Interview with Duma representative Svetlana Gvozdeva about a new government program designed to promote small business in Russia.

Svetlana Gvozdeva, head of the State Duma subcommittee on small- and medium-sized business within the committee on economic policy, is a lower house of parliament deputy from Ekaterinburg.

She is a supporter of President-elect Vladimir Putin and was his campaign representative in her home region. The fruit of Gvozdeva's work in the Duma is a recently adopted federal program of support to small- and medium-sized business. She spoke to The Russia Journal on issues relating to business in Russia.

RJ: What is the aim of the program?

SG: It is a two-year program, for 2000-2001. Three months were lost during the election campaign, but now we've examined the program and prepared the legal framework that will serve as a foundation for developing enterprise, creating jobs and building up the middle class. The program aims at creating a million new jobs and increasing the share of small- and medium-sized business in the GDP from 2-3 percent today to 12 percent.

RJ: How will the program achieve these aims?

SG: The only previously approved program was for 1996-97, and though it wasn't fully financed, it gave business a boost. A lot of people think that you won't get any result with only a little money, but if you look at the statistics, you see that back then, the program did help create jobs and get taxes paid. Unfortunately, the 1998 crisis came and left small businesses in ruins. Banks holding their money went bust, and these businesses had to start from scratch.

With all the problems in the country, the government obviously had no time for small business support programs. There was no budget funding in 1998 or 1999, nor in the 2000 budget. But now we have a program approved by the Duma.

RJ: So where will the money come from?

SG: The main source will be the federal budget. The 2001 budget will allocate 80 million rubles to the program. Money will also come from extra-budgetary funds, and guarantees will be provided by the development budget. We can also use money from the employment fund, for example. But budget money won't be enough, and we also have to look at ways to attract financing from the regions, from local budgets and from companies themselves.

RJ: Why do you imagine local budgets will suddenly show such generosity?

SG: If we have a state policy to develop and support business, it's a signal that we should all pitch in and provide financing, even if only part and not the bulk of the money.

RJ: Are there some priority sectors?

SG: The state has decided to stick to the basic principle of ensuring equal access to the market for all businesses regardless of their sector. As for priorities – these would be the sectors that require capital investment – processing industries, the food industry, aviation technology. There are a lot of companies that could help develop civil aviation, for example.

RJ: How could small businesses do that. By providing various components?

SG: Yes, even in atomic energy. In Murmansk, for example, there's a small company that makes parts for atomic submarines. Or take gas transportation; it's small companies that develop the network, taking gas to villages, to small consumers. Life itself dictates the priorities.

RJ: You really believe that individuals can come and set up small industrial companies?

SG: The State Property Ministry has its part to play here. It can carry out an inventory of all the factories sitting idle, even in the military industrial complex, and where facilities are not being used. They can be let out on favorable terms to small businesses, which often have a problem obtaining premises. We have to create effective owners and effective workers. Small business is the best place for this, but there needs to be state support. Now, when there's federal and regional property in a state of bankruptcy, it's the moment to put it in the hands of people who will manage it well.

RJ: How will they compete with the industrial giants?

SG: Equal access is well and good, but big companies don't want to let the small ones in. We have to provide political support, re-examine the law on tenders to make it work for small businesses.

RJ: What about taxation?

SG: We need to lower taxes. Part II of the Tax Code has a separate section on small businesses that rectifies some past mistakes. The Administrative Code also has to be amended. Small businesses pay the same fines as large companies for administrative violations, but what is just a fine for a big company is a death sentence for a small one. The new draft administrative code will strangle small business, family business, businesses set up by young people.

RJ: Do you look to experience elsewhere?

SG: Yes, we're going to visit the United States in May to learn about land law and farming. In the United States, 50 percent of the workforce is employed in small- and medium-sized business. They got a boost there in 1980 with presidential support for small business.

RJ: With state-financed programs, there's always the risk of the money disappearing into a black hole.

SG: We now have more control over the money. The court of auditors can check where it goes. Companies applying for financing understand that they have to be transparent. Most financing is in the form of low-interest loans.

RJ: What is the state of the middle class today?

SG: Where the middle class is concerned, they're accused of illegal business, tax evasion and so on; but it's tough when you've got the fire service, police and health inspectors all on your back. We need to revise the law on licensing. Dishonest officials milk people for all they're worth. We can't let corruption keep growing and stifle all our companies. There's an anti-corruption committee now, but this, of course, is going to be a huge task.