Strategies of the Development of Entrepreneurship and SME

5.2 DEVELOPMENT OF THE SME SECTOR IN ARMENIA 225.2.1. SME Sector DevelopmentRecognizing the need for the pursuit of the social-economic, well-being, given thesignificant role and strategic meaning of small and medium entrepreneurship (SME) in theeconomic development, enhancement of employment and living standards, formation of themiddle class as well as in ensuring social and political stability in the country, the Governmentof the Republic of Armenia has declared this sector as one of priorities in economicdevelopment thus acting towards creation of sound support system for this sector.Although the SME state policy-making in Armenia has a short history, indeed it ischaracterized with specific developments, having significant influence on almost all elements ofthe country’s economic structure. Due to the Government activities undertaken towardsdevelopment of this sector, particularly during the recent 5-6 years number of positive changeshas taken place. Implementation of reforms targeted at the formation of SME development andsupport system gave an opportunity to introduce key principles and mechanisms into nationaleconomy, necessary for consistent implementation of the state policy.Since 2000 the legal environment for SMEs has been created. The legislative basis forSME development state policy is the “Concept for SME Development Policy and Strategy inArmenia” adopted by the Government in 2000, which has stipulated economic, social andpolitical objectives of SME development policy in the country and the main directions for theirrealization.The adoption of this document served as a precondition for drafting the Law of theRepublic of Armenia on “State Support of Small and Medium Entrepreneurship”, which wasadopted by the National Assembly of Armenia in December 2000. The adoption of the Lawsolved two major problems. It defined, that commercial companies and sole proprietorsemploying appropriate average number of employees as shown in Table 17. are classified asSMEs.Table 17.The criteria for SME definition in Armenia 23ClassificationSMEsSectorMicro(number ofemployees)Small(number ofemployees)Medium(number ofemployees)Industry and other sector of5 50 100productionConstruction and power engineering 5 25 50Science and education 5 25 50Transport, trade and services 5 15 30The above-mentioned Law determines the main directions and mechanism for SME statesupport.as follows:22 Prepared by Anna PETROSYAN, PhD of Economics, Chief Specialist, Department for SME Development,Ministry of Trade and Economic Development of the Republic of Armenia23 Law of the Republic of Armenia on “SME State Support” Article 2: SMEs. The concern of companies to SMEsrunning their activity simultaneously in different sectors is determined by criteria of prevailing sector of activity.Organizations engaged in crediting, insurance and investment activities, lombards, security market professional actors,casinos, and organizations involved in gambling business, as well as subsidiary and dependant units are not consideredas SMEs.86