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. Last Updated: 07/27/2016

Putin Defends Small Business

President Vladimir Putin slammed bureaucrats for stifling small and medium-sized businesses with a myriad of paperwork and crazy rules, even suggesting that people who register a small business should be given a medal for bravery.

Speaking at his Monday meeting with Cabinet ministers, Putin said authorities had failed to help small and medium-sized businesses develop.

"Everyone who opens a new firm or business and registers it should be given a medal for courage because the government and the regions have still not been able to create the conditions in which small and medium-sized business can develop freely," Putin said, flanked by Prime Minister Mikhail Fradkov and chief of staff Dmitry Medvedev.

"I am not talking about taxation -- here something is happening -- but to register an enterprise at the present time is simply impossible. This is simply a mockery of people and common sense."

Putin called on the government, the Federation Council and the regions to improve the situation, "or this chaos will continue further."

Five years into Putin's presidency, small and medium-sized businesses face a host of problems, including demands for bribes from officials, masses of paperwork, a host of conflicting regulations and skewed competition, according to businessmen and organizations representing their interests.

Nurturing the SME sector is seen by organizations such as the World Bank as a key way to boost prosperity and wean the country's economy off its reliance on natural resources.

According to Opora, an organization that lobbies on behalf of SME development, small businesses make up just 13 percent of official gross domestic product, far below rates in the United States, Europe or China.

In the decade to 2004, the number of small businesses officially rose by just 100,000, to 950,000, according to Opora data, indicating that many businessmen avoid registering their companies in an attempt to escape the contradictory rules and predatory officials.

In a draft medium-term economic plan published in December, the Economic Development and Trade Ministry said "a significant amount of small business remains in the shadows without registration and without paying taxes." Economic Development and Trade Minister German Gref has said that administrative barriers -- a catch-all for corruption, paperwork and conflicting rules -- eat up 10 percent of small business revenues.

"Many successful businessmen say they would not have started their businesses today, as it is harder now than even a few years ago," Opora president Sergei Borisov said through a spokesman.

"The government and the state need a coordinated policy on small businesses. Now there are different plans and ideas, but nothing is coordinated. The president said people who found a business deserve a medal, but all businessmen want are the conditions to run their businesses."

One foreigner who runs a small business in Moscow said on condition of anonymity that positive changes to the tax system were being canceled out by increased paperwork for almost every activity and conflicting interpretations of the rules by various officials.

"Russia is losing out on a massive opportunity, as these companies could be a massive driver of growth if we were just given the chance to do our job," he said.