Role of SME in the Russian economy is not that small compared to other countries

Double increase of small and medium-sized enterprises (SME) share in the GDP, i.e. from 20 to 40% is the main benchmark of strategy of small and medium-sized enterprises up to 2030; relevant national draft project suggests increase of SME share in the GDP up to32.5% by 2024 which on the whole matches goals of SME Strategy.
Indeed, major issue related in the previous years to inability to monitor real role of SME sector in the GDP in the absence of relevant annually upd ated index in the publicly available Russian statistics. Currently, it is available, however, juxtaposition with other countries is still difficult on a direct basis due to differences in criteria used for attribution of enterprises to SME sector in various countries.
Abroad, there is no unique definition of SME or unique criteria. In particular, only 46 of 132 countries consider enterprises with less than 250 employees as SME. This is a unique criteria in a few countries only while different indices of industry sector exist in many countries. Variety of criteria come from objective institutional specific features of the countries, differences in economic structure and goals of governmental policy: as a rule, individual support program or a particular development institution determine on their own main or additional criteria of selection in accordance with their specialization.
In the context of international comparison, data provided by Organization for Economic Cooperation and Development (OECD) and Eurostat collected by cross-cutting method, serve as main statistical sources of information on development of entrepreneurship in different countries. According to their calculations, small and medium-sized business in OECD countries create in the average about 55% of the GDP and about 59.1% of working positions and role of SME sector is even higher in the countries of European Union: 57.5% GDP, 65% of employed. For comparison, according to OECD, about 33% of all employees are engaged in SME sector in Russia while there are no data on GDP.
OECD use selection of enterprises per countries for comparison of international data collected according to information provided by tax bodies. However, OECD Russia data bank relates only to 250.000 enterprises while there are approximately 2.7 million enterprises in Russia. Data bank does not account individual entrepreneurs and most of the micro companies who do not submit their zero balance accounting as well as governmental organizations and financial sector (banks). Therefore, referring to SME share in the GDP for international comparison is about business sector rather than the overall GDP, which is the practice of calculation in Russia. Therefore, official index of 21.9% GDP provided by Rosstat shall not be used for direct comparison with other countries.
If SME share in the Russia GDP calculated excluding governmental and financial sectors in accordance with OECD methods it will constitute about 39%, i.e. almost two times higher than official estimation but still lower than in most of the countries.
As for meaningful distinction between level of SME development in Russia and abroad, a certain lag can be explained, inter alia, by objective reasons: SME share in the employment and in the GDP critically depend on structure and size of the economy. In this case, Russia is closer to the USA, Canada, Japan, rather than to countries of the European Union based on development of labor and capital – intensive industries and high index of the enterprises’ average size.
Thus, situation related to basic indices of SME role is not that bad in Russia as is thought to be, but it is specific due to a number of factors. The issue of Russia is not a low number of small and medium-sized enterprises, rather, it is the sphere of SME which does not qualitatively correspond to a similar sector in developed countries by their characteristics: low number of exporters, product companies, technological start -ups and innovation companies, a large number of enterprises who work fully or partially in the shadow economy.
With regard to estimation of fulfilment of the se t goals, it has to be stated that reaching the index of SME share of 32.5% GDP is a rather ambitious task. In order to achieve it, the index should grow more than 1.5% annually while at present it is less than 0.5%. Such a high rate is feasible only with the significant reduction of governmental sector, radical increase of SME share in public procurement, i.e. up to 32% and over, withdrawal of a substantial number of enterprises and self-employed from shadow sector.
Vera Barinova – Head of Innovation Economics Department
Stepan Zemtsov – Senior Research, Innovation Economics Department