The losing positions of the Belarusian business in the Customs Union

Article in “Tomorrow of your country”

“Losing positions of Belarusian business in the Customs Union”

11/29/2011 Alexandra ANTONOVICH.

Favorable conditions for doing business within the Customs Union are not going to give anybody to the Belarusians. What is dangerous and useful for domestic business is the arrival of competitors to the domestic market and what Belarusians lose to Russian and Kazakhstan rivals, the experts “Tomorrow of your country” find out.

1.High taxes

Tax exemptions in Belarus account for 80.4% of profits, while in Russia – 46.5%, in Kazakhstan – 29.6%. With such high taxes, state enterprises and private businesses, represented mainly by small and medium-sized enterprises, will find it difficult to compete with Russian business and even more so with Kazakh business.

– Belarusian prices for domestic goods are still slightly lower than Russian ones, but not much, “said Victor Margelov, co-chairman of the Republican Confederation of Entrepreneurship. – Their increase to the level of Russian – a matter of several months. Prices for energy carriers and raw materials will rise – all this will affect the cost of goods. With such a high tax burden, many types of Belarusian products will become uncompetitive compared to Russia. The buyer will choose what is cheaper, which allows him to buy his salary.

2. High level of protectionism to public sector enterprises

The “concern” of the state about enterprises and the restraint of private initiative led to the fact that state enterprises began to work inefficiently. According to the National Statistics Committee, about 11% of Belarusian enterprises are unprofitable. The amount of net loss in January-September 2011 increased by 47% compared to the previous year to BYB 838.6 billion.

In addition, over the past few years, enterprises have taken loans in Belarusian rubles and foreign currency and budget loans, which in some cases have been used inefficiently. The total debt of enterprises (accounts payable plus debt on loans and borrowings) as of October 1, 2011 was BYB 100.641 trillion.

Borrowings, loans, as well as interest on loans to Belarusian companies will have to be given, and the interest rate is very high – from 50%. From what means?

– Turning to the rules of the game of the Customs Union, and in fact – to Russian rules, we break the old model, “cut off” state support to enterprises, – explains Victor Margelov. – A couple of years ago, at the final meetings, the heads of enterprises reported on how many government investments they had “mastered.” Sorry, but this state “freebie” who, as much as he could, pulled so much and did not know where to use it.

State support turned into weakening of domestic enterprises. For many years, the sale of products was provided by quotas, grants and loans were given as much as needed.

“To get them to work in the conditions of the Customs Union and to compete with the Russians is like sending a drug addict to the Olympic Games,” Victor Margelov sneers.

3. Absence of large private business in Belarus

A large private business in Belarus, like, is. But qualitatively different than in Russia. At the same time, the share of the entire private business is small – almost 90% of the real sector is controlled by the state.

“Private business is more mobile, so it reacts faster and more aggressively to the situation,” Victor Margelov said. – Domestic big business is slow and listens to what opinion will be “above”. It turns out, to the detriment of the interests of enterprises (and, ultimately, the economy), a large state enterprise essentially maneuvers between dozens of interests of other players.

4. Lack of financial resources

Belarus is not a rich country. Our enterprises, both public and private, do not have the resources not only to promote their products, but, as the procuring company of 2011 showed, they are not enough even to purchase raw materials in the domestic market. In particular, many enterprises of the processing industry failed to produce vegetables, fruits, berries and mushrooms at reasonable prices and in sufficient quantities this year due to competition with Russian suppliers, which offered much higher purchase prices.

Advertising budgets for many enterprises are either absent or extremely limited. Russian business is promoting its products, including on the Belarusian market, skillfully and aggressively.

What can Russians think about in Belarus?

By itself, the arrival of Russian business in Belarus, like any foreign business, can even contribute to the development of the country’s economy, experts say.

“It will be very good if a foreign business with new jobs, taxes and investments will appear and develop here,” says Roman Kostitsyn.

The threat, in his opinion, is borne by individual representatives of individual companies who believe that by definition they should be given this market – without competition, without observing the rules of market economy, antimonopoly legislation.

“In the process of creating the regulatory framework of the Customs Union, we will face such representatives more than once,” predicts Kostitsyn.

At the same time experts “Tomorrow of your country” note that the threat to the Belarusian market is present, both in the conditions of the Customs Union, and without it.

“Absorption of Belarusian business by Russia is quite possible, because the Belarusian business is weak, and in the world always the weaker is absorbed by a stronger one,” said George Badey, the chairman of the board of the Business Union of Entrepreneurs and Employers named after Professor Kunyavsky. – Another thing that they absorb in order to make a profit, to win the markets. And if our business is not capable of paying dividends, then why is it needed by the same Russian?

At the same time, small businesses in the Customs Union, on the contrary, can become stronger in the market, said Sergei Naidovich, general director of the business incubator of ZAO MAPZAO.

“Of course, we will have to rebuild,” says the director of the business incubator. – National legislation is always narrower than the union law. At least if our small business unites in its intentions with Russian and Kazakh, it will be easier for us to defend our interests.

However, no one wants to give favorable conditions to the business to the Belarusians, experts believe.

– For some reason, Russian manufacturers lobby their interests and promote their initiatives, and we “sit at home” and wait for someone to do something for us? This does not happen, – emphasizes George Baday.