Oleksandr Klymenko Official website
Articles | 1504 | 22.04.2015

Support by non-intervention: why the state should “slow down”

The formula of rapid growth of small and medium business in Ukraine is simple

One of the «wild» disproportions in Ukrainian economy is extremely low contribution of small and medium businesses into the country’s GDP. In Western Europe, employers form 50-70% of GDP, in Ukraine – less than 10%.

This is one of the reasons for the slow development of the country. SMEs – are mobility, creativity and unusual solutions. It was born in need to fight for its place in the saturated markets, to survive in a tough competitive environment.

There is only one way to lure business from the shadows – via a guarantee of inviolability. It means to establish a permanent monitoring on inspections of controlling authorities for three years. During this period, a viable business idea could get at a stable level of operating company and stillborn – just will not survive.

This is a priceless reserve of the state. Developed countries keep “germ” of the future of the national economy exactly in this segment. Here are breakthrough startups. New leaders improve their managerial skills there. New organizational models are forming here.

Consequently, a country, which does not create such “incubator” of fresh ideas and a social lift for energetic people doomed to be on the last positions in progress, which means relevant (very low) standards of living.

There is no dispute that the small and medium business should be supported and elaborated. Only few people know why is it necessary. This thesis is just taken on faith. I outlined my arguments and the vision of the mission of business: the engine of development in the country with a market economy is mobile, energetic, creative, nonstandard business.

There are no such large corporations. In the nature of the case, macrosystem tends to be conservative.

I am talking about it in details because misunderstanding of SME’s mission leads to the lack of a coherent state policy concerning this segment of the economy.

If you have a clear vision, solutions will become obvious.

If this concept is a foundation for the function of small and medium-sized business in national economy, the state’s protectionist measures will be formulated quickly and easily.

There are two such measures.

The first one is – do not interfere. This means that it is necessary to agree to the maximum deregulation. My experience as an entrepreneur and state manager confirms that any relief always has a positive effect. In our time in the tax office, we started with a moratorium on testing, then we implemented a new model of the simplified system of taxation, after this we carried out the electronic delivery system reporting with free digital signature keys.

Each of these steps did not lead to the rapid growth of small and medium-sized business. Their total number increased gradually, in driblets.

Meanwhile, the declared flows and payment of taxes were increasing significantly.

This gives me an opportunity me to make the conclusion that, perhaps, the share of small and medium-sized business in Ukraine is not so far from developed countries. Business prefers to remain in the shade under the pressure of unfriendly system of state regulation.

Nowadays, only 17 Ukrainian banks have special programs for lending to small and medium-sized business. The government should make it as a trend and standard. For instance, they can reimburse part of the interest rate on bank loans from a special fund.

The second form of protection from the government – is an access to cheap credit sources.

It should be provided not everywhere and not for everyone, of course. It could be implemented in the priority sectors and clusters after the qualified audit assessment of the prospects and risks of the business project … However, the state must ensure that the SMEs could have its funds for development.

In general, there are plethora forms of support for small and medium-sized business, namely: business incubators, special funds and programs of major corporations, grant support projects with low profit margins. Though, there are some extremely important for society – the “green” technology, infrastructure of subsistence, etc.

It does not matter, which form you will choose. The basic principles remain the same – not to interfere and to ensure access to resources.

It’s easy.

Link to source: Forbes

Photo: Shutterstock