariff regulation as one of the obstacles to exports: “A big problem is non-tariff regulation. For example, when exporting to Ukraine under current conditions, we have to check several times whether the product is a dual-use item, and we ultimately still face difficulties at customs”.

State Secretary and Russian Deputy Minister of Economic Development Oleg Fomichev continued the topic of non-tariff regulation, adding that there are definitely a number of pitfalls in this issue. The speaker also provided an answer to a key question of the discussion: “If you look at the figures – only 1% of small businesses export their products – then there truly is no place for small business in exports. If we’re talking about the future, a place does exist, but you have to know how to grab it”. Fomichev offered recommendations for growth in exports by SMEs: "If we’re talking about mass exports, it is essential to create infrastructure that allows small businesses to produce goods, find a supplier through the Internet, and then not worry about anything else”.

Yuliya Balashova, the General Director of Business for Export, a representative of small business, outlined the main problems facing small companies (up to RUB 50 million annual turnover). “There are not enough highly specialized employees at such companies. There are difficulties with finding finances for certification and difficulties with legalization since, once again, there aren’t enough highly qualified professionals”, she said. She also noted positive and negative aspects of work performed by the Russian Export Center: “First, the conditions for obtaining financial means must be simplified and documentary support for transactions must be unified: the information of customs and the REC may vary. Assistance must be comprehensive”.

“Today, entrepreneurs aren’t so much worried about administrative barriers, and non-tariff difficulties related to licensing have also been smoothed out more or less. The most important problem today is export control, and dual-use goods in particular. This is due to our international obligations, restrictions, and closed-door decisions”, said Mikhail Antipov, the director of support for export projects at Russian Export Center. “There is a place for SMEs in export. But comprehensive support is definitely a must, above all from the government”, he said.

Federal Tax Service Deputy Director Dmitry Satin offered a positive assessment of the dynamics in the tax service’s activities: “There is a place for small business in exports. Rules have been created for this. It’s been a long time since inspectors served as experts assessing a company’s activities, the human factor has been reduced to a minimum, and everything is decided by the system. We are also preparing a set of amendments that will reduce the burden on SMEs”.

Zlatdekor General Director Svetlana Negrebetskikh spoke about the problems that make exports difficult for SMEs.

Inna Melnikova, Chairperson of the Association of Professional Mediators, a representative of Opora Russia in the Czech Republic, mentioned the positive results of work performed by the Russian Export Center, noting the importance of unification and work in the one-stop shop system. “The REC’s job is to create representations in other countries”, Melnikova said.

Wrapping up the discussion, Alexander Kalinin, President of the All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses Opora Russia, noted that the REC’s clout should be strengthened and the center should be given more powers. “The REC should be given the function of the chief administrator of budgetary funds so that it doesn’t have to coordinate its actions with the five ministries. The support should also be targeted”, he said.
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