Банкеръ Weekly

Briefs

THE BIG ENCOURAGEMENT OF BUSINESS HAS STARTED

The MPs from the Parliamentary Economic Commission have at last given a chance to the draft Bill on the Encouragement of Entrepreneuship to reach the plenary hall. It was moved to the National Assembly back in November 2003, but due to unprecise legal formulations its discussion in the commission was several times postponed. Now the only provision that has to be additionally specified next Tuesday (April 27) is connected with the role of the Incentive Bank when guaranteeing credits, extended to small and medium-sized enterprises (SMEs). The draft bill itself, which after its approval by Parliament will entirely revoke the Act on SMEs (effective since 1999), is very similar to the law it is going to replace. It only introduces the European criteria about macro-micro- and medium-sized firms and regulate the merger between two structures - the Agency for SMEs and the Agency for Encouragement of Trade, which could be effected with the same success by a Council of Ministers' decision.By the new act we want to generate and stimulate the general entrepreneural culture, and to make purely structural changes in the institutions with the state administration which are related to the policy regarding enterprises, the Deputy Minister of Economy Dimiter Ivanovsky said in front of the BANKER weekly. In his words, the amendments will also introduce new measures for the encouragement of entrepreneurship. The Chairman of the Agency for SMEs Angel Despotov sees two important point in the new legislative document. The first one is connected with the SMEs concept. As until now the number of the firms' personnel will be the major criterion for specifying their statute. A micro company will be that whose staff is up to 10 persons; a small one - with up to 50 employees, and a medium-sized company will have up to 150 employees. New and considerably higher financial indicators will be also introduced for these enterprises. Until now a firm with an annual turnover of up to BGN1MN was regarded as a small one, and the new law will raise that threshold to BGN13MN. The medium-sized category will include companies with an annual turnover of up to BGN78MN (up from the current BGN3MN) and balance value of assets up to BGN52MN. However, the bill does not make any provisions for firms with a small number of personnel but with high efficiency. There are plenty of such companies in the spheres of wholesale trade and financial services. The European definition is somewhat restrictive, but it does not affect the companies themselves, Mr. Despotov commented.The second important point in the draft, according to Mr. Despotov, is the change in the structure of the Agency for SMEs, and more specifically its transformation from a state-run to an executive agency with the Ministry of Economy. Even now the agency formulates the policy regarding the small business, but its chairperson does not attend the meetings of the Council of Ministers, and his communications with the Cabinet are effected through the respective minister. This creates difficulties, but they will be eliminated by the projected transformation, Mr. Despotov is adamant.The deputies from the Parliamentary Economic Commission rejected the proposals, moved by the MPs Ginyo Ganev, Radoslav Ilievsky and Yordan Nihrizov, for setting up a BGN50MN guarantee fund for SMEs. Deputy Minister of Economy Ivanovsky explained that the concrete measures and schemes for financing SMEs would be planned in the annual programmes, worked out by the Economy Ministry, in compliance with the National Strategy for Assisting Entrepreneurship. The necessary funds will be earmarked in the budget of the Ministry of Labour and Social Policy, headed by Ms. Lidiya Shouleva. At the present stage I would not like to comment on concrete amounts, although the budget procedure for 2005 has already begun. But I can certainly say that within the framework of the Ministry of Economy's budget we'll insist to direct money for financing innovation projects for energy efficiency this year, Mr. Ivanovsky pointed out. As per the proposal of Valeri Dimitrov, Chairman of the Parliamentary Economic Commission, the draft bill will include a provision, stipulation the new mission o Incentive Bank. In addition to appraising the credit rating of companies applying for financing from commercial banks, it will be also act as their guarantee. For that reason and on the proposal of experts from the Ministry of Economy the Financing chapter was entirely dropped from the bill. Mr. Ivanovsky's explanation is simple and clear: It did not say anything in particular. Presently, the Ministry of Economy is also implementing a programme for the encouragement of entrepreneurship, and more specifically for starting a business in four spheres under the JOBS programme. of the US Agency for International Development (USAID). We are also offering funds to potential entrepreneurs under grant schemes. It is sufficient if they have a good idea for launching a business. Of course, after working out the standard business plan, the idea is appraised by an expert committee, the Deputy Economy Minister added.Both MPs and experts are adamant that the new law will enter into effect by the end of the present parliamentary session. It is another question how it will start working.

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