Exit without ‘SHOCK THERAPY’

 Sanctions, falling oil prices, the devaluation of the Russian Rouble, and poor performance across state sector enterprises by the end of last year indicate urgent need for reform in Belarus
 Sanctions, falling oil prices, the devaluation of the Russian Rouble, and poor performance across state sector enterprises by the end of last year indicate urgent need for reform in Belarus.

Top-level political agreements have partially helped, and the stabilization of credit has been resolved via integration institutes, as discussed between the presidents of Belarus and Russia recently. The price for Russian gas in Dollars has fallen and other important questions for Minsk have been solved.

Without far-reaching change, the Belarusian economy won’t achieve positive results; agreements are not enough. Discussion of Belarusian economic reform must reflect various points of view: from ultraliberal to ‘military-communist’. The state position uses a combination of measures, with new approaches to support exports and the development of small and medium-sized businesses.

Stadler company plans to invest 4-5 mln euro in the works in Fanipol in 2016

Relying on businessmen

Structural reorganization of the economy won’t be successful without accelerated development of small and medium-sized businesses. Those launching start-ups cannot turn around the situation without state support, so concrete measures are required. Confirmed by the Council of Ministers, within the Belarusian Export programme, prepared by the Ministry for Foreign Affairs, measures aim to help businesses help themselves.

Despite the actions of some entrepreneurs, Belarus’ administration is yet to follow their lead. The question of certification of goods produced outside the Eurasian Economic Union remains a matter of principle, with power firmly standing its ground. Our businesses, state and privately run, should be competitive internationally, leaving the chaos of uncertified grey market goods in the past.

Entrepreneurs are currently obliged to conform with international and national legislation, so it seems only just that the state support small and medium-sized businesses in gaining export contracts, helping them promote their products. In turn, the state will gain tax revenue from sales. It’s predicted that small and medium-sized enterprises will be employing 35 percent of the workforce by 2020, and that their ‘gross value added’ will rise by 32 percent. According to Belarus’ Minister of Foreign Affairs, Vladimir Makei, such companies’ expanded involvement in export activity should bring considerable economic benefit. Businessmen are to be invited to the interdepartmental council on foreign trade policy and Belarusian authorities intend to improve the country’s position in the Doing Business ratings.

Social obligations will not be rejected

Despite the complexity of the situation, the Belarusian administration has refused to conduct reform ‘shock therapy’; it will not allow state enterprises to ‘freewheel’ into the hands of private investors. Rather, it aims to reduce the cost of production at state enterprises by 25 percent, reducing capital expenses held in machinery, while keeping jobs.

The relevant Presidential decree stipulates measures of social protection not only for those who are vulnerable (young people, large families, the elderly and disabled) but those who may lose their employment or fall on hard times. This year, Br10.8 trillion is being allocated in this direction, including the provision of accommodation allowances. Price regulation measures are also planned.

The Belarusian administration is being careful and realistic in this time of global crisis, refraining from the liberal ‘road map’ some economists might expect. Time will tell of course. Success depends on whether plans can be fulfilled. As one well-known commander said: ‘It’s better to make a wrong decision, than to make no decision’.

Export centre of the economic union

Vital to ‘anti-crisis reform’ is the use of international co-operation. Belarus is to join the WTO, taking into account the interests of the national economy, and maxi­mising the advantages of Eurasian integration. Belarus aims to remove barriers to trade, especially for energy carriers, assembly manufacturing and auto-transportation, alongside other sensitive industries within the EAEU. The country is working towards equal conditions for goods and services across the EAEU countries, deve-loping and realizing programmes of import-substitution and export stimulation. Minsk’s negotiation agenda with the EAEU partners includes a transition towards a co-ordinated industrial policy. Belarus intends to pursue promotion as the export centre of the economic union.

The Silk Road economic zone project is a key link in integration, supported by Presidential Decree #78 and a state programme of export support. The Chinese initiative aims to modernize and expand the transport-logistic system, with at least $1.5 billion of exports heading to China. Belarus will create favourable conditions for transit between China and the EU.

By Victor Andreev
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