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The government currently treats small and medium-scale businesses as a low-value adjunct to the juggernaut of the state-controlled economy. This explains why the measures deployed to support this sector are correct in principle, but hardly meet the requirements of entrepreneurs. This point of view was voiced by Georgiy P. Badey, head of the Kunyavskiy Union of Entrepreneurs and Employers, in an interview with our correspondent.

12/01/2007

– Such a law is certainly needed. The big question is what kind of law will ultimately be adopted. It looks as if the executive government wants to pass a purely declarative document, serving primarily ideological goals.

You mentioned the draft law, which was developed by an expert group comprising not only representatives of business associations but also consultants from IFC, the Council for Private Enterprise Promotion, and other bodies. I would like to point out that this document was not an alternative to the draft law being drawn up by state agencies. In line with the agreement reached with the government, we added a number of specific provisions to the draft law prepared by the Ministry of Economy, none of which was incorporated in the version submitted to the House of Representatives. The representatives of the business community again voiced the amendments they proposed to include in the draft law at a session of the parliamentary commission. As a result, the union was offered a review of the draft document, which we did.

We primarily took issue with the overly abstract provisions included in the government-developed version to safeguard the property of private investors and shield private entities from state interference. These issues, which are of utmost importance for the business community, are covered by a single, loosely worded article. We proposed to include in the draft law a special chapter, “Protection of Property,” containing eight articles.

The revamped law could have had a positive influence on the business environment, but I do not believe it is worthwhile to adopt the purely declarative document developed by the Cabinet. Protecting their version of the draft law, the Ministry of Economy officials pointed to the definition of a medium-sized business and its criteria. However, to introduce these provisions, one does not have resort to the adoption of a new law. It would be sufficient to amend the presidential decree on small business accordingly.

Unfortunately, the parliamentary commission rejected our proposals and submitted the document developed by the government to the Presidential Administration. To the best of my knowledge, the Presidential Administration did not support the draft, as it failed to emphasize private business development in small towns and rural areas.

– I cannot say anything either good or bad about these procedures, as approaches to state registration, inspections, and business regulation in general have seen little change in the current year. As for efforts aimed at improving these procedures, I would like to say that they should not be turned into another propaganda campaign. Palpable results can only be generated by hard work to modify the existing legislation. This work would have been carried out if the agencies tasked with overcoming administrative barriers had been doing their job.

The Cabinet of Ministers has created a commission on small business development, led by a deputy prime minister. The regulation governing the commission’s activities explicitly says that it is empowered to conduct expert assessments of legal acts and develop specific proposals to improve the applicable legislation. Unfortunately, the commission has been doing nothing of the kind. The blame belongs to not only the commission chairman but also to all its members. If business associations and other organizations did more to put together comprehensive proposals, many barriers could be removed. We are still shying away from specific steps, and going for more general measures. For example, IFC has drafted very interesting and sensible proposals to modify administrative procedures in Mogilev Region. However, we still lack a comprehensive regulatory procedure for setting up retail outlets. There exist dozens of procedures for securing land plots, endorsing construction projects, and documenting leases, which have been enacted by legislation adopted by state agencies. I believe that each of these documents should be carefully examined.

I believe that the modification of rules governing state registration, inspections and other administrative procedures is important, but hardly the most urgent issue.

– The creation of equal operating conditions for all economic entities should be regarded as a top priority, a premise borne out by complaints filed by entrepreneurs with our union. This should include ensuring equal access to raw materials, financing, and markets. The President keeps saying that the SME sector should be given every possibility to develop, but the executive continues to adopt decisions that do the exact opposite.

The most flagrant example of such a trend is Decree No. 499, which regulates the formation of a construction investment fund. Although private construction firms are obliged to contribute significantly, they cannot get any financing, as the fund serves large state-owned companies. In effect, private concerns have to finance the strengthening of their direct competitors. Here is another problem. Construction contracts are allocated by tender. It is virtually impossible for a private firm to land a contract this way, as it is obliged to contribute 13.5% of the contract value to the investment fund, while the contribution of state companies is set at 4.5%.

A recent Cabinet of Ministers resolution obliging state companies to obtain business plans from state-owned entities is yet another document aimed at lobbying in the interest of the state sector. A state enterprise willing to commission a private firm should seek the consent of its superiors. Another example is Beltelekom’s decision to fix Internet rates for private providers at double the tariffs paid by direct users. In effect this step established wholesale prices which are twice as high as retail rates. Directors of state companies also receive verbal instructions to deal with other state companies. This is fair competition—Belarusian style.

– I do not think so, even though Resolution No. 1029 does contain important measures, and the private sector will gain a lot if even half of them are implemented. In our comments, we noted the limited nature of this document. The Resolution does nothing to address the creation of equal operating conditions for SMEs, which is the most acute problem. This aspect, along with the establishment of a material base (as SMEs cannot survive on leased premises) and tax administration, remain outside the Resolution’s purview. Even the adoption of the decree introducing a simplified taxation system does not resolve the tax impasse. Matters will not be helped if 10% rather than 1% of companies make the switch to the simplified taxation system. This should hardly be regarded as an ultimate goal.

However, the country leadership might regard the SME support measures implemented or planned by the government on a par with the place occupied by the SME sector in the Belarusian economy. The study of the key guidelines for social and economic development of Belarus makes the role played by small and medium-sized business clearly apparent. This document defines “the development of the real sector of the economy” as a strategic objective. It begs the question whether private business is part of the real sector or of some other segment. The latter seems to be true, as it is included in a separate chapter entitled “Infrastructure and Small Business”. I believe that by treating small business as a hobby or sideline of sorts, the government is making a grave mistake. All transition countries have regarded small business development as a primary objective, and the rationale behind reforms. Belarus continues to treat 100 large companies as top priority, and small business is relegated to the role of an orphan.

– The answer is self-evident. I would not like to voice the usual grievances with regard to state agencies, even though they would deserve them. I would like to dwell on a different aspect. Business associations are not prepared to systemically interact with state agencies. Such cooperation envisages expert assessment of draft legal acts governing economic issues. At the very least, state agencies do consider the proposals we submit in relation to the legal drafts we are called upon to examine. However, we would look for more effective cooperation.

Interaction with state agencies has yet to extend to entire areas of business activities, primarily due to the two following reasons. Firstly, not all drafts are submitted for our assessment. For example, the draft law on the construction investment fund developed by the Ministry of Agriculture not only bypassed business associations, but also took the Ministries of Finance and Economy by surprise. By some unknown route, the document was submitted to the President, who signed it into law. This is hardly an exception. Secondly, even if business associations received all the legal drafts, they would hardly have the capacity to deal with them. Thus, we can hardly expect a breakthrough in the interaction between business associations and state agencies in the foreseeable future.