The theme of small and medium businesses is the inseparable part of the speeches of the Armenian statesmen. They have always said that it’s necessary to develop, cherish and protect the small and medium businesses.
However, besides speaking, nothing else is done in that direction. The impression is that they are uttering these words by duplicating the words of others that they have heard. It seems that in reality they are thinking what we need the small and medium businesses for. For example, they are thinking why would there be 100 small stalls and stores if there can be one big supermarket. And let the owner of the small store work at the supermarket as a salesperson. Of course, he won’t have any profit but will have a regular salary and his nerves will be in a decent shape because he will avoid dealing with the tax body and regulations. Moreover, in the case of the small store owners they not only think so but also realize their plans. Truly, if we look at this with the business logic – efficiency of profits, expenditures then in the real market small businesses shouldn’t have existed. The bigger ones should have already swallowed the small ones and it would really resemble communism. Everything would be centralized. The only difference would be that the owner of the capital wouldn’t be the state but certain individuals. But such a thing doesn’t exist even in the most developed countries. And the reason is not only the fact that the state wouldn’t allow this. In developed countries the biggest companies realize the importance of small and medium businesses and no one messes with them. So which are the benefits? Here are some of those:
a. The increase of the number of small and medium businesses implies strengthening of the middle class, which is the main guarantee of democracy and political stability (unlike Armenia migration is not the guarantee).
b. The ratio of the economically active citizens grows, which increases the incomes of people and mitigates the polarization of social classes.
c. The development of small and medium businesses enables to open new workplaces without spending a big capital (especially in the service sector).
d. No matter how surprising it might sound the development of small businesses conduces to the development and investment of technological and organizational innovations. In conditions of intensive competition smaller companies more often take the risk and implement new projects.
e. Small businesses indirectly contribute to the increase of efficiency of major companies by occupying new markets. Not only big companies are born from small businesses but also progressive scientific branches and productions.
f. Small businesses prevent monopolies especially in the sector of production and conduce to the deepening of competition.
g. Small businesses bring different sectors of the economy closer.
h. Small businesses are more flexible and responsive to changes, which results in increase of quality and demand of products.
In developed countries people understand these facts very well. That is why that, for example, the law on small businesses of the United States writes that the economy cannot survive without small business, which in its turn needs permanent state support.
They not only write about it but take serious steps for that purpose. Among countries that attach importance to this issue are European countries, Japan, Canada and other developed countries. Currently in the US small and medium businesses provide 50-52% of the GDP, in Japan – 55-57%, in Italy – 57-60%. According to certain information, in Armenia this rate does not exceed 40%. This is heroism in consideration of the fact that small businesses are supported here only by declarative announcements.
By the way, Armenia has a law on supporting small and medium businesses too, which was adopted in 2000. Of course it does not write that the economy cannot exist without small businesses as the US law does, but it writes the directions for the support of the state. According to the la, the main directions for supporting small and medium enterprises are formation of attractive environment, supporting financial investments, providing guarantees, creating supporting infrastructure, advisory support, assisting with innovations and investing modern technologies, training specialists, etc. What has been done so far? Has the reporting and tax policies been simplified? There are event things that are simply funny.
A center for supporting the development f small and medium enterprises has been created but its effectiveness is very small. According to the information of this institution, in 2010 only 30 start-up businesses received support and only three companies received the right for partial subsidy of business credit. This is very small thing even in consideration of the fact that according to the information of the supervisory body, this support in many cases did not reach the real destination. For example, people took money for developing businesses but spent it on reconstructing the second floor of their private house. We saw the attitude of the state to small and medium businesses during the crisis too. In developed countries the crisis made governments to pay more attention to small and medium enterprises. In Armenia a special institution for supporting these businesses was created, but it was decided that they would not support start-up businesses.
In a word, the small and medium businesses do not enjoy the support of the government but instead of that they resist the state. In addition, successful small business owners are in horror as they start to have problems all the time. The government says all the time that registration of businesses has been simplified and can be done online, but they don’t speak about the other side of the coin. Maybe with this procedure we are like European countries, but with effectiveness of support to the development of businesses we are stagnating because even if one is success, they squeeze the last cent from him instead of supporting initiatives. This simplified process of business registration seems to have one purpose only – to push people into a swamp.
If this process continues and businesses are centralized, large businesses will press on small ones, and the state will only watch them dissolving. In the end large businesses will start to merge and buy each other, and small ones will watch them doing it, but they will watch from Europe and other countries with the help of the Internet. We hope one day large businesses will understand that by merging small ones they act against themselves. But we don’t think it may happen because from the old times wishing the property of others happened more than thinking pragmatically.