GOB AND SME REPS TALK PAST EACH OTHER ON BUSINESS

C O N F I D E N T I A L SECTION 01 OF 02 MINSK 000063 SIPDIS SIPDIS E.O. 12958: DECL: 01/30/2018 TAGS: PGOV ECON BO SUBJECT: GOB AND SME REPS TALK PAST EACH OTHER ON BUSINESS CLIMATE REF: A. 07 MINSK 1044 ¶B. MINSK 023 Classified By: Ambassador Karen Stewart for reason 1.4 (d). Summary -------------- ¶1. (C) In a novel twist, the government made a public showing of attending a conference organized by one of the main business associations in Belarus. Analysts and business leaders put forth common complaints about government regulations and a generally oppressive business climate. GOB participants said that the government supported small- and medium-sized businesses (SMEs) and that legislation would only improve. GOB representatives did not seem genuinely interested in any suggestions from other participants. End summary. Government Gives Business Group Trappings of a Hearing -------------- -------------- ¶2. (C) On January 29, the Minsk City Union of Entrepreneurs and Employers (MCUEE) hosted a seminar entitled "Issues in Developing Entrepreneurship and Improving the Business Climate in the Republic of Belarus." The organization hosts regular events (e.g. ref A),but for the first time authorities granted it use of the Palace of the Republic. Also, while the government usually rejects such invitations or sends only working-level officials, one deputy minister and two members of parliament addressed the seminar. State broadcasters also covered the event (although subsequent television coverage did not mention the MCUEE's role). Mises Research Center Director Yaroslav Romanchuk told Deputy Pol/Econ Chief that the high profile event would help the MCUEE promote itself during frequent visits to the regions. Independent Observers Put Forth Usual Complaints -------------- --- ¶3. (U) Several speakers gave pessimistic overviews of Belarus' business climate (ref B). Romanchuk summarized Belarus' consistently poor ratings in international economic indices. Yelena Rakova of the Institute for Privatization and Management said oppressive regulations mean that a substantial portion of SME activity remains in the shadow economy. Government in turn underestimates the importance of SMEs to the economy and fails to see the need for deregulation. Viktor Margelov, First Vice Chair of the MCUEE characterized government actions as causing losses for most businesses and unjustified profit for the favored few. Aleksandr Kalinin, Acting Chair of the Belarusian Union of Entrepreneurs, noted that planned profit from state-owned property consistently declined, meaning higher and higher taxes on the private sector made up the difference. Vitaliy Braginets, Chair of the MCUEE's Committee for the Legal Defense of Entrepreneurs, said registering a business still often took six months and a lawyer, and closing a business was even more difficult. ¶4. (U) Others focused on concrete examples illustrating the effects of the poor business climate. Nikolay Silinov, told of customs, land use, investment and taxation obstacles hampering his packaging business in Vitebsk. Ukrainian Trade Representative Petr Layshev recounted recent examples of foreign investment in the regions, a supposed GOB priority, stymied by bureaucracy. Government Touts Supposedly Positive Record -------------- ¶5. (U) Anatoliy Pavlovich, Chair of the House of Representatives Committee on Industry, Energy, Transportation, Communication and Entrepreneurship, lamented that SMEs accounted for only 8% of Belarus' GDP, but said the GOB supported business, including through a recent Presidential Order to cut taxes for new firms in villages and small towns. Sergey Kiselev, Chair of the House of Representatives Committee on Budget, Finance and Taxation, said there was "positive movement." Deputy Taxation Minister Vasiliy Kamenko listed numerous taxes that had been lowered or removed and noted that tax inspections decreased by over 50% last year. Comment: Is the Government Genuinely Interested? -------------- --- MINSK 00000063 002 OF 002 ¶6. (C) Sharp presentations by business representatives, especially Margelov, contrasted with the defensive and unoriginal speeches by GOB officials. Businesswoman Zhanna Grinyuk presented on the possibilities for partnership between business leaders and authorities, but admitted she did not detect the spirit of dialogue in the conference. Even if the GOB was not ready to listen, MCUEE further established itself as a strong independent association able to present solid arguments to the public and to the regime. STEWART