In July, the State Duma adopted the law governing social entrepreneurship. Midterm, it is to transform the social welfare, said Sergey Khoroshaev, Investment Commissioner of the Government of the Kaliningrad Region under the Government of the Russian Federation in Moscow:
The law has been adopted, lets suppose what happens next. The Ministry of Economic Development of Russia will prepare the Procedure for granting social status to enterprises. We all know that a sub-law is capable of clarifying a law beyond recognition, but, in my expert opinion, this time no distortion of the Federal Law is expected.
Regions can provide support to such social enterprises from their budget: finance, lend property, train, advise, etc. By the way, vice governors for social affairs hold the most significant budget.
The following scenario is also possible: the regions will receive a definite recommendation to pass social issues on to private business and support it from meagre regional (let alone municipal) budgets, lease out real estate and organize fairs. The state is choking on attempts to fulfil its social obligations; the local administrations lack money and personnel.
But, given the significance of domestic policy issues over economic feasibility, I would not bet on this option. Which governor would trust rogue entrepreneurs (non-oligarchs) to care for people with disabilities? If they fail, hes responsible.
The mixed version looks much more realistic: at first, the young technocrats and other heads of regions have to partially, maybe as pilot projects under tight control, include SMEs in the social services. At first, this is an extra load for the region. Before they had their state unitary enterprises with a known manager who served, reported, received allocated money and steadily solved problems. Now a region has to dole out budget (!) money to some businessperson, entrust a sensitive social issue, stress over it and keep a tight reign over it every day.
However, at the next stage, when, for example, a city-forming enterprise, which by law is a medium-sized business and back in Soviet times held a kindergarten and sports clubs on their balance, re-masters these non-core operations, part of the governors headache vanishes. At that, regional budget loading remains.
At the third stage, the question of reducing, including to zero. The use of budget funds can be brought up. Enterprises should become self-sustaining.
So far, it is unlikely that the state will take on additional domestic political risks. However, just a few years ago, who could imagine discussing a retirement-age increase or cutting free health-care services? Constant attempts to cut public sector employees even though they are overwhelmed with the amount of work are indicative of what? In the end, according to the global practice of impact investing, the state is just one of the tools to ensure critical social needs.
Obviously, in the case of the real universal use of the law on social entrepreneurship, significant changes will affect vice governors for social policy and reach far beyond.
Material prepared by:
Investment Commissioner of the Government of the Kaliningrad Region under the Government of the Russian Federation in Moscow