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Naša Niva: To Study, Study and Again Study Capitalism

A translation of an article by one of this blog’s authors about economic reforms, published by the newspaper Naša Niva. The government of Belarus demonstrates readiness to perform market reforms in the country and supports words by deeds. Sometimes these actions look unsure, sometimes even comical, but at the end of the day the investment climate seems to be slowly getting better in Belarus. There is still much to do, but one thing that is difficult to predict now is whether the national economy will survive the transformation without a breakdown in midst of it. Whether it is not too late for the government’s ambitious reforms plans.

To Study, Study and Again Study Capitalism

For several weeks, before and after the Belarusian Investment and Economic Forum, the media was being bombarded by news on developments around the privatization of Belarusian state property and plans for further liberal reforms in the economy of the country. Belarusian authorities finally outlined plans to make order in the Augean stables of the national tax system – the world’s worst according to international rankings. Movement in the right direction is good, but its shortcomings must be corrected.

How to attract adventurers

The Belarusian economy is perceived as a high risk investment target. To improve the image of Belarus, more than just one year is needed. Old scandals (unsuccessful investors to Belarus in the 1990s, like “Baltika” or “Ford”) are much better remembered than new success stories. No protection of investments, biased courts and the overall exotic totalitarian image of Belarus – the government has a huge scope of work to do. Positive changes must happen and be recognized by the international community.

Only adventurer-type investors would be ready to invest in Belarus now. For ignoring the risky image of Belarus they want high returns on their investments. Prospects of such returns are vague: Belarus doesn’t have natural resources that attract investors to Russia or Kazakhstan It is hardly possible to transform Belarus from the “Assembly Shop of the USSR”, as it was called in Soviet times due to Belarusian heavy industry supplying the rest of the USSR, to “a Small Assembly Shop Near the EU” because Belarus is not even a member of the WTO. Today, when Finnish wood processors sometimes find it easier to handle Russian wood in China, Belarus is not physically able to compete with Asian countries as an eventual location for foreign production facilities.

“To be proud of one’s export potential is past century,” a senior foreign delegates of the Belarusian Investment Forum said in a private conversation. Investors are more interested in domestic market and the effective domestic demand, on which Belarus is not very attractive, he added.

The government could sell state-owned companies, which it can’t manage anyway, for a lower price, but today the Western investors have enough cheap objects at home. This makes them less interested in Belarusian enterprises. There are many assets for sale in Belarus, but many of them lack a realistic valuation, the forum participant complained.

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