Business Ombudsman Boris Titov: it is difficult to build capitalism — everyone wants public procurement

Naberezhnye Chelny's 'kitchen of ideas' by Boris Titov

Boris Titov, the Commissioner for the Protection of the Rights of Entrepreneurs under the President of Russia and the P. A.Stolypin Institute of Growth Economics, developed a federal programme for the development of small manufacturing businesses in Russia with the conditional name 'The economy of simple things'. Its key provisions were discussed for 2 days in Kazan and Naberezhnye Chelny. According to the authors of the programme, with the support of KAMAZ, Naberezhnye Chelny managed to implement the best world practices in the construction of industrial parks for small businesses. As Titov himself says, manufacturing companies from the SME segment in Russia still occupy too small a share — only 9%. For various reasons, it has more problems than other types of businesses.

“The largest industrial park in Europe has been built in Naberezhnye Chelny. Master KIP is launching the seventh stage, and entrepreneurs are lining up to get into it," Titov praised Naberezhnye Chelny, making it clear that, apparently, the “kitchen” of many of his new initiatives was just Naberezhnye Chelny, and not, for example, Moscow or Kazan.

The essence of the developed programme is to unify the working conditions for businesses in industrial parks for the whole country and eliminate regional differences. As the ombudsman says, even within the borders of Tatarstan alone, the experience of the functioning of parks is contradictory. There is no uniform policy on the cost of connecting to communication networks, on the amount of rental rates, on a set of tax benefits.

Indeed, there are a good hundred industrial parks operating on the territory of the republic with completely different regimes: some work under the preferential rules of the PSEDA (in five cities of Tatarstan), there are two SEZs in which technoparks operate. Everyone has their own rules.

“How to develop a manufacturing business in the country?" Boris Titov exclaimed rhetorically.

Entrepreneurs on their own

“Until now, in some regions, the entrepreneur himself brings the engineering infrastructure for business. This is nonsense," said the head of the Investment Developemnt Agency, Talia Minullina. “This is not the case in Tatarstan. We have solved the problem. The basic engineering infrastructure to our hundred industrial parks is supplied at the expense of the state, there is gas, electricity, water supply. All these issues have been resolved! But if earlier there was enough engineering infrastructure, now entrepreneurs want ready-made buildings for rent, they do not want to build them themselves. They also raise the question of personnel. The question of competencies in the territory is very strictly raised. And Tatarstan has all this. In the complex, this is an ecosystem that was created in the republic.

According to Minullina, many entrepreneurs are annoyed by officials, because not only they cannot help, they are also ready to interfere with great zeal. In Tatarstan, they are trying to get rid of overly zealous officials at the local level, the head of the agency said.

The head of the Stolypin Institute, Anton Sviridenko (part-time adviser to the business ombudsman) outlined the main approaches to the unification of industrial park infrastructure. In his opinion, if there are no systemic changes in economic policy now, there is no chance of growth.

Three components of Titov's new programme

The authors of the programme offer to provide support in three areas. These are the financing of clusters, the creation of industrial parks near large cities, and the financing of projects from the bank of standard solutions.

1. Clusters are an association of enterprises for cooperation, joint sales. As an example, Sviridenko cited the agricultural cooperation in Krasnodar Krai in the cultivation and processing of products. According to the ombudsman, the state should provide systematic measures, and not randomly financing enterprises, as it has been happening in recent decades. “Even now, state support is interrupted: there is one year, and the next year there is not. And it turns out that first come, first served ," the speaker criticised the selective approach.
2. The second is the placement of industrial parks around megacities and medium-sized cities. Why is it so? Because there is a workforce, competencies, and entrepreneurs near the cities. “We have PSEDA, SEZ, and SPIC located in completely illogical places. They are located so that you can't get to every one. We think it should be made easier — to create industrial parks near cities and with special conditions," Sviridenko explained.
3. The third is the financing of projects from the bank of standard productions. Now this bank includes 100 types of projects that allow you to produce simple things — pipes, containers, furniture... “Now the service sector is oversaturated with entrepreneurs. The competition is high, the margin is decreasing. They would like to move to another sector, but they do not know where. We offer them alternative projects in production," the adviser to the ombudsman explained.

Supporting, not squeezing dry

In addition to this, he proposed several more serious measures of assistance:

• provide residents of industrial parks with free rent for 3 years (according to this logic, the state should pay);
• facilitate taxation. It is proposed to increase the threshold of simplified taxation revenue for manufacturing SMEs (only legal entities) to 5 billion (instead of 2 billion ) and the number of employees to 500 people;
• for enterprises in industrial parks that have chosen the simplified taxation, similar tax conditions are offered as in the PSEDA, for 10 years;
• for those applying the general taxation system, do the same as in the PSEDA: income tax 0-5%, taxes on land and property — 0%, insurance premiums — 7,6%.

“If all this happens, if the federal programme is adopted, then we will expect an explosive growth. By 2037, the production volumes of SMEs will grow 22 times," the head of the Stolypin Institute dreamed. In short, the team of the business ombudsman believes that it makes no sense to demand a lot of money from a new production, it is necessary, on the contrary, to support it.

Tatarstan does just that. Talia Minullina reminded how the republic supported entrepreneurs during the coronavirus lockdown:

“This is 2,5 billion rubles of subsidies for urgent needs for more than 40,000 entrepreneurs of Tatarstan, which last year our government allocated to small businesses. This is more than 7,500 preferential loans at 0% and 2% per annum for 17 billion rubles, which we have issued. We have extended the deadlines for paying taxes for 46,000 entrepreneurs. Strategic enterprises have received more than 7 billion preferential loans. There were industries that were not included in the federal list of victims. The republic has implemented support measures for them in the amount of 3,3 billion rubles, and it is also very important to support them in time.”

In conclusion, Business Ombudsman Boris Titov warned businesses against playing with state orders, which is why many criminal cases are being initiated. “It is difficult to build capitalism — everyone wants public procurnmnet," he joked.