www.Kremlin.ru
August 5, 2009
[Medvedev] Opening Remarks at Meeting on Lowering Administrative Barriers for Small and Medium-Sized Businesses
Zvenigorod, Moscow Region
PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Colleagues,
About a week ago, I met with the Prosecutor General, who gave me the good news that the number of small business inspections and audits is decreasing as a result of the decisions that we nurtured and pushed through, which I then turned into legislative initiatives. In many cases, the Prosecutor General’s Office is guarding the interests of small businesses, medium-sized businesses, and ultimately, all businesses, and is refusing to authorise conduct of unnecessary and unjustified inspections.
Of course, this made me happy, but I wanted to see how things were going in the field, so I decided to meet with all of you, so that you can honestly tell me what is happening, and whether anything has progressed recently or not. Because on the outside, everything looks fairly good: we have passed a new law on auditing entrepreneurial activity (you and I discussed it multiple times); supervising agencies are now working within a special procedural framework; small and medium-sized businesses now have a greater access to the public procurement contracts; we have instated so-called priority rights for purchasing rented facilities; we have established preferential tariffs for connection to energy grids; federal constituent entities have been delegated the right to make decisions on lowering tax rates applicable under the simplified taxation procedure; and this year, we have increased financing for the federal programme to support businesses more than 2.5-fold.
Everything appears well, but there are some reservations related to things that I have been seeing and hearing. I have received quite a number of comments and complaints, both through direct personal contact and electronically, through my web page and my blog. People are writing very different things, and are often writing that nothing has changed at all, that everything is getting worse, that things take longer to get done, etc. I understand that in many of these cases, people are being emotional. Indeed, I think we actually have made progress. But the sheer number of complaints containing negative information about the state of business regulation, especially for small and medium-sized businesses in our country, is exceedingly high.
Clearly, adequate conditions for developing small businesses are formed locally. These conditions are formed on the basis of federal legislation, but the federal legislation is modified by regional legislation, and often, the regional laws either improve the federal laws or, on the contrary, make them more perplex by bringing in additional requirements. This is also something we should discuss. Incidentally, perhaps in many cases, our efforts are unsuccessful due to the actions of federal and local civil servants. This is not the case everywhere. No doubt, there are places where the smallest businesses receive a great deal of attention; in some territories, economic activity is entirely ensured by small businesses. We are meeting here in Zvenigorod, and I think local authorities will make their comments on the subject. There is certainly much to discuss.
Lowering administrative barriers remains our key goal. I already listed the measures taken, but we must not forget that the regulations in the law now taking effect, protecting the rights of entrepreneurs during inspections, can be changed or simply twisted by lower-level legislation, as well as departmental documents. For example, certain supervisory agencies believe that the regulation regarding the maximum permissible duration for inspections 50 hours per year does not apply overall, but rather, to each individual type of inspection. Thus, to break it down mathematically, let’s multiply forty types of inspections by 50 hours; clearly, these inspections can last all year long. This is simply profane and a mockery of the law’s intent.
I am certain that there are many similar examples. The Prosecutor General’s Office, which is present at our meeting, and other law enforcement agencies must suppress this type of activity. In this regard, we need to pass inter-departmental regulations as quickly as possible and ensure that regional legislation in the federal constituent territories corresponds to the federal legislation. I am hereby instructing the Prosecutor General’s Office and other supervisory agencies involved in this process to accomplish the task.
Just a few words about enforcing the law on priority rights for purchasing rented facilities. For the moment, its implementation is progressing very slowly. Based on the information I have available, only about 500 corresponding agreements have been registered. Does this imply that we only have 500 small businesses that would like to purchase their facilities? Of course not. It means that they are being hindered by faulty rules and individual bureaucrats that simply do not want to give these facilities up to the private sector, and are using all possible loopholes in order to maintain control of those facilities, because they essentially see them as their own private assets that can be used to make money.
The implementation of this law will essentially be a test of our bureaucracy’s attitude toward small and medium-sized businesses. And this test will show whether or not we are really serious about changing.
Businesses face another complication: state services that are delegated by executive authorities to state unitary enterprises and state offices, the so-called authorities-linked commercial entities. We have discussed this a lot in similar meetings. Here, too, the situation has changed very little. Most of these services not only need to be paid for, but are also expensive and monopolised, and it is almost impossible to get around.
I began talking about this issue about two years ago. At the time, there were some truly repulsive examples related to waste treatment and something else, when enormous amounts of money were charged for merely drafting technical assignment for a business that only employed three to five people. This was done in a quasi-legal manner, as there was indeed a regulatory act and pertinent recommendations on making a service rendering contract with a particular company which is the only one to provide corresponding services, i.e., to draft documentation required. I think that there is no need for further explanation: without a doubt, such an authorised company subsequently gave “kick-backs” to the official who signed the corresponding regulatory document. I think law enforcement agencies, once they become aware of the cases like that, need to investigate into such practices.
Certain services are also parcelled out element by element, thereby demanding additional payments. At this rate, it would seem that soon, any move by a civil servant will need to be paid for. But I would like to note that our businesses are not rich enough to dole out money any time a civil servant sneezes. According to expert assessments, entrepreneurs’ expenditures for overcoming administrative barriers make up a significant share of their annual receipts a very significant share. It varies, but it is quite high.
Furthermore, the usual kind of extortion remains, and is particularly appalling. Today, I specifically started by discussing negative examples, despite the fact that we have recently made a good deal of regulatory progress in the last year, more has been done than in the previous five to seven years combined, because we are addressing this issue actively and because the economic crisis has compelled us to work harder.
Nonetheless, it is very important that all of the documents we’ve worked so hard to create can actually function, and not just fall apart. This is dependent on coordinated action by federal, regional, and municipal authorities, as well as businesses. This is what’s most important.
I hope that today, we will hear an honest assessment of how things stand from President of Opora Rossii [The Backbone of Russia, which is a national association of small and medium-sized businesses] Sergei Borisov and from other representatives of business community that I have specifically asked to come to this meeting. First, I would like to listen to you, and then hear out our colleagues from the Cabinet and other government institutions.
Let’s get down to business.
