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The Role of the Third Sector in Russia’s Socioeconomic Development

May 26, 18:53 UTC+3
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The last two to three years saw the Government turn towards the so-called third sector. Non-profit organisations (NPOs) already partner with government agencies in social services. However, the NPOs' contribution to the Russian GDP remains small (ca. 1%), and the number of people employed in the third sector makes just 1.1% of the labour force.

In 2017, a legal framework for NPO operations has been developed, with NPOs defined as “providers of socially useful services”. According to the list approved by the Government, the socially useful services include social and domestic, healthcare, psychological and teaching services; social aid to children, disabled persons, seniors and disadvantaged individuals; social rehabilitation of alcohol and drug addicts, etc.

But the non-profit sector is not a significant part of the Russian economy so far.

  • NPO employees make 1.1% of the economically active population, and NPO contribution to the GDP is a measly 1%.
  • The average NPO share of the GDP globally stands at 4.5%. The percentage of NPO employees is generally much higher, e.g. 10.5% in Canada, or 9% in the US.
  • Russia has 224,500 registered NPOs, including over 140,000 socially oriented ones (SONPOs). However, only 10–15% of the total are active.

The key issues faced by the Russian NPOs are as follows:

  • Inadequate support from the Government. Allocations from the budgets of various levels account for as little as 11.7% of the total NPO funding. Revenues from the sale of goods and services make 36.4%, while private and corporate donations exceed 37%. In the Western world, government funding of NPOs accounts for 32%, operating revenues stand at 43%, while donations are as low as 23% of the total.
  • Lack of premises, with many NPOs unable to lease or purchase them.
  • Low intensity of collaboration between the business and NPOs, especially in non-metropolitan areas.
  • Poor professional skills of employees and shortage of qualified volunteers.

The Government is currently set to resolve these issues:

  • A roadmap until 2018 has been approved for enabling non-governmental organisations to provide services in the social sector. It is planned to extend government support for SONPO borrowings, similar to that available to small and medium-sized enterprises. Yet another plan is to update the law on social entrepreneurship and charity.
  • In January 2017, the Ministry of Justice started a register of socially useful organisations. Any SONPO that has been providing socially useful services of adequate quality for over 12 months and is not deemed to be a “foreign agent” can be put on the register for two years. The registered organisations have a priority right to receive government funds, e.g. they are entitled to get additional subsidies. It is also planned to provide them with non-financial support by allotting assets, opening free access to the state-owned media, or training of employees and volunteers.
  • The SONPO funding remains relatively flat. In 2017, RUB 4.32 billion was allocated to SONPOs from the federal budget. In 2016, the allocation was RUB 4.6 billion, in 2015 – RUB 4.228 billion, and in 2014 – RUB 4 billion.
  • The granting policy is becoming more transparent. Tendering is entrusted to the foundation in charge of presidential grants for civil society development. In 2017, tender paperwork was replaced with electronic bids, which can be submitted using a personal online account.
  • SONPOs can still enjoy their tax benefits.
  • Assistance with premises is provided. Pursuant to the amendments to the Russian Housing and Civil Codes, SONPOs will be allowed to operate in residential buildings.
  • The human resources issue is being addressed. The Moscow-based SONPO Incubator provides training for NPO leaders. The Agency for Strategic Initiatives is drafting a roadmap to promote the volunteer movement in Russia.
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