Small and medium businesses are still facing problems in Armenia

Hovhannes Hakobyan

Elena Hakobyan opened her food facility months ago. He says that his small business supports 6 families, the employees pay legal taxes, but it is very difficult to work in Armenia․

“The government always brags that it supports small businesses, but starting a business was more difficult, I imagined․ I took the loan with great difficulty, after which a series of problems started, which I am still trying to overcome. I have tried to apply for many programs, I thought that maybe I am in a new field, that is why it is difficult, but day by day I am convinced that starting a business does not benefit me, but I suffer losses”․ says Elena.

The United States Agency for International Development (USAID) has noted that difficult access to financial resources in Armenia is an obstacle to the development of small and medium-sized enterprises, as there is a strong mismatch between SME property required by financial institutions as collateral. As a result, SMEs that do not have real estate are often rejected by banks, or because of high rates they avoid taking loans. The World Bank (WB) reports have repeatedly cited the unhealthy competitive environment in which start-ups fail to position themselves.

On the other hand, the government declares that SMEs "under its auspices" enjoy a number of privileges. Programs have been implemented, as a result of which the price of electronic signatures has been reduced, the number of tax reports has been tripled from 12 to 4 per year, the processes of liquidation of the enterprise, conversion of the apartment into an office have been simplified, customs and tax administration has been simplified. A new generation of cash registers (cash registers) was introduced, the Law of the Republic of Armenia "On Turnover Tax" was adopted, etc.



SMEs are active in the processing industry (food and non-food). According to the data of 2018, out of 74,365 active taxpayers, 6491 are engaged in this sphere, 485 - in agriculture, forestry, fishing, 339 - in mining. In the field of industry, micro-organizations are more active, mainly operating in the field of agricultural processing.

SMEs have a growing share in GDP. It provides about 33% of GDP. To increase this share, small and medium-sized enterprise development policies remain in the focus of government attention. The National Center for Small and Medium Enterprise Development (SME DNC) of Armenia, established to identify their capabilities by different sectors of the economy, to provide financial and consulting support, is implementing a number of programs in this area of business. The organization also provides free consulting services to businesses in this sector.

Small and medium-sized businesses in Armenia rarely receive professional advice, which is explained by the lack of business management culture among Armenian businessmen. According to the analysis of Ameria Consulting Company, this is the most prominent of the many problems that hinder the development of SMEs in various industries. Only 14% of SMEs invest in industry innovations, 13% in marketing, and 6% in new types of products for the domestic market.

“Ensuring a competitive field is necessary for the activation and development of the SME sector in Armenia. And for that we need a fight against sectoral monopolies, real tax benefits, reduction of the number of inspections, etc. In addition, the Government of Armenia should initiate the financing and implementation of business management culture, capacity building programs for individual entrepreneurs. Direct financing of start-ups will contribute to their faster development” says Gharib Harutyunyan, an economist, President of the Compass Center in Gyumri.