Yerevan /Mediamax/. Interview of Executive Director of “Small and Medium Entrepreneurship Development National Center of Armenia”## Foundation (SME DNC of Armenia) Ishkhan Karapetyan to Mediamax agency and Banks.am portal

- SME DNC of Armenia has been functioning since 2002, however the activity of the Center, it seems, became especially actual only lately. What is the reason?

- I do not agree with your statement, according to which the work of the Center only recently became actual. 98% of our organization’s activity is directed to solution of financial, information and other tasks of small and medium entrepreneurship subjects in the regions of the republic.

Simply, we also gained a new function, directed to establishment of cooperation between the subjects of SME and state structures. This became a reason for the activity of the Center to enjoy special attention recently. The Center, per se, became the main link between business circles and state structures, in particular, the State Tax Service and the State Customs Committee. Besides, there were new developments as well, which related to the State Register, the State Cadastre Committee, as well as the activity of organizations, which realize certification, licensing and checks.

- How does one differentiate the small business from the medium or the large ones? Does the Armenian SME DNC have its own standards?

- SME DNC in Armenia does not have its own standards. The criteria for classification of subjects of small and medium entrepreneurship are brought in the law “On state assistance to small and medium entrepreneurship”, according to which the classification is carried out basing on 3 criteria.

Super-small enterprises are the ones, which have less than 5 employees. Small enterprises are the legal entities, the average list of employees of which does not exceed 50 people in the sphere of industry and material production, 25 – in the sphere of construction, energy, science and education, 15 – in the sphere of transport, communication and trade. Medium are the enterprises, the average list of employees of which does not exceed correspondingly 100, 50 and 30 people.

At present, a new draft law is at the stage of elaboration. The draft law will allow classifying small and medium enterprises not only as to the number of employees, but also as to the level of turnover and the indices, reflected in their balance sheet. This will allow making more exact distinction between small and medium enterprises.

- What are the main issues, concerning which the enterprises turn to the SME DNC of Armenia and what are the mechanisms, according to which the Center realizes its assistance?

- SME DNC of Armenia realizes its activity by means of its branches and representative offices in all the marzes of Armenia, as well as the central office in Yerevan. The assistance programs can include all the enterprises, which meet the criteria, established by the law, as well as the priorities, defined by annual programs of state assistance for small and medium entrepreneurship, which include the sphere of production, entrepreneurship in distant and bordering settlements, production of import-replacing goods, as well as application of innovations and new technologies.

The main part of requests, addressed to us, concerns consultation, information and educational assistance, the significant part are subjects, which turn to us for financial assistance.

Recently, our hotline by 563714 phone number started functioning, using which people often turn to us with questions concerning interrelations with the tax and customs systems and various structures. Besides, we also receive proposals on improving the legislation aiming at making the voice of a SME subject better heard. All the questions and proposals, which we receive, are generalized and presented to the consideration of the Supreme Council on implementing new culture of income administration, headed by the Prime Minister of Armenia. The Council discusses those questions and proposals and makes the corresponding decisions.

Jointly with the State Tax Service and the State Customs Committee, there was a special order of work with the issues of businessmen elaborated, due to which solutions are found in quite short periods of time. The answers to questions are placed at the website of SME DNC (http://www.smednc.am ) in the section of “Questions and Answers”.

- How many enterprises did receive assistance from the Center?

- In 2007, we received 8494 applications and rendered assistance to over 4800 subjects of SME, more than 3500 of which received assistance in a few program directions.

In the first half of 2008, we received 3334 applications, 2228 of which, beginners, just as already functioning subjects, received assistance from the Center. I should note that 578 of them received complex assistance. Notable is the fact that in July, the number of subjects, using the assistance programs, grew for 10-15%, which is conditioned by actively spreading information on the programs of the Center.

- What are the main obstacles, which small and medium business in Armenia faces?

- The problems of small and medium business in Armenia are various and differ in Yerevan and in the marzes of Armenia as to the depth and the level of their manifestation. The majority of problems of small and medium enterprises in Armenia concern their relations with state structures and the availability of financial resources. The latter is mainly conditioned by high interest rates of the banking credits. This problem is especially urgent in the marzes of Armenia. We have a situation, when a beginner entrepreneur, who wants to attract financial resources and start his/her own business, does not have that opportunity.

There are serious problems, related to the availability of consulting. And there is a huge information gap among SME subjects in Armenia.

To solve all these tasks, the Center is realizing programs, which include a program for providing credit guarantees, a program on supporting the beginner businessmen in attracting financial resources (which allows the newly-established enterprises receiving financial support already in the process of its establishment), a program of partial subsidizing of credit rates, as well as a new pilot program of share funding, which is being realized starting this year and provides that we acquire a certain share in the authorized capital stock of the company.

- Which are the banks you cooperate with and do you plan to expand the list of the partner-banks?

- At present, SME DNC cooperates with 6 banks. Recently an agreement was signed on cooperation with VTB Bank (Armenia), which became the participant of our program on provision of credit guarantees. Talks with “Converse Bank” are at their conclusion stage and the cooperation agreement with the given bank, probably, will be signed in mid-August. Besides, we also carry out active work with “ProCredit Bank”, aiming at realizing joint programs.

- It is expected that the electronic format of communication between the entrepreneurs and tax bodies will begin functioning starting from 2009. Are you aware of the details of the new system?

- The package of draft laws on improving tax administration, which, most likely, will be approved at the fall session of the parliament, provides for measures, directed to significant simplification of communication between SME subjects and the tax bodies.

One of the main preconditions of this is considered to be the implementation of a system for providing tax reports electronically. The transition to electronic system will be realized stage-by-stage. Today, a quite simplified procedure for provision of tax reports already functions and the entrepreneur may submit his/her tax report in the course of a few minutes.

After the implementation of the corresponding program support, it will become possible to provide the reports electronically, which, I hope, will become reality in 2009.