CC BY
60
UDC 331.5.024.5
DEVELOPMENT OF SMALL BUSINESS IN RUSSIA AND ITS IMPACT ON THE EMPLOYMENT OF RURAL PEOPLE
Lovchikova E.I., Pervykh N.A., Associate Professors
Orel State Agrarian University, Orel City, Russia E-mail: [email protected], [email protected]
ABSTRACT
Small business development is one of the key elements of Russian economy growth promoting formation of the "healthy" competitive environment, increase in production of Gross Domestic Product, population employment, growth of its actual income, life upgrading. Pliability and management simplicity of small enterprises, ability to further of scientific and technical progress and to mobilize the considerable resources of production and finance of the society predetermine the important economic, antimonopoly, innovative and social role of this sector of economy. The necessity of working out of principally new conception of regulation and supporting of small business in context of forming of economic policy on macro- and regional levels is conditioned by absence of common approach to the realization of its complex support which takes into account the specific regional features. Development of small business is proved to be one of the main strategic directions of the state policy. The studies revealed the dynamics and features of small enterprises development in Russia. For all that it is emphasized that proper management mechanisms of the system state support of small business development in Russia are not created. At that time their absence prevents the home development and dynamic growth of small enterprises. The estimation of labour resource capacity of small business development in rural areas was conducted. In the article the problems of business in the rural community was depicted and suggested the means of its activation. The authors gave reasons for the necessity of state intervention in the functioning of small business in the current conditions of the market economy and the basic forms and methods of such effects: legal regulation, finance and credit, tax tools, personnel and information support of small business.
KEY WORDS
Small business; Employment; Economic expansion; Government support; Rural population.
One of the priority tendencies of Conception of long-term social-economic development of Russian Federation is the assistance of small and middle business. In the mature economies of the world entities of small business have proved to be the necessary and important component of the strong national economy long before. The share of small business in Gross Domestic Product and employment of these countries makes 50-80%, while in the Russian Federation this indicator does not exceed 17-50% (tab. 1). Considering the share of this sector in economy, the smaller share in Gross Domestic Product is the share of one taken in small and medium business in the Russian Federation than in the countries with the developed and high-growth economy.
Table 1 - The share of small and medium-sized businesses in Gross Domestic Product and employment
in different countries
Country Share of GDP Share of employment
The USA ~ 50% ~ 50%
EU countries 50-70% 50-70%
Japan >50% >80%
People's Republic of China >60% >80%
South Korea ~50% >80%
Brazil >60% ~ 65%
Russian Federation <17% < 50%
But it's not only the quantitative characteristics that matters. This sector is typically market and makes the basis of modern market infrastructure as first of all promotes formation of the «healthy» competitive environment of economy. Subjects of small business provide an improvement in employment and growth of the real income of the population, improvement of life quality, create the most part of Gross Domestic Product, develop innovative and risk kinds of activity.
Small business in the modern market economy is both the target and the instrument of its development. This dual role is confirmed by the results of the functions analysis which are inherent to small businesses and which mostly characterize its development and focused on providing the unified integrity (Fig.1).
Figure 1 - Functions of small business
Thus, small business can be considered as the leading sector defining rates of economic growth. From the moment of the beginning of transformation of economy it is its major stabilizing factor.
ANALYSIS AND DISCUSSION
Unfavorable conditions for development of small business, including underdevelopment of public policy instruments of small business regulation, inadequate legislation, excessively high taxes, bureaucracy of the society and economy have caused relatively low rate of growth in the number of small enterprises (Figure 2).
2000 1600 1200 800 400 0
2012
2008 2009 2010 2011
■ Small enterprises ■ Micro enterprises Figure 2 - Number of small enterprises, thous. (just across the Russian Federation on January 1, 2013)
Thus, the average number of employees in small enterprises nationwide during the same period remained virtually unchanged. In 2008 this sector employed 10,366.2 thousand. At the end of 2012 the number of employees amounted to 10,481.0 thousand (Fig. 3).
12000 10000 8000 6000 4000 2000 0
2008 2009
Small enterprises
2010 2011
Micro enterprises
4 149,3 1526,9 3320,0 $863,2 1118,6
>217,1 5727,1 6470,2 5557,6 362,4
6
2012
Figure 3 - The average number of employees taken at small enterprises, thousands (All across the Russian Federation on January 1, 2013)
° building industry
□ agriculture
□ any other activity
□ wholesale and retail trade
B transport and communications
H real estate operations
B mining operations
□ manufacturing activity
Figure 4 - Number of small enterprises according to the economic activity in Russia, %
(January 1, 2013) [3]
13,7
Q building industry
□ agriculture
0 any other activity
□ wholesale and retail trade
□ transport and communications h real estate operations
■ mining operations B manufacturing activity
Figure 5 - Average number of employees at small enterprises according to the economic activity
in Russia, % (January 1, 2013) [3]
Analysis of the data by industry sector of small business in the country indicates that the largest number of small enterprises in 2012 accounted for wholesale and retail trade and real estate operations, respectively - 39.6% and 20.8%, the proportion of enterprises involved in agriculture economy, is only 3.5% (Fig. 4).
In the structure of the average number of workers at small enterprises, according to the economic activity in 2012, the share of employment in wholesale trade is 28.9%; 20.4% were engaged in real estate operations, 14.8% at the manufacturing sector, 13.7 % in building industry, the smallest number of workers employed in agriculture and mining 5.4% and 1.8% respectively (Fig. 5).
As specified above, the special importance and relevance is gained by the researches connected with creation of conditions for effective functioning and development of small business on macro - and regional levels, which is one of the priorities of state policy and is the serious step to economic and social prosperity of the society as a whole.
In most of Russian regions considerable specific weight is occupied by rural territories. They possess two thirds of the area of the country with the population of 39.2 million people, representing 27% of the total population. It allows considering the level of development of the rural zone as the target indicator of region's economy growth and the country as a whole, and also reflects the degree of its stability and readiness for the solution of contemporary challenges of modernization.
At the same there is not a simple situation in the village today. After the forced privatization of the enterprises the economy of the rural zone continues to degrade. The cultural heritage and identity of the Russian village is lost. The solution is possible by creating favorable conditions for small business development in the rural zone, and also acceptances of well-timed measures for support of the enterprise initiative.
Practically any economic activity in the rural zone can be the sphere of employment of small business representatives: besides traditional agricultural production and production processing, it is necessary to develop intensively nonagricultural kinds of activity, including rural tourism, public catering, consumer service enterprise, trade, repair shops, etc., thereby carrying out the role of the integrating beginning in increase of interrelations in economy of the region and promoting accessibility of urban living standards for rural residents.
In this regard, labor resource potential assessment will be significant for the development of small business in rural areas. Survey of rural residents (2011), conducted by the Center for Social Policy and Rural Development Monitoring All-Russian Research Institute of Agricultural Economics, and showed that the numbers of residents who are ready to create and develop their own business are less than unready ones: respectively 37 and 44%. As many as 20 % of a contingent, expressing willingness to running small business, they will be engaged in only with financial support from the state in the form of grants or concessional loans.
In response to the question: «What are the reasons you're not ready to build your business in the event of job loss?» - generally causes of socio-psychological and demographic data predominate, such as age and health status, lack of knowledge, reluctance to put oneself to some bother and take responsibility, fear to be broke to the wide. At the same time, the main reason is the seed capital; 34 % of respondents do not have the initial capital, the size of the state subsidy is considered insufficient. They hesitate to use credit, because it requires the return, and credit arrangements is considered to be difficult. 88 per cent of the canvassed managers (among the management of rural enterprisers) were in favour of financial difficulties as the main obstacles to the development of small businesses in rural areas.
Regarding the choice of self-employment and entrepreneurship, here the preference is given to agriculture (Table 2) [1]. 45% of respondents would be engaged in agricultural enterprise, on condition of receiving a subsidy in necessary size, to their opinion, then trade activity (29%) and consumer services of the population (14%) follows further.
Organization of rural tourism, fishing and craft activities, harvesting and processing of wild fruits and berries attracts only 4-6% of the respondents. Thus, it is necessary to create additional preferences for the development of these activities in rural areas.
Table 2 - The most attractive activities for the creation of small businesses in rural areas, 2011
Types of activity % of respondents working in companies and organizations
agricultural entrepreneurship 45,4
rural tourism 5,9
rural trade 29,3
public services 13,7
arts and crafts 4,3
harvesting and processing of wild fruits and berries, etc. 5,0
other 17,9
Small business in the Russian agricultural industry is represented mainly by private (peasant) farms (P (P) F) and private households (PH). In the law of the Russian Federation «Concerning the private subsidiary farming» they are all classified as non-profit organizations, while at the same time, many of them realize to 30% and sometimes more of output, ( while the average in the sector of agricultural economy is 18%) , that is involved in entrepreneurial activity. Therefore together with about 260 thousand (P (P) F) it is possible to refer about 25% of personal subsidiary farms as subjects of small agrarian business with the share of about 20% in products of agricultural industry. This share could be even more significant if small businesses do not have to face serious obstacles and constraints including economic and legal order. As a result, the number of private farms since 2000 has not practically increased and it makes no more than 15% of total number of small forms of market business in the country. At the same time, in terms of reducing the demand for labor from the collective agricultural enterprises, the expansion of employment in individual farms and small holdings helps prevent rising unemployment and becomes an important source of income.
Transformation of Russian rural economy in the new economic conditions depends largely on the «appearance» and fixing in the market of the figure of the business owner. That is the farming, as the subject of small business, which will give to agricultural industry the most part of the businessmen meeting the modern requirements of agrarian labour market.
At the same time small business in the Russian regions develops very slowly and unevenly. The most common reasons for this situation are the regional differences in regional branch structure of the economy and in the number of small farms, economic and geographical position of infrastructure which is necessary for the development of small businesses, marketing outlets etc. Also regional priorities in support of small business, local regulations, action of authorities, cultural and professional characteristics of the population, in particular predisposition to entrepreneurship activity is various.
Small business development promotes formation of aspirations to realize itself in business and to achieve success at a certain part of the population. It is impossible to underestimate the importance of this condition to achieve entrepreneurial success, as in our country, during the period of socialist development of the agricultural sector, technocratic forms of organization of the production process were actively applied, which provided the clear separation of workers to managers and executives, and finally contributed to their low level of interest in the results of their labour and alienation from the means of production.
In turn, the analysis of the entrepreneurial potential of rural areas revealed the following: the narrowness of the rural consumer market , weak technical capabilities of most small businesses enterprises, due to limited access to high technology and the lack of modern equipment in the village; the low education level of rural leaders , leading to adoption of wrong decision making; insufficient level of information support for the small business, which doesn't allow to be guided on local sales markets of production quickly; undeveloped investment base of small business; backward rural engineering , transport and social infrastructure [4].
Thus, based on numerous analytical researches it is possible to allocate a number of vital issues which representatives of small business face in the activity and which require urgent solutions: imperfection and discrepancy of the current legislation of standard and legal bases of small business administration from the state; backwardness of the state infrastructure of small business support; lack of effective financial and credit mechanisms for investment of small enterprises, as well as mechanisms of risks insurance; unfavourable taxation; problems
of material resource and staffing small business, as well as training and retraining for the implementation of activities in the competitive environment; lack of information systems support for small enterprises; difficulties in the implementation and realization of innovative projects and programs of entrepreneurs.
Today small business in Russia does not cease to experience serious difficulties. To overcome these difficulties requires the systematic and consecutive work including active financial support of small business, further improvement of the legislation, increase of efficiency of the state and regional development programs of small business, decrease in level of intervention for their overcoming in economy regulation, elimination of administrative barriers and fight against corruption.
The need to develop a fundamentally new concept for the management and support of small business, as an integral part of economic policy at the macro and regional levels, was determined by the lack of the unified approach to the implementation of its comprehensive support which would consider also the specific features of the region.
Studies show that Russia has not yet established a proper mechanism for the development of management system of state support for small businesses, contributing to the formation of optimal conditions for its operation. Their absence prevents internal development and dynamic growth of small businesses.
At the same time, formation of the layer of owners and businessmen, growth of competitiveness of the private sector in agricultural production can significantly smooth the situation in the field of employment of rural population now. Development of small business together with creation of additional workplaces broadens the sphere of business activity, involving the citizens, who are not possessing high competitiveness on the labor market, in work. Expansion of employment of rural population in the sphere of small business strengthens the competition between employers when hiring more highly skilled workers. Reacting to dynamic changes of market conditions, small business enterprises seek to become participants of innovative processes, to create new workplaces, using modern equipment and qualitatively improving professional characteristics of workers at the same time.
Nevertheless, the small business sector has taken its place in the national economy and represents rather influencing economic and political forces with stable dynamic development. The creation of sustainable economy, providing the high level and life quality of population and also integration of Russia into the world economic community is the main aim of economic reforms in the country. The developed small business, in its turn, is the effective instrument to achieve these goals without which the economy and society cannot exist and develop adequately.
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