International Sanctions and their Impact on Business

International Sanctions and their Impact on Business

Small business is one of the basic elements of a market economy. It can revitalize the economy by forming the middle class, which is necessary today and which should constitute a significant share of the active population in the economy. Western countries assign a leading place to small business. The growth of the economy in Western countries is associated with the growing importance of the SME sector, and it is deliberately given a leading place there.

The development of small business contributes to the reduction of unemployment, growth of population's incomes, development of competition, increase of tax revenues to the budget, provision of favorable conditions for capacity building in science and production.

What about small business now?

Small business is understood as a set of small and medium-sized enterprises that are participants in the economic market. 

Small business in Western countries is a direct source of economic growth in the country. There is a real cult of small business there, as a result of which a preponderance of American and European businesses fall into the "small" and "medium" categories.

What should the state do?

The main directions of improving the efficiency of small and medium-sized businesses should be considered:

  • Providing grants. First of all for companies in the sphere of agriculture, industry, commodity production, high technology, and social services.
  • Creation of a comprehensive infrastructure of facilities rendering assistance to entrepreneurs.
  • Constant monitoring of the effectiveness of the measures taken and their improvement.

It is also important to note that one of the key reasons allowing small businesses to develop successfully is the holistic tax legislation and tax benefits. The practice of foreign countries in this area and their experience of building a system of taxation in the sphere of small business cannot but arouse interest.

For example, in most developed countries small business at the legislative level is assigned the status of a special subject of state regulation.

What must the business community do?

The crisis and sanctions have led to a host of problems, most of which remain relevant today:

  • lack of working capital;
  • weakening of the ruble / currency instability;
  • Decrease in demand for products;
  • unavailability of borrowed financial resources;
  • worsening of conditions of supply of raw materials and components;
  • reduction in the production volume of the company;
  • reduction in the company's investment programs / their postponement;
  • inability to equip the organization with new equipment, technologies due to restrictions on
  • imports of goods, works and services.

Without support from the state, business certainly can not cope with all this mass of problems, but to stay afloat in current conditions, it must apply all possible relevant to a particular company anti-crisis measures, among which are most common:

  • cost-cutting;
  • implementation of programs to introduce energy and resource-saving technologies;
  • Optimization of the company's costs without reducing output;
  • Sale of non-core assets;
  • increase in prices;
  • reorientation to the output of other products;
  • Preservation/increase of investment programs;
  • reduction of production/provision of services.

Despite the difficult situation in which business found itself as a result of the imposition of sanctions and the impact of the global economic crisis, it has a number of opportunities. These include:

  • import substitution;
  • increase in the market for products and services of companies inside the country;
  • growth of competitiveness;
  • diversification of business;
  • conclusion of new state contracts;
  • export growth.

The points described above are ambiguous and debatable. The positive assessments of the sanctions by the state are not fully shared by the business community.

Conclusion

Under the conditions of the economic crisis and sanctions, representatives of small and medium-sized enterprises are among the first to suffer, since they are the least protected from external economic influences. Numerous attempts by the government to provide support for small business in the form of tax vacations, grants, loans, subsidies, allowances and other measures do not allow it to reach the proper level of development. The state needs to develop a comprehensive approach, which would include the use of all instruments of state regulation