SME Development Council Holds Second Session

Second session of the SME Development Council, chaired by Prime-Minister T.Sargsyan, was held today in the Government of Armenia.

It did not take long for the work, initiated by the SME Development Council, to bring its first fruits. Based on the discussions between the officials and business circles during the SME Development Council first session, a few issues hindering doing business in Armenia have now been resolved.

Secretary of the Council, Deputy Minister of Economy Karine Minasyan presented the progress achieved after the first Council meeting. She mentioned that to secure implementation of the protocol directions of Small and Medium Entrepreneurship Council first meeting on 27.07.2011, the following actions were carried out to resolve three issues:

A. the state registration process for business entities has been simplified, and the private enterprises are provided their registration number for making social insurance payments at the state registry office immediately upon registration there, without wasting time on visiting other offices. At the moment, the principle of “one window” of legal entities' state register doesn’t apply to getting registration number in social insurance fund, which means that advantages of "one window" concept are not used completely. However, starting from January 2012 the situation will change, and business owners will not need to spend additional time and effort to get registration number in the social insurance fund. This has been achieved through the RA Government Law N 1122-N, accepted on August 4, 2011.

B. registration of real property lease for business purposes has been simplified, and as of January 2012 the rental procedure will not need to be registered at the notary's office. In addition, the cost for renting an office will be fixed at 25,000 AMD instead of per square meter calculation, as it is done at present. The RA Law “On making amendments in the RA Law “On state registration of property rights” eliminated the provision of notary validation of leasing contracts, thus establishing one-window principle, which functions at the RA State Cadastre Committee. At the same time a unified payment for leasing contract registration has been determined.

C. the cost of acquiring of e-signature for small businesses after July 2012 will go down by three times, from 15,000 AMD to 5,000 AMD. Considering limited financial possibilities of micro and small enterprises, the payment established for purchasing electronic signature hinders the entrance of those entities into the system of electronic management, which will be a must after 2013.

The discussion during the session into considering of options on facilitation of doing business for small and micro small enterprises. In particular, T.Sargsyan noted that fees charged by the Center for Accountancy Assistance for providing accounting services to those entities could be reduced (currently they pay 50,000 AMD monthly, which is a burden for micro small enterprises) while simplified statement forms should be developed, as well as the number of necessary accounting documents could be decreased, to make the overall process both simpler and cheaper. T.Sargsyan assigned to the Small and Medium Entrepreneurship Development National Center to discuss this issue with the Center for Accountancy Assistance, which is providing services to legal entities, and propose solutions during the next Council session

The representatives of business communities raised three issues concerning facilitation of business for SMEs. In particular, they focused on creation of equal opportunities both for local producers and importers, mainly in situations where the cost of imported products is lower than that of locally produced goods. Next issue for discussion was simplification of procedures of registry of lease of real property for business purposes in State Cadastre.

On top of this, they raised the issue of elaboration of a protocol for putting into practice collective load transportation mechanism which will greatly reduce the export expenses for small and medium enterprises.

T.Sargsyan welcomed those suggestions and assigned the Secretariat of the Council to elaborate government decisions for the last two issues in the shortest possible timeframe, as they can be resolved without any legislative changes.

Tax Changes to Improve Business Environment for SMEs

Speaking with the representatives of small and medium businesses at the second session of SME Development Council, Prime-Minister Tigran Sargsyan introduced today the forthcoming changes to the tax legislation, elaborated by the Government of Armenia. He highlighted that many of those legislative changes are targeting better business conditions for small and medium enterprises. Those changes are expected to come into force in 2012 and will facilitate doing business in Armenia, in particular, by creating equal opportunities for various business groups, including importers and exporters and small, medium and big businesses. The amendments will also shift the tax burden from the SMEs to big businesses.

Among other important things, noted the Prime Minister, is expansion of number of areas of commercial activity at privileged tax conditions for SMEs (this will mainly relate to production of food, hotels, transportation of people by mini-buses, parking lots and auto repairs), and increase of VAT refund threshold from 100,000 AMD to 10,000,000 AMD without check-ups and audit by tax bodies. Besides, the government will require conducting big transactions using bank transfers instead of cash operations. This will also create better conditions for small and medium enterprises.

SME Development Council 2nd Meeting on November 2

On Wednesday, November 2, the second SME Development Council meeting will be held in the Government of Armenia. Chaired by Prime-Minister T.Sargsyan, the session will look at the progress after the first session on July 27, identify next issues to be examined and processed. The state officials and businessmen will discuss a set of questions related to improvement of business climate in Armenia and suggest ideas to make doing business in Armenia eaiser.

TWO COUNCILS SET UP TO IMPROVE BUSINESS CLIMATE IN ARMENIA

Continuous improvement of business environment for small and medium enterprises (SME) is a key direction of Armenian Government's reform program. In its efforts to enhance the enabling environment for doing business, the Government of Armenia, jointly with the Business Support Office of European Bank for Reconstruction and Development (EBRD BSO), has taken important steps to promote structured partnership and successful policy dialogue between the state and the private sector. Those included establishment of the Inspection Reform Coordination Council and of the SME Development Council.

Creating a platform for a meaningful public-private dialogue was the key objective in setting up the Inspection Reform Coordination Council. An innovative approach and creative practice resulted in full ownership of the reform program among business community.

The successful cooperation through the platform under the Inspection Reforms Council set a stage to broaden the scope of the policy dialogue and establish a more advanced module to enhance the effectiveness of the public consultations. There was a need to establish a new forum with limited participation of senior cabinet members and relevant representation from the private sector, with a clear understanding that the private sector is expected to become more proactive and maintain effective pipeline of issues for regular consideration.

To address this need, after intensive stage of consultations with all parties concerned, the government developed a concept on establishment of the SME Development Council. The concept was circulated within the government and presented to the prominent private sector representatives. Based on the feedback, all comments and suggestions were carefully reviewed and considered while finalizing the charter and modus operandi of the Council.

On July 7, 2011 the Government made a decision on establishment of the SME Development Council. The idea is that the Council will serve as a platform for policy dialogue aimed at identifying, prioritizing and resolving key constraints to the SME development in Armenia. The Council is chaired by the Prime Minister. It has nine permanent members, five of whom are representing the private sector, two - donor organizations and 2 - the Ministry of Economy.

The private sector is represented in the Council by the most prominent and active associations: Chamber of Commerce and Industry of Armenia, Chamber of Commerce and Industry of Yerevan, the Business Advocacy Network, the Foundation for Small and Medium Businesses and the Association of Armenian Freight Forwarders. The EBRD and the Organization for Security and Co-operation in Europe (OSCE) are the members representing the donor community in the Council. The Ministry of Economy is represented by the Minister and First Deputy Minister.