Business Support Office - ANNUAL REPORT 2015 · 2016-05-11 · EBRD Business Support Office Annual...

EBRD Business Support Office Annual Report 2015

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Promoting public-private dialogue, strengthening advocacy, building capacity,

improving business environment and investment climate

ANNUAL REPORT

2015

BUSINESS SUPPORT OFFICE - ARMENIA EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

This report provides a comprehensive

overview of the EBRD BSO’s activities in

2015 and outlines the work program for

2016. It features the summary of

implemented activities and illustrates the

main achievements and key facts.


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1. THE BUSINESS SUPPORT OFFICE ACTIVITIES IN 2015

Introduction

The Business Support Office (the BSO) has been established by the European Bank for

Reconstruction and Development (EBRD) with the objective of promoting a structured

partnership and constructive policy dialogue between the state and the private sector in Armenia.

The vision of the BSO is to become an integral and valuable catalyst between the

Government and business community through ensuring an effective dialogue aimed at improving

the country’s business environment and investment climate.

The mission of the BSO is to raise any key issues that affect the business environment,

provide technical assistance to the Government in the process of developing strategies/reforms to

address identified impediments, and, in parallel, facilitate prior consultations with the business

community and transmit feedback on proposed reforms to the authorities.

The BSO project was funded by the EBRD’s Multi-Donor ETC Fund for the reporting

period and submits reports to the Operation Leader, Head of EBRD’s Resident Office in

Yerevan.

Assistance to Investment Councils

In 2015 the BSO has continued supporting the activities of the two Investment

Councils, which serve as unique PPD platforms for the Private Sector in Armenia to raise

and address issues.

Inspection Reform Coordination Council (IRCC)1

The stable cooperation with the Secretariat of the Council and the Ministry of Economy

has continued since 2010 with BSO facilitating an effective public private dialogue on

the ongoing inspection reforms at the highest level between the Government, the business

community and donors.

1 http://www.bso.am/assistance-to-ircc

http://www.bso.am/assistance-to-ircc


2

SME Development Council (SME Council)2

Since its establishment in 2011m, based on the success of the PPD coordinated by the

IRCC, the Council serves as a platform for constructive policy dialogue aimed at

identifying and resolving key constraints to the SME sector.

During the reporting period the BSO has continued:

Ensuring the effective functioning of the PPD platforms (Councils) for implementing

reforms aimed at improving the business environment

Outlining the reform agenda for the Councils, ensuring the inclusion of the issues raised

by the businesses at the Council meetings’

Cooperation and proactive involvement of the private sector in the reform-making

process

Enhancing public awareness on the undertaken reforms.

Cooperating with the donors operating in the field of business environment improvement,

sharing and exchanging information and expertise.

The BSO Activities

Assistance to IRCC and SME Council

Facilitation of policy dialogues with the Private Sector through the organization of

regular meetings with business associations and NGOs

Providing technical expertise for developing potential solutions to the issues raised

Day-to-day cooperation with the RA Ministry of Economy

Networking with Private sector, keeping it informed on the reform processes

Outreach to SMEs in regions of Armenia

Brief review: what has been changed

During the reporting period there were 4 high-level Council meetings, which resulted in the

advancement of the inspection reforms process and introduction of new reforms for SMEs.

In cooperation with the Ministry of Economy the SME development strategy for 2016-2018

was drafted and adopted by the RA Government on the 1st of October, 2015. The strategy

2 http://www.bso.am/what-we-do-2/assistance-to-sme-development-council

http://www.bso.am/what-we-do-2/assistance-to-sme-development-council


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introduces the SME Development Council as the main structure and PPD platform that has a

crucial impact on the development of the SME environment in Armenia.

Our team together with the SME Development department of the Ministry of Economy has

agreed to ensure the implementation of the Strategy and achievement of the strategic goals

presented in the strategy (See part 2 of this report).

The progress in the simplified taxation for SMEs resulted in the amendment of the

Turnover tax, ensuring that each turnover tax payer in trade has the right to decrease its tax

percentage according to the volume of presented purchase invoices of those goods that have been

purchased for sales. Meanwhile the threshold of a turnover tax payer up to VAT payer has been

increased to 115mln AMD from 58.35mln AMD, which means that more SMEs can benefit

from the turnover tax regime.

After numerous discussions in frames of the SME Council on the Turnover Tax

percentage review and the issue of reconsidering the mandatory requirement of documentation

of purchases for SMEs, the National Assembly adopted the amendments to the RA Law “On

Turnover Tax”, enacted on July 1, 2015. In accordance with the amendments a diversified

approach in terms of documenting purchases of goods for direct sale was applied, providing the

trade area SMEs with an opportunity to decrease the preliminary set 5% of their turnover

up to maximum 1.5 % depending on the volume of

the documented deals.

In accordance with the reform for IT sector

startups, adopted by the SME Council, the system of

certification of IT start-ups has been working

effectively: by the end of 2015 72 start-ups have

applied for the certificate so far out of which 63

start-ups have received the certificate. In frames of

cooperation with the Ministry of Economy the BSO

has continued providing assistance in the

implementation of the RA Law "On state support

to IT sector" and the BSO legal consultant is

involved in the meetings of the certificating board.

The implementation of the law resulted in establishment of IT Companies Register in accordance

with the Government Decree as of 10.12 2015. The creation of the E-Register is significant for

Deputy Minister: 60 small IT companies with 250 workers opened in Armenia due to tax

exemptions November 17, 2015, news.am The number of those who want to start their own IT business is growing. In the beginning of the year, only rare application on the exemption regime were submitted, that number already reaching dozens now. The decisions on the applications are taken by the state and private council. Start-ups are also opened by workers of already operating companies, who decided to enter the market on their own with something new. But these are mainly young graduates, the Deputy Minister said. Source: http://news.am/eng/news/296895.html


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the sector development and will serve a database involving information on all the companies

representing the IT sector in Armenia.

The BSO has had several meetings and discussions with the USAID Tax Reform Project

representatives on the concept and preliminary works of the preparation of the Tax Code

Draft.

The BSO consultants have taken part in the launch of the working group meetings on the

Draft Tax Code and within the reporting period have worked on reviewing its General Part

with a purpose to submit recommendations to the Draft Tax Code in 2016. The BSO has also

been assigned by the Prime Minister at the SME Council meeting to review the new Draft

Tax Code, in particular studying the SME-related articles, identifying potential problems

and providing recommendations for solutions. The BSO has cooperated with the Ministry of

Economy in terms of providing recommendations and following up on their future discussions.

The BSO has initiated Leasing legislative framework improvement project aimed at

establishment of a favourable legislative basis for leasing development in Armenia and

development of mechanism for SME access to leasing. Together with a contracted consultant the

BSO has made a research on the obstacles of development of the leasing as a financial product.

Several problems have been identified which required a number of amendments in the legislation

along with organization of a number of activities aimed at raising awareness of leasing among

the SMEs. Several meetings have been held with the stakeholders and the preliminary

recommendations have been concluded in a presentation to be discussed with IFIs, banks and

other stakeholders as well.

In the framework of cooperation with the Ministry of Economy the BSO has been involved

in Doing Business programs monitoring. The BSO consultants have reviewed 43 legal acts

sent by the Ministry so far, most of which are related to the Doing Business Program.

Another issue solved in frames of SME Council resulted in an opportunity for Bed and

breakfast (B&B) small businesses to work under the regime of family entrepreneurship,

thus being exempted from business taxes.


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With respect to the assistance to IRCC the

activities of the BSO were directed at assisting the

launch of the second phase of Inspection reforms,

which is the Optimization of the inspection system

and with the support of the BSO the RA Government

approved the Law on Inspection Bodies. The law

provides a new type of bodies for all inspections and

the overall process to be completed by 2019.

2015 summarized the following achievements:

All the management boards inside the

ministries were established.

The first Inspection Body (Market

Surveillance) was established.

New Draft Law “On Inspections” was drafted

with the assistance of BSO.

Sub-legislative acts of the RA Law “On

Inspection Bodes” were elaborated.

Continuing the implementation of events in

context with the Inspection Reform PR strategy

together with the Ministry of Economy and The

World Bank Group several meetings have been organized, including a separate Press

Conference for journalists where the current situation of the reforms has been resented and

discussed, as well as meetings with entrepreneurs in Gyumri.

For other settled issues see the BSO 2015 achievements list and progress on achievements

set by the Action Plan below.

During the reporting period the BSO has continuously implemented communication and

raising awareness activities. The meetings with businesses in Yerevan and regions organized

by the BSO are a major part of the raising awareness campaign. 3 meeting in trade centers in

Yerevan and meetings with SMEs in 5 regions of Armenia have been carried out, in course of

which the businessmen were updated on the latest regulatory changes depending on their activity

Inspection Reforms: transparent management

system by 2018 June 8, 2015, banks.am The Head of EBRD Business Support Office Gevorg Poghosyan told Banks.am that the reforms are intended to introduce a better management system in inspection bodies and more transparent for enterprises. “Today the inspectorates are trying to assess their work by means of the identified irregularities, as well as the amounts of the fines brought to the state budget. The new law “On Inspection Bodies” defines that the inspectorates when evaluating their work will not have the right to use the amounts from fines submitted to the budget as a sign of their efficient work, because in reality this criterion cannot demonstrate actual efficiency…”.

Source:http://www.banks.am/am/news/newsfeed/10927/


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area, monitoring Turnover tax application was carried out and the SMEs had the opportunity to

discuss and consult on the problems they have faced.

Leaflets and notifications on changes in

SME-related regulations and legislation have

been prepared and circulated electronically, by

means of Facebook page and news updates on

BSO website.

The BSO has launched a new rubric entitled

“Small business smiles”, and we are going to

make short introductions of success stories of

SMEs operating in regions and Yerevan,

representing different areas and carrying out

interesting and unique activities, that can

encourage readers and start-ups.

Another innovative idea has been called to

life on BSO website. Different events, seminars,

workshops, meeting and even important deadlines

for SMEs are gathered in one place on a monthly basis as SME Events Calendar and available

here: www.bso.am/events .

The BSO Action Plan 2015: progress on achievements

Below is the overview of the BSO Action Plan issues that had been set to be addressed in

2015, their progress on achievement and current status:

TARGETED

REFORM AREAS

STATUS

PROGRESS ON

RESULT INDICATORS

COMMENTS

1.Implementation of

support to IT sector

startups

Met 1. Number of applied

startups -72

2. Number of registered

startups/ provided

certificates -63

In a period of six months

since the launch of

certification

-263 new job positions have

been opened,

-total profit is 519.370.585

AMD,

http://www.bso.am/events


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- total export volume

327.145.125 AMD

2.Business (Tax)

Ombudsman

establishment

In

process

A draft law was designed by

the staff of the government

after a number of discussions

and negotiations related to the

necessity of a Business Rights

Protection Office in Armenia.

The draft later has been

amended according to the

BSO comments inter alia.

3.Adoption of the

favourable option in

regard of the

obligatory

documentation

requirement for trade

area Turnover tax

payers

In

process

1. The overall percentage

of documented turnover

among SME traders-1.6%

2. The decrease of the

average tax percentage in

comparison with the

former percentage -1.9%

3. Increase of SMEs

which applied to work

under Turnover tax:

Turnover taxpayers as of

01.01.2015 -53443

Turnover taxpayers as of

01.10.2015 -57522

Increase: 4079 taxpayers

According to amendment

each tax payer has the right to

decrease its tax percentage in

accordance with the volume

of documented purchase

invoices.

4. SME access to

factoring and leasing

In

process

The BSO has initiated

Leasing legislative

framework improvement

project aimed at

establishment of a favourable

legislative basis for leasing

development in Armenia:

- Together with a contracted

consultant the BSO has made

a research on the obstacles of

development of the leasing as

a financial product.

- Meetings have been held

with the stakeholders

- Recommendations have

been concluded, presented

and discussed with IFIs,

banks and other stakeholders.3

5. Research and In The planned research was

3 http://www.bso.am/ebrd-bso-has-launched-a-project-on-leasing-development-and-legislation-improvement

http://www.bso.am/ebrd-bso-has-launched-a-project-on-leasing-development-and-legislation-improvement


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recommendations on

problems the

businesses faced at the

customs border

process delayed because of necessity

of additional funding.

Recommendation on the

problem of import and export

of cryptographic devices was

developed.

6. Introduction of

separated rates of local

fees for SMEs

In

process

The draft on decrease of local

fee amounts is currently under

the consideration at Yerevan

Municipality.

7. Assistance in the

Doing Business

Program 2015 and

development of SME

country strategy of

2016

Met 1.Armenia: increase in the

Doing Business rank: +3

2015-38

2016-35

2. Number of

recommendations and

suggestions included in

the SME Strategy:

17 recommendations

8. Clarification and

simplification of

taxation regime for

B&B providing small

businesses

Met Adoption of the taxation

mechanism for B&Bs:

(B&B) small businesses

were granted with an

opportunity to work

under the regime of

family entrepreneurship thus being exempted from

business taxes.

Today there are more than

200 B&Bs in Armenia.4

The increase of the number of

B&Bs will be calculated in a

year period starting from the

enforcement of the new tax

regime- January 1, 2016.

9. Review of the

Article 205 of the

Criminal Code

In

process

-The number of criminal

cases and proceedings

instituted by the

Investigation Department

of the Ministry of Finance

dynamic:

In 2013 – 705

In 2014 – 494

In 2015 – 178

-The number of criminal

cases sent to the court

after preliminary

investigation and

indictment:

The liability of investigating

economic crimes is often used

by the tax authorities not in

order to identify the crimes,

but to apply an additional

inspection on the basis of the

decision of the Investigator.

After raising the issue at the

SME Council a workgroup

including Ministry of Justice

and BSO to change the

Article's sanctions making

them proportionate to the

conducted acts, as well as to

abridge and clearly define the

4 http://hetq.am/arm/news/60733/mek-tarum-hayastanum8-nor-hyuranoc-e-bacvel.html

http://hetq.am/arm/news/60733/mek-tarum-hayastanum8-nor-hyuranoc-e-bacvel.html


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2013 – 66

2014 – 18

2015 – 15

Article's scope of application.

The fact that the issue has

been raised at the Council has

already positively affected on

the decrease number of the

cases enacted.

10. Development of a

draft of a new law “On

Inspections”

In

process

The Draft has been developed

by the BSO. All the

comments of the relevant

bodies on the Draft law have

been sent to the Ministry of

Economy for summarizing

and introduction at IRCC for

Government’s approval.

11. Drafting sub-

legislative acts for the

implementation of the

law “On Inspection

Bodies” and all the

necessary acts for

establishment the first

inspection body.

Met 1. Number of adopted

sub-legislative acts

- 6 Government Decrees

- 1 protocol decree.

2. Establishment of an

inspection body and its

management board

- Gov. Decree on

establishment of Market

Surveillance inspection

body and its

management board.

3. Establishment of the

appeal board

- Gov. Decree on

establishment and the

statute.

Other relevant information:

-Prime Minister’s Decree on

the appointment of the Head

of the Inspection body.

-Announcements on

appointments for vacant

positions for inspection body

staff.

-First range of trainings of

inspectors launched in

February of 2016.

12. Continue the

implementation of

events in frames of

Inspection Reform PR

strategy together with

the Ministry of

Economy and The

World Bank Group.

Met 1. Number of events

implemented-2

2. Number of SMEs

involved in the events- 59

June 5-6 a seminar with

journalists on inspection

reforms. Representatives of

12 media agencies

participated. Media coverage

followed.

December 9 Meeting with

SMEs on inspection reforms

in Gyumri. 47 SMEs attended.


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Press Review: Excerpts from news

Inspection Reform Coordinating Council meeting took place

March 18, 2015,news.am “The Council approved the working procedure of the Joint Appeal Committee of inspection bodies, the procedure for nominating the members of the Committee, the complaint form, etc…”. “The Commission will also examine the complaints filed against tax and customs superior authorities.”

Source:http://news.am/arm/news/257620.html

2015 "Best Businesswoman" Award of the Prime Minister of the Republic of Armenia takes place

April 7, 2015, mineconomy.am Since 2012, to properly appreciate the achievements of Armenian businesswomen in different branches of the country’s economy, "Best Businesswoman" Award of the Prime Minister is being held in Armenia. The award is aimed at ♦ discovering woman entrepreneurs, who achieved highest results during recent years ♦ encouraging the spread of best practice of the most effectiveness ensured businesswoman ♦ rising business activeness of women Incentive awards were given from international organizations: ADB, EBRD BSO, USAID, AWAY, IFC, UNHCR, EBRD BAS, UNIDO YOUTH, UNIDO Source: http://mineconomy.am/eng/598/1/news.more.html

Privileges for startups establishment and growth

are in force March 30, 2015, armenpress.am “Tax privileges for IT sector start-ups have been set up in Armenia fostering the establishment of new companies. From now on IT startups will be exempt from profit tax and income tax for them is to be reduced to 10%. The law has been drafted by the Business Support Office of the EBRD and the Ministry of Economy upon the request of NGOs representing the interests if IT sector companies in Armenia. “Armenpress” has talked to the BSO Legal Consultant on the privileges and certification procedure…”

Source:http://armenpress.am/arm/news/799653/startapneri-stextsman-ev-khoshoracman-hamar-artonutyunnery.html

SME Development Council Holds Meeting

June 19, 2015, gov.am The Council first discussed the possibility of applying a differentiated approach in the matter of taxation and granting tax benefits to those self-employed entities engaged in the family hotel business “Our goal is to eliminate barriers to SMEs, enable businesses to further strengthen and consistently promote economic development. We need to combine our efforts in order to advance the country,” - Hovik Abrahamyan said.

Source:http://gov.am/en/news/item/7965/

The Government supports bed and breakfast

house businesses September 25, 2015, banks.am B&B businesses will be granted an opportunity to work under the family entrepreneurship regime. “Moreover, it should be noted that this issue was raised at a meeting of the SME Development Council."-said Minister of Finance and State Revenue Committee Gagik Khachatryan” Source: http://www.banks.am/am/news/newsfeed/11297/

Armenian parliament approved resonant amendments to the law “On Turnover Tax” July 5, 2015, pastinfo.am …It is proposed to calculate the 5-percent tax rate to the total turnover, which can be reduced by 4% of the total volume of documented transactions for the acquisition of goods for direct sale / resale. At the same time the law determined that turnover tax calculated for persons engaged in commercial activities, may not be less than 1.5% of the taxable object. The revised law will come into force on 1 July 2015 and will be valid until 31 December 2018 inclusive. Source:http://www.pastinfo.am/ru/node/69180


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4 High-level Coordination Council meetings, chaired by the

Prime-Minister5.

Adoption of SME Development Strategy for 2016-2018 with

the BSO contribution and a separate chapter on SME

Development Council.6

Decrease of the Turnover tax percentage in accordance with

the volume of documented acquisitions (5% to 1.6%),

documentation of acquisitions becomes voluntary.

Meetings with SMEs in 5 RA regions, 3 trade markets

(discussion of new legislative initiatives, raising awareness,

Turnover tax application monitoring)

Adoption of a favourable tax regime for small B&B

businesses: family entrepreneurship regime with exemption

of taxes.

12 workgroup meetings with SME Council Private Sector

member NGOs, 48 consultative meetings on tax and general

issues, 23 IT start-up consultative meetings at the BSO

office.

Assistance in implementation of the RA Law “On state

support to Information Technologies sector” and startups

certification: the BSO Legal Consultant is included in the

Certification Committee (14 Committee meetings).

First Inspection body established: Market Surveillance

Inspection Body.

Adoption of all sub-legislative acts implementing the RA Law

“On Inspection Bodies”.

Development of a new Draft Law “On Inspections”

Implementation of Inspection reform PR strategy with the WB

and the Ministry of Economy: meetings with businesses,

conference with journalists.

5Detailed information on Councils’ meetings is available on www.bso.am

6 http://mineconomy.am/eng/38/gortsaruyt.pastatuxt.html

Turnover Tax Payers + 4079

Turnover tax rate decrease opportunity

• 72 applied

IT startups

• 63 certified

263 new jobs

July

• 53443

October

• 57522

98.4% of

all micro businesses are Turnover tax

payers

5% 1.6%

156

Family businesses

opened

287 Border area businesses

opened

ACHIEVEMENTS

AT A GLANCE

2015 ACHIEVEMENTS

http://www.bso.am/

http://mineconomy.am/eng/38/gortsaruyt.pastatuxt.html


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TC Reference ID: RESULTS MATRIX

Title:

Reporting Schedule Completion

Datasource

value date value date

At least 3

per year

Dec-15 4 CCIC

meetings

Dec-15

Datasource


At least 5

per year

Dec-15 12 Dec-15

Datasource


At least

10 per

year

Dec-15 21 Dec-15

Datasource


2 per year Dec-15 1 per

year-

annual

Mar-16

Datasource


1 Dec-15 38-35

value date

At least 8

per year

Dec-15

value date

11 per

year

Dec-15

value date

1 Dec-15

value date

1 Mar-15

value date

1 Dec-15

Output 4 Target Value

IC Secretariat produces CCIC Annual Report approved by

government and EBRD

Notes: The IC Annual Report will be prepared by the Head of the Secretariat to the CCIC and approved jointly by the government and the

EBRD. The metrics in the WB DBR to track "improvement" shall include number of reforms identified in the DBR, overall score and rank,

distance to the frontier narrowed and individual rankings for Starting a Business, Dealing with construction permits, Getting electricity,

Registering property, Getting credit, Protecting investors, Paying taxes, Trading across borders, Enforcing contracts and Resolving

insolvencies.

The Secretariat to the Consultative Council on the Investment Climate

("CCIC") in Armenia: The Business Support Office

IC Secretariat makes, and CCIC endorses, recommendations for

amendments to laws and regulations to improve the business

environment.

CCIC Annual

Report

Purpose of this TC and links to investment operation (if any)

Target Value

Outcome Indicator 2

Outcome Indicator 4 Target Value Baseline

Target Value

CCIC meetings held, chaired by the Prime Minister, with

participation of relevant government agencies and

representatives of the private sector.

Outcome Indicator 3

Main Outcome

Progress Report 2

Outcome Indicator 1 Baseline

Transition Impact indicator

4. Institutions, laws and policies that promote market functioning and efficiency

Output 3

IC Secretariat holds outreach events/consultations in each and

all of 10 regions of Armenia and in Yerevan as well

CCIC Website (WWW.BSO.AM) updated monthly

Target Value Baseline


IC Secretariat ensures findings from studies/research, as well as

IC decisions, are disseminated at policy dialogue events and

public consultations.

IC Secretariat coordinates preparation of studies/research and

business consultations on priority issues

CCIC Annual

Report

CCIC Annual

Report

Progress Report 1

Output 2

The Armenian CCIC promotes public sector - private sector dialogue, improvements in the legislative and regulatory framework, as

well as their application, toward improvement of the business environment, especially for local MSMEs. The Secretariat supports

the CCIC pursuant to a Terms of Reference agreed between the government and EBRD.

Target Value Baseline

Target Value


Armenia's rankings in World Bank Doing Business Report improve

over time (see note)

Semi-annually, IC Secretariat produces recommendations to

EBRD and donors to finance consultancies related to CCIC

activities and business environment improvement

Written

recommendations

submitted to EBRD

Outcome Indicator 5 Target Value Baseline

Armenia's rankings in World Bank Doing Business Report improve

over time

World Bank Doing

Business Report

RESULTSMATRIX


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Armenia: Doing Business 2016 Fact Sheet

Rank In Doing Business 2016: 35 Rank In Doing Business 2015: 38

Increase in rankings in the following areas:

- Trading Across Borders,

-Dealing with Construction Permits,

- Enforcing Contracts

Press review: excerpt from news

Armenia has rank improvement in accordance with “SME policy index 2016”

February 23, 2016, Armenpress.am

The RA First Deputy Minister of Economy indicated that Armenia has faced improvements not only in 10 directions of the index, but in three of them (SME bankruptcy, second chance, support mechanisms and innovations for SMEs and startups) Armenia is ranked the first among the Eastern Partnership six countries. OECD Eurasia Competitiveness Project Coordinator Antonio Somma reaffirmed that Armenia has made significant progress in comparison with the previous report introducing the SMEs a number of market opportunities. Source: http://armenpress.am/arm/news/836988/pmdz-qaxaqakanutyan-indeqs-2016-ov-hayastann-ardzanagrel.html

http://armenpress.am/arm/news/836988/pmdz-qaxaqakanutyan-indeqs-2016-ov-hayastann-ardzanagrel.html

http://armenpress.am/arm/news/836988/pmdz-qaxaqakanutyan-indeqs-2016-ov-hayastann-ardzanagrel.html


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2. THE BUSINESS SUPPORT OFFICE WORK PROGRAM FOR 2016

Summary

In 2015 the BSO continued supporting the activities of the two Investment Councils,

namely the SME Development Council and Inspection Reform Coordination Council. The BSO

has extended networking and cooperation with organizations representing the interests of Private

Sector, has intensified cooperation with donors, discussing ideas and mutual projects directed at

business environment improvement.

2015 resulted in implementation of the first phase Leasing legislative framework

improvement project, the BSO carried out monitoring of the Turnover tax implementation and

raising awareness on the amendments to the turnover tax related to trade area businesses,

diversified approach on rate decrease and purchases documentation issue. IT startups’

certification and tax privileges to the sector in accordance with the law demonstrated to be

successful and the BSO is planning to continue providing assistance to the proper

implementation of the law. Another promising example of a sectorial business boost is expected

to concern B&B businesses which were provided with an opportunity to work under “family

business” regime.

Raising awareness activities are a continuous process which is planned to be applied in

2016 in frames of the outcome of both Councils’ meetings:

on the part of SME-related reforms-Private Sector involvement in the reform making

process, etc.

in terms of risk-based inspection system implementation, inspection system optimization

impact on businesses, etc.

Besides the preliminarily outlined directions in 2015 the BSO addressed a number of

regulatory issues raised by the businesses throughout the year.

In 2016 a number of SME-related activities will be implemented in frames of the SME

development strategy for 2016-2018 in cooperation with the Ministry of Economy to ensure the

implementation of the strategic goals presented in the strategy:

Strategic goal 1: Improving the institutional, legislative and practical environments for

the creation and development of the SMEs;


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Strategic goal 2: Improving access to finance for SMEs;

Strategic goal 3: Strengthening and developing the entrepreneurial capacity (culture);

Strategic goal 4: Increasing the domestic and international competitiveness of SMEs;

Strategic goal 5: Ensuring the Public-Private Dialogue;

Strategic goal 6: Strengthening the organizations supporting the SME development;

Strategic goal 7: Stimulating women in business and supporting start-ups.

Targeted areas to address in 2016

The BSO has considered several directions for upcoming reforms to be addressed in 2016:

Leasing improvement legislation elaboration. In accordance with the analysis of the

revealed problems, preparation of a draft paper of legislative amendments

(particularly, amendments to Civil Code and Tax Code)

Identification of problems in SME-related articles of the Tax Code and introduction

of those to the RA Government and SME Development Council.

Study of EEU legal regulations related to SMEs, raising awareness on the new

regulations, identifying problems in regard of SMEs’ activities arising from EEU

legal acts, presentation of proposals for settlement.

Continue the assistance to the implementation of the RA Law “On state support to IT

sector”

- participation in Certification Committee works created to support new IT companies

- monitoring results of the certified companies

Support to Doing Business

- research on judicial terms reduction index (the possibility of establishing a separate

procedure small claims) and introduction to the Ministry of Economy

- research on bankruptcy process improvement and introduction of recommendations

to the Ministry of Economy

National Business Incubator Concept draft, discussion with stakeholders, pilot

program launch.

Business Ombudsman establishment

Research and recommendations on problems the businesses faced at the customs

border


16

Introduction of separated rates of local fees for SMEs

Assistance in implementation of strategic goals outlined in Armenia’s SME

Development Strategy for 2016-2018

Reduction of customs fees and simplification of procedures in case of small volume

import/export

Establishment of a possibility of deferred VAT refund on the basis of VAT debit

balance

Reconsideration of the powers of investigators of the Tax inspectorate

Continue the raising awareness activities, meetings with SMEs in regions and

Yerevan, meetings with NGOs and business associations, networking and e-

communication, etc.

Ensuring provision of clearer and simplified inspection with the adoption of new

Law “On inspections”

Adoption of package of Laws “On general safety of non-food products” and “On

market surveillance”

Providing continuous assistance to Inspection System Optimization program

Continue the implementation of events in frames of Inspection Reform PR strategy

together with the Ministry of Economy and The World Bank Group.

Targeted Reform Areas: result indicators for monitoring

In accordance with the outlined reform directions for 2016 and preliminarily defined result

indicators the BSO will continue assessing the effectiveness of assistance to Councils.

The table below includes result indicators that can be estimated now, however depending on the

course of activities additional result indicators and/or reforms can be included.


17

TARGETED REFORM AREAS

RESULT INDICATORS

Leasing improvement legislation

elaboration

1.Number of amendments to the RA Civil

Code

2. Number of amendments to the RA tax

Code

3. Number of discussions with stakeholders

on the elaborated drafts.

Continue the assistance in the

implementation of the RA Law “On state

support to IT sector”.

1. Number of applied startups

2. Number of registered startups/ provided

certificates

3. Number of new jobs opened

Business Ombudsman establishment 1.Adoption of the relevant law on Business

Ombudsman establishment

2.Establishment of Business Ombudsman

institute

Study of EEU legal regulations related to

SMEs

1.Number of the reviewed regulations

2.Number of recommendations proposed

3.Number of the amendments adopted

Identification of problems in SME-related

articles of the Tax Code and introduction

of those to the RA Government and SME

Development Council

1.Number of recommendations provided

2.Number of recommendations adopted

Research and recommendations on

problems the businesses faced at the

customs border

1. Number of issues and problems

identified

2. Number of recommendations

3. Number of organizations that have been

provided with the research

Introduction of separated rates of local fees

for SMEs

1.Adoption of the relevant amendments in

the RA law "On Local Fees":

2. Decrease of the local fee amount payable

by small traders

Assistance in implementation of strategic

goals outlines in Armenia’s SME

Development Strategy for 2016-2018

1. Number of activities supporting the

implementation of the strategic goals of the

SME Development Strategy in 2016.


18

Assistance in the Doing Business-Armenia 1. Increase in the Doing Business rank

2. Increase in rank of Resolving Insolvency

3. Increase in rank of Enforcing Contracts

4. Number of recommendations submitted

to the Ministry of Economy

Reduction of customs fees and

simplification of procedures in case of

small volume import/export

1. Reduction of customs fees

2. Customs clearance steps decrease

3. Possibility of a self –declaration

system

Establishment of a possibility of deferred

VAT refund on the basis of VAT debit

balance

1. Adoption of the relevant amendment

ensuring the establishment of a possibility

of deferred VAT refund

National Business Incubator Concept draft,

discussion with stakeholders, pilot program

launch.

1. Adoption of the NBI Concept

2. Establishment of the Incubator

3. Launch of the pilot program

Continue the raising awareness activities,

meetings with SMEs in RA regions and

Yerevan, meetings with NGOs and

business associations, networking and e-

communication, etc.

1. Number of meetings with SMEs

organized in Yerevan

2. Number of meetings in the RA regions

3. Number of meetings with NGOs and

business associations

Reconsideration of the powers of

investigators of the Tax inspectorate

1. Number of criminal cases decreased in

official statistics

2. Decrease of the number of tax

inspections carried out based on the

investigator's decree.

3. Increase of the amount set for getting

under criminal prosecution

Ensuring provision of clearer and

simplified inspection with the adoption of

new Law “On inspections”

Adoption of the law.

1. Decrease of the procedures formerly

carried out as an inspection

2. Decrease of the non-published

inspections

3. Decrease in number of SMEs appealed

for the procedural violations

Establishment of new procedures for

Market Surveillance and general safety

Adoption of package of Laws “On general

safety of non-food products” and “On

market surveillance”


19

Providing continuous the assistance in

Inspection System Optimization program

Number of inspection bodies established

Continue the implementation of events in

frames of Inspection Reform PR strategy

together with the Ministry of Economy and

The World Bank Group.

1. Number of events implemented (with a

detailed description).

2. Number of SMEs involved in the events

3. Number of NGOs involved

Cooperation with IFIs and donor organizations

Throughout the year the BSO continued its cooperation with donor organizations

exchanging experience on activities and projects carried out for the business environment

development.

The BSO continues cooperation with the World Bank Group Armenian Investment

Climate Reform Project in frames of Inspection Reform providing expertise to the Inspection

Reform Unit at the Ministry of Economy RA, joint activities in terms of Inspection system

optimization, legal framework provision and public outreach in frames of joint PR strategy.

Cooperation with OSCE was marked this year in terms of joint discussions on the

necessity of having regular and comprehensive format of SME statistics. The BSO supported the

short study introduced by OSCE on how the SME statistics should be collected and classified, as

far as the creation of such database with regularly updated information is vital for donors and

business support organizations in Armenia. The BSO is planning to cooperate with OSCE on the

issues of the implementation and follow-up of the above-mentioned initiative.

The BSO has a continuous and stable cooperation with the European Union. During the

reporting period the BSO experts have had regular meetings with EU Delegation to Armenia

officers on elaboration and assistance in implementation of EU Export Helpdesk- a platform for

Armenian businesses to organize export to EU countries. The BSO is also assisting in

dissemination of information on using the helpdesk to simplify the organization of export to EU

among business associations and SMEs.

BSO has had several meetings with EU Twinning Project representatives to discuss

business environment improvement programs and introduce the legal framework improvement


20

for Armenian businesses, in particular towards which the BSO’s activities had been directed.

Throughout the year the BSO had meetings and discussions on business environment

improvement activities with the German Business Association (DWV) Country Manager

Armenia and Business France Experts (EU Twinning Project on Strengthening the Investment

Promotion and Investment Policy institutional framework of Armenia).

The BSO has continued Cooperation with the IMF on business environment –related

projects.

The cooperation with the Embassy of the United States in Armenia on regulatory

framework for Armenian businesses has continued in 2015 as well.


21

Conclusion

Throughout the year 2015 the BSO continued providing assistance to the works of

Inspection Reform Coordination Council and SME Development Council, thus ensuring the

effective functioning of both IC as PPD platforms called to discuss the Private Sector’s concerns

and most importantly create actual opportunities for the resolution of their problems raised.

Year-by-year the BSO is working towards being represented and recognized as a mediator

between the Armenian businesses and the Government and an office where any business, NGO

or sectorial business association may apply with their concerns, ideas on improvement business-

related legislation and procedures.

Moreover, the reporting period was marked with more intensive cooperation with the

Ministry of Economy not only in terms of both Councils’ activities, but in outlining mostly all of

the business environment improvement projects, exchanging opinion and involving the BSO

experts.

In accordance with its mission the BSO will continue constant involvement of the business

community in the reform-making process transmitting the voice of Armenian businesses to the

authorities.

More information on the SME Council and IRCC meetings and the Councils’ meetings

minutes are available on the BSO website:

http://www.bso.am/what-we-do-2/assistance-to-sme-development-council/sme-development-

council-meetings/

http://www.bso.am/assistance-to-ircc/ircc-sessions/

Other activities highlighted in newsfeed throughout the year are available here:

http://www.bso.am/category/news/

You can also follow the BSO Armenia YouTube channel:

https://www.youtube.com/channel/UCpD0Kap4MBdUY2MW84Uel6A?nohtml5=False

http://www.bso.am/what-we-do-2/assistance-to-sme-development-council/sme-development-council-meetings/

http://www.bso.am/what-we-do-2/assistance-to-sme-development-council/sme-development-council-meetings/

http://www.bso.am/assistance-to-ircc/ircc-sessions/

http://www.bso.am/category/news/

https://www.youtube.com/channel/UCpD0Kap4MBdUY2MW84Uel6A?nohtml5=False

Business Support Office - ANNUAL REPORT 2015 · 2016-05-11 · EBRD Business Support Office Annual...

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