The Prague Post Online: Business: State to trim small-biz funding

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November 22nd, 2008

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State to trim small-biz funding

EU funds will replace gov't aid, ministry says

By Paul Voosen
Staff Writer, The Prague Post
September 12th, 2007 issue

As part of the state’s move to lower its budget for 2008, the Industry and Trade Ministry is planning to trim three programs used to support small and medium-size businesses. The move is expected to save the ministry 2 billion Kč ($98 million) next year.

The Industry and Trade Ministry is one of several ministries facing significant cuts in next year’s budget, which the Cabinet will discuss in its preliminary version Oct. 12. The ministry is slated to lose 15.2 percent of its finances, limiting its projected expenses to 14 billion Kč.

Some 9,000 small and medium-size businesses received 10.4 billion Kč in combined state and European Union support in 2006, over half of which came from the ministry. These subsidies will drop to 10.1 billion Kč this year and are expected to fall to 7.9 billion Kč in 2008.

However, the ministry’s cuts will be more than made up for by the 100 billion Kč in EU structural funds that are earmarked for the country from 2007 to 2013, said Tomáš Bartovský, the ministry spokesman.

“The support of small and medium-sizedenterprises [SMEs] will not be affected by cutting the state programs, because SMEs will be able to use even more ‘European monies’ for the same purpose,” he said.

The ministry currently supports small businesses with three programs: support of strategic services and technology centers, incentives for direct investment and supports to developing entrepreneurial infrastructure. The programs will be trimmed 19 percent, 34 percent and 34 percent, respectively.

The funding cuts were necessary because several of the ministry’s other projects, involving the environmental restoration of lands previously contaminated by state-owned companies, must take priority, Industry and Trade Minister Martin Říman said after the budget was announced.

For example, the remediation of the closed uranium mine in Stráž pod Ralskem, north Bohemia, begun in 1996, is expected to last until 2035 and cost approximately 40.9 billion Kč, according to DIAMO, the state-controlled uranium company.

The SME programs aren’t the only example of ministry belt-tightening, according to Bartovský.

“There will be reductions in organizational and administrational expenditures that should save tens of millions of crowns,” he said, including the planned annual reduction of 3 percent of the ministry’s staff.

As it currently stands, the state’s budget for next year would give the country its lowest deficit since 2002, at 70.8 billion Kč; expected revenues would total 1,037 billion Kč (up 9.2 percent from 2007) and expenditures, 1,107 billion Kč (up 6.4 percent). Twinned with the recently passed public-finance reforms, it is expected the budget will put the country on track for euro adoption.

Since the budget is only in draft form, none of these cuts are yet set in stone.

“The state budget [will be] discussed in Parliament, so changes are always possible,” Bartovský said.

Paul Voosen can be reached at pvoosen@praguepost.com

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