Vestnik Kavkaza, Russia
Oct 31 2013

31 October 2013 - 11:44am

David Stepanyan, Yerevan. Exclusively to Vestnik Kavkaza

The sphere of small and medium-sized business (SMB), which is still
the basis of the Armenian economy, isn't developing due to unbearable
taxation. This is one of reasons for the migration of businessmen,
which leads to a reduction in demand for SMB goods among the
population. SMB is under a extremely strong negative influence which
can be called "the ripple effect." It can be concluded, after reading
the results of the survey "SMB in Armenia: the current situation,
tendencies, development, and applied instruments," which has been
conducted by the consulting company Ameria.

Considering the fact that the share of SMB in Armenia's GDP was
about 43%, the problems of the sphere had to cause concerns among
top officials. However, it isn't taking place. According to surveys
involving 1003 enterprises, only 5.1% of Armenian SMB entities are
medium-sized enterprises, 20.2% are small, while the other 74.7%
are micro-entities. 47.6% are involved in trading; 34.4% - in the
service sector; 15.5% - in industry; 2.2% - in construction.

According to the director of development of the group of companies
Ameria, Tigran Dzhrbashyan, the SMB sphere suffered a significant
fall in comparison to 2012. And Armenia hasn't established favorable
conditions for development of the sphere. Small and medium-sized
enterprises, especially micro-entities, remain in a profound
depression. This is encouraged by huge migration from the regions. One
of main problems in the path of SMB development is heavy taxation,
which traditionally attacks micro-businessmen. As a result, some of
them have shut down, others are almost bankrupt.

Another negative factor is the low accessibility of loans for
enterprises working in the regions, i.e. pay-back periods are short,
while rates are enormously high. Average dram credit rates are about
18.5%, dollar credit rates - 14.5%. This means that an SMB is an
instrument of profit for commercial banks.

Low demand in the SMB sphere can be compensated only by growing
exports. Exporting enterprises are least vulnerable to the fluctuations
of internal demand. Considering the fact that SMB goods are unlikely to
be popular in Europe, Armenian businessmen will have to wait to join
the Customs Union. At least this can be concluded from the results
of the surveys by Armenian experts. .