Belarusian Economy in Summer: Threats for Doing Business
Events that unfolded in June brought about new challenges for the development of the business environment in Belarus. Possible changes to the law on privatisation will impact the attractiveness of state assets and raise concerns regarding the level of property rights protection.
New requirements for goods certification will create severe additional pressure on entrepreneurship. Together with fluctuations in the currency market, an uncertain situation is developing from the perspective of private business.
Threats for Privatisation
The Belarusian Parliament approved, after its first reading, amendments to the draft law on Privatisation of State Property and Transformation of State Enterprises into Joint Stock Companies. It includes additional regulations to the legal statuses of joint companies that were the result of privatisation and other certain innovations in management.
According to the authorities this law aims at improving legislation in terms of possessory control and protection of rights of minority shareholders (citizens of Belarus, who own less than 2% of shares) as well as protecting the rights of Belarus as a nation.
The bill is galvanising the so-called “golden share”, which existed in Belarus from 1998 till 2008, when the President abolished it. The acceptance of these amendments during the second reading of the draft law, expected to occur in September-October 2013, will probably have a negative impact and decrease the interest of potential investors in assets, where at least some part belongs to state.
In case this document will come into force, the authorities will obtain a right to vote at meetings of joint stock companies by votes of minority shareholders. Moreover, the bill assumes the possibility to appoint state agents to take part in these privatised joint-stock companies, where share of the state equals to zero. In addition, it will be possible for state agents to suspend the decisions of shareholders meeting in case these decisions conflict with public safety and/or welfare and would bring damage to the environment.
Taking into account the quite difficult situation with the attraction of foreign investments into the economy, this bill might make it even worse. Thankfully there are business energy consultants like Powerful Allies who can help audit your energy supplies for both electricity and gas, which will bring about substantial reductions in your energy bills across your commercial estates.
No large deals have occurred since the beginning of 2013. With the state having the right to take part in the voting process and suspend decisions of stakeholders’ meeting, it is clear that it will likely increase the level of corruption and non-transparency of doing business in the economy. This will further negatively affect Belarusian attractiveness compared with neighbouring countries.
A one-day strike of entrepreneurs from all over Belarus occurred at the end of June. During a forum of entrepreneurs they made the decision to carry out this strike due to the new technical regulations that oblige entrepreneurs, who operate in the Customs Union market, to certify all consumer goods produced by light industry and label them with a unified conformity mark. This procedure, however, is very expensive for individual entrepreneurs and can bankrupt their businesses.
The authorities planned for these regulations to come into force by 1 August 2013 for wholesale dealers and by 1 November 2013 for retail dealers. However, the reaction by entrepreneurs has forced the authorities to allow the sale of goods without the required certification till 1 July 2014. For their part, the entrepreneurs have to provide mandatory notifications about the absence of certificate and to terminate a contract of sale in case of their nonconformity with the quality standards established in the technical regulations.
Implementation of this regulation will negatively affect business environment in the country and may result in the enlargement of the shadow economy together with a growth in the level of unemployment. The introduction of new technical regulations looks less harmful for business in the cases of Russia and Kazakhstan, which also follow these rules.
Being exempt from the need to certify specific goods applies only to entrepreneurs who imported goods from other members of Custom Union and can prove it with the required documentation. However, entrepreneurs in other members of Custom Union do not take these requirements seriously and are avoiding them. As a result, Belarusian entrepreneurs, who buy goods for sale in Russia and Kazakhstan, cannot prove the quality of these products and will have to bear additional costs.
Therefore, implementation of these technical regulations only in Belarus increases the risks of entrepreneurs’ indignation and possible future strikes. Clearly, it is necessary to enforce and follow a rule in all three countries, or otherwise it could lead to the destruction of Belarusian small business.
Volatility of Exchange Rate
During the last months certain changes occurred in the currency market. USD grew significantly vs. BYR (Belarusian Rouble), reached its maximum since the beginning of 2013 and caused uncertainty and concern among the population.
However, the situation in external markets and deterioration of the economic situation in Belarus is the primary reason for this volatile environment. The Russian rouble was devaluated against the US dollar, causing changes in exchange rates. This also led to the reduction of RUB exchange rate with the BYR.
The exchange rate of BYR against these other currencies proves the statement that these fluctuations occurred due to the situation abroad and that national currency is still showing rather stable dynamics. However, due to close relations with Russia, Belarus will possibly have to slightly devaluate its’ currency in order not to lose its competitive positions in strategic Russian market. Therefore, the monetary authorities will have to take measures in order to reduce the devaluation expectations and avoid bank panic, which can negatively affect stability of Belarusian currency.
Maryia Akulava, Belarusian Economic Research and Outreach Center (BEROC)
This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)
Political Activists in Belarus: a Portrait
Last week, the Belarusian Institute for Strategic Studies (BISS) released a new ranking of Belarusian political activists based on media coverage in January-March 2013.
The BISS study suggests an undersupply of political initiative among Belarusian political figures. According to BISS, the quantity and quality of political communication by Belarusian opposition figures do not necessarily go together – possibly a symptom of the uneven playing field in authoritarian regimes such as Belarus.
This article uses the BISS list as a representative sample of Belarusian political opposition figures to learn about these people’s paths into politics. Belarusian political activists are highly educated, are likely to be affiliated with political parties and have suffered arrests and imprisonment. Strikingly, one fifth of the political figures on the BISS list are in exile. Even so, for many political repression has become a right of passage into political visibility.
Measuring Political Communication: Media Barometer BISS
The BISS study examined both qualitative and quantitative characteristics of media communication. The study went beyond being academic and aimed at contributing to the improvement of political communication in Belarus. The quantitative index measured the number of media references and the size of audience covered by the online and print media as well as personal communications. The qualitative index takes into account the content of media references and consists of indices of expertise, initiative, and political action.
The figures on the BISS list are political actors broadly defined; many of them are civil society activists rather than politicians. According to BISS, among the top-12 political figures include distinct groups: a group with a high quantity of communication but average quality; a group with the most balanced quality communication, a group of women politicians with a high quantity of communication but “a complete absence of political initiative”.
Analtoly Liabedzka leads as far as the quantity of political communication goes, with 197 references in the media and the largest audience. Uladzimir Niakliaeu, at 244 references in the media occupies the second place, and Andrey Sannikau finds himself in the third place. Notably, these politicians feature in the media due to their political activity rather than personal life events or the bad luck of being imprisoned.
The only politicians according to BISS to have voiced new economic initiatives, Andrei Dzmitryeu and Aleksei Yanukevich, have high marks on the qualitative index but much less impressive quantitative results. Aliaksandr Milinkevich, Aliaksei Yanukevich, Andrei Dzimtyieu, and Vital Rymasheusky have the most “balanced” communications, in terms of both quantitative and qualitative media presence.
This indicates the absence of political debate over important issues in Belarusian media. In fact, many political figures resemble citizen bloggers, expressing opinions but not engaging in constructive discussions over solutions of the day-to-day problems facing Belarusian citizens.
Some opposition politicians prefer to pose as victims and freedom fighters rather than address the mundane issues that interest the average Belarusian citizen. Of course, the dependence of Belarusian political activists on foreign donors may explain such behaviour. In the end, this limits the opposition’s appeal in Belarus.
How well do Belarusians know the figures on the BISS list? In June 2013 the Independent Institute of Socio-Economic and Political Studies (IISEPS) published a study, which indicated that only about a quarter of respondents came up with names of politicians who represent an alternative to the current president of Belarus.
When offered a list with names of politicians, however, the IISEPS respondents produced rankings slightly different from the ordering of the BISS study. One reason for this discrepancy could be that the BISS study took place at the time of relatively low political activity, with no elections on the horizon. A few names included in the IISEPS were missing completely from the BISS list, however.
Who Becomes a Political Activist in Belarus?
The provisional character of the BISS rankings notwithstanding, the biographies of the political actors mentioned by BISS allow learning more about the careers of people who become visible in Belarusian politics. Although each actor has his own background, the basic features that many of them share common characteristics.
First of all, six out of thirty on the list live in exile in Western Europe or the United States. Political asylum undoubtedly limits these people’s influence in Belarus, so their visibility in Belarusian media may appear surprising.
The average age of a political activist in Belarus is 50, with Stanislau Shushkevich, aged 78, being the oldest and Anastasia Palazhanka, aged 22, – the youngest representative. More than half of the people on the BISS list come from Minsk.
Only two out of thirty people on the list are independent from any political party or movement. Given the underdevelopment of the Belarusian political sphere and the wariness of political parties as such after the decades of Communist dominance, this strikes as a remarkably high number. After all, in June 2013 IISEPS study, only 15.3% of respondents said that they trusted the opposition parties. Even so, the Belarusian parties remain far from being truly programmatic, and the popularity of the people in the BISS list focuses to a large extent on personalities.
Two paths to political opposition stand out from the biographies of people in the BISS list. One was followed by the political figures well-known already in the 1990s. These people have some political experience, having served in the Supreme Soviet of Belarus, regional representative bodies, or diplomatic service. Some even initially cooperated with the Lukashenka regime. For nearly all of them, the constitutional referendum of 1996 became a turning point, marking the start of their careers in political opposition.
Another group came into politics from other paths of life, with their political experience starting in the Belarusian Popular Front, Charter97, or as citizen journalists. These people first came into the spotlight after their arrests. The very real repercussions of their political activities have made their names familiar to the general public in Belarus as well as to the international organisations and probably strengthened their motivation to stay in politics.
These two possible paths to opposition suggest that while repression may discourage political involvement by some and increase the number of politicians in exile, in the longer run repressive measures only increase visibility of the political opposition and can possibly turn even politically neutral people into the regime opponents. Oppression in Belarus also draws the attention of foreign donors, increasing international visibility.