GOB'S STEPS TOWARD MARKET REFORMS WELCOME WHILE INCOMPLETE

UNCLAS MINSK 000030 E.O. 12958: N/A TAGS: EINV ETRD ECON PGOV BO SUBJECT: GOB'S STEPS TOWARD MARKET REFORMS WELCOME WHILE INCOMPLETE ¶1. Summary: President Lukashenka signed his first decree in 2009 simplifying the process for registration and liquidation of businesses. The GOB further enumerated an ambitious, 52-point plan envisioning an overhaul of the country's business code in 2009 toward liberalizing the economy. While the Belarusian business community and independent economic pundits generally welcome the far-reaching plan, they caution that further reform of operational regulations is needed and many implementation questions remain in order to effect significant improvement of the business climate. End Summary. -------------- - Starting and Terminating a Business Simplified -------------- - ¶2. On January 16, President Lukashenka signed his first decree of 2009 on State Registration and Liquidation of Businesses. This decree, which comes into effect on February 1, applies to all businesses with the exception of banks and other credit and financing institutions. Starting on February 1, new business registration will take no longer than one day; now, a businessman will need to file an application, attaching a their business charter and pay a registration fee. Individual entrepreneurs will not need to produce a charter and will need only to attach the same documents and a photograph. Liquidation will similarly become a simplified, one-stop procedure. ¶3. The decree also simplifies the procedures by which businesses can open bank accounts. It cancels all requirements of a charter capital value, cancels the requirement to list and submit all intended business activities and exempts businesses from indicating their legal address in the charter. The GOB claims the decree launches registration procedures based on a notification rather than a permission principle. -------------- Changes Are Welcome but Insufficient -------------- ¶4. The Belarusian business community and independent economic observers have generally welcomed the decree while calling these partial measures which will not change the overall operational environment. Former Chairman of the Belarusian Union of Entrepreneurs Alexander Patupa opined that the GOB should focus first on making the overall business climate more "predictable and friendly," highlighting outstanding critical issues of high rents and a cumbersome tax system. Independent lawyer and economist Sergei Balykin called as well for GOB interference in pricing and salary policies. Chairman of the Perspektiva NGO, Anatoly Shumchenko, believes that simplified registration will not significantly increase the number of small businesses and individual entrepreneurs. He urged other primary steps, such as permitting entrepreneurs to hire at least five employees, which would help create up to 500,000 new jobs in Belarus (overall population is 9.6 million). Director of the independent Strategia Analytical Center Leonid Zaiko called the decree a welcome start, though voiced skepticism about any significant improvement in the business climate unless it is in the interest of the country's nomenklatura (bureaucratic elite),which he speculates is preparing to privatize and buy the country's best assets. -------------- 52 More Reforms Announced but Underdeveloped -------------- ¶5. In a GOB press release issued January 17, the GOB announced a sweeping, 52-point plan to liberalize the economy in 2009. This document enumerated a wish list including a simpler and more streamlined tax system and customs clearance; lower lease payments; more liberal pricing policies; less red-tape; easier certification and a more liberal investment policies. Deputy Economy Minister Andrei Tur said he is counting on the positive results of the plan in the first quarter of the year. ¶6. While independent economic observer Leonid Zlotnikov welcomed the plan, like many commentators, he doubts that implementation will be thorough and consistent. Zlotnikov pointed to mixed signals from the GOB, saying, "We see one Deputy Economy Minister telling us about more liberal economy and the other Deputy Economy Minister being concerned over high retail prices and promising tough administrative measures against businesses charging such prices." The Belgazeta newspaper's economic observer Sergei Zhbanov echoed such doubts, saying that he views the plan as "nothing but a letter of intent." -------------- Comment -------------- ¶7. Post shares many observers' skepticism that there will be broad-based, consistent progress towards the necessary structural economic reforms. While the liberalization plan's laundry list looks impressive on its face, the lack of development of intended implementation steps leads to questions as to the seriousness of the GOB's intent. As the GOB recognizes that its financial crunch necessitates some steps towards a market economy, the regime is likely to take some partial reform measures with at least one eye winking at potential donors. MILLER