Small business lacks knowledge of legal self-defense

Much is said about the arbitrariness of officials toward traders in the bazaar. But a survey conducted by the State Committee for Entrepreneurial Activity reveals another, quite shocking, side of the matter: people are prepared to take the infringements of their rights without complaint. Only when small businesspeople run out of patience do they stage spontaneous protests. It is perhaps too early to call this social group a sprout of civil society. For nothing corrupts a bureaucrat more than an individual who is unaware of and unable to defend his or her rights.

The marketplace fee, a total of about UAH 230 million, is gradually becoming the main source of local budget revenues. This is the result of a study conducted by the Ukrainian State Committee for Regulatory Policies and Entrepreneurial Activity at 112 markets of diverse forms of ownership in all regions of Ukraine. Currently Ukraine has a network of 2,715 markets employing in one way or another about two million people. Fixed tax earnings alone have almost doubled in the past four years, reaching over UAH 250 million last year. But in reality, as the same study shows, retail market trade is great only on paper.

The survey found that markets now feature a radically different type of employees, with hired labor accounting for 90% of them, while three years ago entrepreneurs proper prevailed. According to committee chairwoman Oleksandra Kuzhel, this is “the only good news,” which means that marketplace entrepreneurs have accumulated capital and now work as legal entities, thus filling the ranks of the middle class. Simultaneously, this state committee’s experts ran into problems which the committee chairperson thinks “need an urgent intervention of the state.” Among them are first of all the very low level of professional training and lack of the required business knowledge. Having no elementary knowledge of accounting, tax law, and laws dealing with social insurance, leasing and land usage, entrepreneurs often breach the existing normative instruments and are fined by the supervising agencies. The overwhelming majority of bazaar sellers are totally unaware of their rights and fall easy prey to dishonest controllers. The survey found more than enough examples of ignorance of law. For instance, traders heard for the first time about a provision, in force for two years, that the period of market employment is considered part of the pension-entitlement period of service. Only 10% of those polled knew they had the right to be given a document describing market employment as their main job. Although the unitary tax comprises deductions to the unemployment insurance fund, traders also pay an additional fee to this fund. What depressed Ms. Kuzhel most was the fact that only two vendors at 112 markets under survey asked her to show written permission for her inspection. All the rest meekly produced any papers without even trying to establish the controllers’ credentials. “I personally would not launch a business of my own today, for I don’t know who to hire,” Ms. Kuzhel noted.

PROPHYLACTICS OF ENTHUSIASM

Ukraine’s Premier Anatoly Kinakh suggested recently that dry goods markets be streamlined without major job cuts. Mr. Kinakh opposes the abolition of markets because “they employ hundreds of thousands of people who have lost their jobs” and are thus their only source of income, Interfax-Ukraine reports. He also said that “putting dry goods markets in order calls for a political will, for very many elements that operate at those markets have some protection.” Simultaneously, the premier said he was convinced that the governmental and non-governmental organizations would manage to put these markets on a civilized footing.

Ms. Kuzhel also believes that no new markets should be set up (their number has risen by 1.8 times over the past five years) and inventory should be taken of the existing ones. Here is, she thinks, the simplest way of establishing most markets: they take a plot (asphalt-covered at best) of land, put up all the structures on the money collected from the entrepreneurs, then the sellers pay the rent. Ms. Kuzhel points out that today’s markets are permeated with a slave ideology such that market owners do not feel they are employers and, therefore, bear no responsibility for work conditions. However, the intentions of local authorities to streamline market trade are not always welcomed by vendors who see this, and rightly so, as a disguised form of administrative pressure. Suffice it to recall the tumult caused among Kyiv entrepreneurs by the Kyiv City Administration’s order to certify the markets (Den’ March 20, 2002, not translated). Yet, the Kyiv authorities also see certain positive points in this resolution. Viktor Bilych, chief of the Kyiv City Administration entrepreneurial activities department, told The Day that the order, already in force, does not concern sellers and only strives to improve the markets’ situation in terms of public sanitation, “This is the demand of time and of Kyivans, this is, after all, respect for the market employees.” To confirm his words, he quoted statistics: 21,000 jobs were created in Kyiv last year and another 6,000 in the first quarter of 2002.

Still, entrepreneurs usually take a cautious view of the concern the authorities express about them. “Public hygiene is a problem the market management addresses until the market is closed down. As soon as it is closed (the Kyiv administration’s order sets out this kind of sanction – Ed.), the problem passes to the sellers because jobs are also being eliminated,” Alla Didukh, chairwoman of the Kyiv City Coordinating Council of Entrepreneurs, told The Day. The management of a Kyiv market told The Day an interesting fact: there are so many those wishing to get a job that even market department functionaries “request” the manager to employ the “right” people. Naturally, these requests are being fulfilled, although this causes violations of the public-sanitation standards set by the same bureaucrats.

WHAT THE ELECTIONS SHOWED

Ms. Kuzhel’s raid on Ukrainian markets coincided in time with the election campaign, which again confirmed inability of the entrepreneurs to defend their own interests. Ms. Kuzhel noted that the local government elections revealed the following paradox: sellers often voted for the officials they had suffered from most. Even in the capital, Ms. Didukh claims, entrepreneurs slept through the local council elections. As a result, the council is now full of big businessmen who are very interested in squeezing small traders out of the markets and placing them at large and expensive shopping centers. “This is administrative pressure, not competition,” Ms. Didukh said. Kyiv’s entrepreneurs also complain of the new Verkhovna Rada: as the deputies are still vying for parliamentary committees, there is no place for small businesspeople to complain about the new Rules of Market Trade.

Ms. Kuzhel links further development of entrepreneurial activity in Ukraine with the adoption of five draft laws now awaiting consideration in Verkhovna Rada: on inspections, regulatory policy, simplified taxation, registration of entrepreneurial entities, and micro-loans. The passages of these laws will also improve the market situation. Following the survey of markets, the State Committee for Entrepreneurial Activity has drawn up a presidential decree. This question will be discussed in detail at the national conference of small and medium business slated for July 2002.