Why is the government changing approaches to state support for small businesses?

The discussion of the future national project for SMEs, which lasted throughout the second half of 2023, revealed the government’s dissatisfaction with the current state of small businesses and a desire to revise support measures to make them more efficient and accurate. The debate about whether it is more promising to support the entire sector or only sustainable and viable SMEs has actually been renewed. Although the economic justification for the feasibility of the second option was proposed back in the covid years of 2020–2021, the discussion was restarted during the war years of 2022–2023. However, its character has changed somewhat: in recent years, the authorities have collected a dynamic array of data on how the sector lives and what it needs. Apparently, it is the further replenishment and clarification of this data that will allow us to end the discussion about the logic of assistance to the sector, transferring responsibility for the distribution of state support to an automated system.

In 2024, a new national project will be adopted for the SME sector; its development has actually already begun. Numerous discussions of the future document, which have taken place in different formats over the past few months, are associated not only with the desire of the authorities to determine priorities in advance, but also with the fact that the goals of the national project in its current version have been achieved and exceeded. A year before the document was updated, the authorities, together with business associations, determined its main idea: to refocus support for SMEs from achieving quantitative indicators to qualitative growth.

The government’s dissatisfaction with the current state of the sector, which emerged during the discussions, is understandable: until now, the authorities have provided massive support to entrepreneurs, without actually making specific counter-demands on them, but at the same time expecting that SMEs will increase their importance in the economy.

Let us recall that before the start of the pandemic, the government “grew” small businesses as a target for potentially promising investments and expected its share in GDP to increase to 32.5% (see “Kommersant” dated August 5, 2019). But the figure over the past five years has not changed and fluctuates around 20%. This is partly due to the crisis during the spread of COVID-19: measures to support the sector were restructured literally manually with only one goal – to help SMEs survive (see “Kommersant” dated March 20, 2020). Coming out of the pandemic, an attempt was made to return to pre-Covid guidelines (see “Kommersant” dated March 26, 2021), however, the restructuring of support was never completed due to the start of the Russian military operation in Ukraine.

The anti-crisis measures deployed in the spring of 2022 actually repeated the Covid ones, and at first were aimed more at saving the sector than at the previously expected growth.

Now, when it has become clear that small businesses have survived, the authorities associate their future with the replacement of foreign suppliers, and not only and not so much goods (SMEs cope with this function one way or another), but technologies. Although this goal will not be specifically spelled out in the national project, it will become noticeable in the priorities outlined in the document (see “Kommersant” dated October 24, 2023).

Since the crises of recent years have shown that completely repackaging support with each change of focus is inconvenient and time-consuming, situational assistance measures are going to be integrated into systemic ones – the latter will be tested for effectiveness. It is precisely this logic that meets the initiatives of the Ministry of Economy prepared in recent months.

For example, the ministry will expand the list of information that is accumulated in the register of SMEs receiving support, and will take into account not only targeted benefits, but also the use of general economic business incentive measures by companies (see “Kommersant” dated November 8, 2023). In isolation from what is happening in the sector, updating the register with information can be perceived as an attempt to bring together the full range of available measures so that businesses understand what they can expect.

However, when viewed through the lens of new objectives, additional data collection may be needed to audit SME assistance measures.

A review of support tools for effectiveness actually restarts the discussion about how to build systemic assistance to the industry. There are two main options: to support everyone in the hope that “something will happen,” or to focus interest on promising ones, that is, on those who would survive without support from the state, and with it will be able to help the authorities achieve various goals ( now: from import substitution to building technosovereignty).

This is not the first time the government has faced such a choice – this fork in the road was widely discussed during the pandemic: then world economists offered detailed justifications for why supporting “everyone” is inappropriate (see Kommersant from 7 And October 12, 2020).

At least one fundamental change has occurred in this context over the years since then – the Russian authorities can now independently test the hypotheses of the IMF and the World Bank: for this they have a collected array of business data, which in real time allows them to track what and why occurs with any specific sector companies. Supplementing the data with information about general economic support measures is necessary in order to increase the accuracy of efficiency assessments.

Relying on data in the future can take the human factor beyond the perimeter of determining the logic of distributing funds to representatives of the sector, which seems especially important considering how often businesses require additional assistance (usually, of course, new financial support measures). However, the collected information is already being actively used by officials themselves as an argument when communicating with entrepreneurs who are dissatisfied with the amount of support. When the process becomes fully automated, the discussion about the scale of support and who should provide it will completely collapse – you can’t argue with the numbers.

Kristina Borovikova