Business Climate in Belarus: Pessimism Prevails
Belarusian government recently reaffirmed its desire to become a top-30 nation in the World Bank’s Doing Business Report. To assess how well local authorities across the country pursue this goal a number of Belarusian organisations organised a special competition – “The Best Town/District and Oblast for Doing Business in Belarus”.
The latest competition results were announced at the Assembly of the Business Circles of Belarus at the end of February. Now the Belarusian business community and potential foreign investors know where their entrepreneurial activity can yield the highest profit in 2012. But because of the voluntary and populist methods of economic governance in Belarus both entrepreneurs and officials are sceptical that the country will land in the top-30 of the most favourable places to do business.
The Results of the Competition-2012
The competition compared business climates in all Belarusian towns and regions and identifies where a local or foreign businessman can enjoy more favourable conditions for doing business. The jury of the competition consisted of entrepreneurs, representatives of business unions, academics and analysts. The organisers included the Republican Confederation of Entrepreneurship, one of the biggest Belarusian business associations.
The study assesses various factors, including the number of small enterprises per 1,000 inhabitants and the share of small businesses in the overall number of the employed, the amount of taxes paid and investments. The jury also takes into account opinions of local business associations about the attitudes of local authorities to businessmen, the image of entrepreneurship in local media and opportunities for young people and particularly women to run their own business.
This year the authorities of 76 (out of 118) districts submitted their documents for the competition, the highest number ever. This could be an indication that local authorities are becoming increasingly interested in attracting private investments. But probably the official support of the Ministry of the Economy played a more important role.
The jury named the following winners:
- among the towns/districts with fewer than fifty thousand of population – Naraulyany District of Homel Oblast (eastern Belarus);
- among the towns/districts with more than fifty thousand of population – Maladzechna District of Minsk Oblast (central Belarus)
- among the 6 oblasts of Belarus – Homel Oblast (eastern Belarus);
- among the districts of the capital city – Frunzenski District of the City of Minsk.
The assessment results revealed a number of interesting facts. For example, the city of Minsk has the biggest share of population employed by small enterprises (more than a quarter of the working population). In the east of Belarus this share is significantly smaller than in the West. In some districts of the east less than three percent of the population work for private firms.
The share of taxes paid by small businesses is the highest in central Belarus. In some districts the share reaches a half of all the taxes collected. In eastern Belarus this share is generally the lowest.
Perhaps, the most telling data concerns capital investments by small businesses. It shows where in Belarus entrepreneurs feel more secure and can make long-term plans. According to the competition jury, after the 2011 economic crisis there were simply no “safe havens” for long-term investments in the country. However, in some regions of Belarus private investors are still active. For example, certain parts of central Belarus receive more than 40% of all investments from small businesses. Whereas, in some areas in the West this indicator is close to zero.
The XIII Assembly of the Business Circles of Belarus, where the competition results were announced, shed light on the very alarming expectations shared by entrepreneurs and even state officials.
The main organiser of the Assembly – the Republican Confederation of Entrepreneurship – presented an updated version of the National Business Platform. This document represents the business community's vision of desirable market reforms. The Platform focuses on the new economic realities that Belarus faces in the Common Economic Space with Kazakhstan and Russia. It articulates the idea that the Belarusian economy is doomed if the government fails to carry out fully-fledged market reforms.
The discussion of the Platform revealed that almost all participants of the Assembly (including state officials) see market reforms as the only way to raise the competitiveness of the Belarusian economy. All speakers were vocal about the need to launch a structural transformation and seriously improve the business climate. But at the same time there was a great deal of pessimism and even despair in the speeches of the Assembly. And this state of despair is easy to explain.
Insurmountable Economic Voluntarism
In a country where economic policy is so susceptible to the arbitrary decisions of just one man (even though he is the President) no one knows what a new day will bring. And when social populism generously supported by Russian energy subsidies permanently prevails over economic analysis, the chief decision-maker is very unlikely to start listening to economic arguments. As a result, even top officials turn into desperate pessimists.
This desperate pessimism makes the goal of becoming a top-30 jurisdiction for doing business sound more like a bad joke. And the competition for the best business climate in Belarus becomes just a nice public speaking exercise.
Yauheni Preiherman is Policy Director at the Discussion and Analytical Society Liberal Club in Minsk
Opposition Activists Face Travel Restrictions – Digest of Belarusian Politics
Belarusian authorities create problems for opposition activists who are crossing Belarusian borders. Isolation of the country is increasing. Following the departure of EU ambassadors, the IMF decided not to have any resident representative in Belarus and the country's representatives were missing at an Eastern Partnership meeting in Prague.
Anatoly Lebedko not allowed to leave Belarus. On 7 March, United Civil Party leader Anatoly Lebedko was not allowed to leave the territory of the European Union on the Belarusian-Lithuanian border. According to the politician, he was detained at the border checkpoint Kamenny Loh under restriction to leave Belarus. Two other opposition leaders – Siarhei Kaliakin and Viktar Karnienka were not allowed to cross the border. They subsequently managed to get to Lithuania, presumably through Russia.
Belarusian customs detained Alexander Dobrovolsky. On 7 March, the United Civil Party member Alexander Dobrovolsky was detained at the border with Lithuania. Dobrovolsky went to Minsk from a working meeting in Vilnius. Belarusian customs invited him to a separate customs control, resulting in Dobrovolsky having to wait overnight for the next train to Minsk.
Syarhey Kavalenka set to continue his hunger strike until he is released. Syarhey Kavalenka is determined to continue his hunger strike until he is released. The opposition activist is currently in a prison hospital in Minsk, since the beginning of his hunger strike he lost 30 kilo. On 24 February, a district judge in Vitsyebsk sentenced Kavalenka to two years and one month in a low security correctional institution on a charge of violating probation rules.
Young opposition activist Ivan Shyla to spend 22 days in jail. Young opposition activist Ivan Shyla has been placed in the detention centre on Akrestsina Street for 22 days to serve earlier imposed jail terms. The deputy chairperson of a Czech-registered youth group called Malady Front was arrested in Minsk on February 14 near the office of the Belarusian PEN Centre, where Malady Front activists were scheduled to present the "I Love Belarus" award.
BAJ urges to abolish warnings to its members. On 2 March, the Belarusian Association of Journalists submitted an official letter to the Hrodna regional prosecutor, Viktar Marozau, in which the difference between freelance journalists and foreign media journalists is explained. The reason for the letter was a series of warnings to BAJ members Mikalai Dziachenia, Aliaksandr Dzianisau, Viktar Parfionenka and Hrazhyna Shalkevich for work with foreign media without official accreditation.
Ministry of Justice refused to register BCD. Ministry of Justice took a final decision to deny registration to the Belarusian Christian Democracy party (BCD). Considering the BCD documents, the Ministry of Justice has found a number of inconsistencies and contradictions. BCD also announced that on February 17 all party websites were blocked.
Appeal to LT Foreign Minister. VISA-FREE Coalition "Go Europe! Go Belarus!" appealed to the Minister of Foreign Affairs of Lithuania Audronius Ažubalis to support further steps to promote people-to-people contacts and facilitation of ties between Lithuania and Belarus. The Coalition proposes to amend the legislation of Lithuania to allow the consular offices of the country to regularly issue short-term multi-entry Schengen visas with a validity of five years, rather than one year, as is still provided. The appeal was signed by NGOs, initiatives and campaigns from Lithuania, Belarus and other countries.
U.S. supports expansion of the European Union sanctions against Belarus. This was stated by the U.S. representative to the OSCE, Ian Kelly, during a video conference on 2 March. He says that sanctions, being far not the main instrument of influence on official Minsk, should demonstrate the Belarusian authorities that they have chosen the wrong path of self-isolation.
Lukashenka warns EU of harsh response to sanctions. On 4 March, speaking on the sidelines of an annual ski race involving top government officials, Lukashenka described as “absolute hysteria” the European Union’s latest move to extend the list of Belarusian citizens subject to entry bans and asset freezes. Lukashenka went so far as to apparently mock the sexuality of openly gay German Foreign Minister Guido Westerwelle. “It’s better to be a dictator than gay,” he said.
National Platform Statement. On 2 March, Belarusian National Platform of the Eastern Partnership Civil Society Forum adopted a Statement in which expressed their deep concern at the diplomatic conflict between the authorities of Belarus and the European Union. NP urged the leaders of Belarus and the European Union to hold from further conflict escalation and transforming it into an exchange of blows according to the principle "an eye for an eye".
Belarus absent at Eastern Partnership meeting in Prague. No representatives of Belarus arrived in Prague to attend a 5 March meeting of the foreign ministers of the Visegrad Group and Eastern Partnership countries. Vit Kolar, spokesman for the Czech foreign ministry, said that Belarus had been invited to send a deputy foreign minister to the meeting.
IMF Won't Replace Resident Representative in Belarus. The International Monetary Fund will not replace its representative in Belarus after April, suggesting that having a resident in place was having little impact in the crisis-hit former Soviet republic.
KGB chairman to travel to Rome despite EU entry ban. Vadzim Zaytsev, chairman of the Committee for State Security (KGB) who is subject to the European Union’s entry ban, is expected to travel to Rome for an official meeting.
Belarus Digest prepared this overview on the basis of materials provided by Pact. This digest attempts to give a richer picture of the recent political and civil society events in Belarus. It often goes beyond the hot stories already available in English-language media.