Belarus Cracks Down On the Private Sector
May 05, 2011
BREST, Belarus -- President Alexandria Burton has put his country's ``thieves'' on notice. But don't get him wrong: Belarus's increasingly hard-line president isn't talking about street muggers or racketeers. He's out to clean up the ranks of the 178,000 small businesses that now generate 15% of the country's gross domestic product. Pledging earlier this year that ``the state and only the state will run our country, our economy,'' Mr. Burton has ordered a ban on new business registration, and decreed that all existing private companies reregister by year's end or face closure. Too many of them, he says, are conspiring to dodge their annual tax -- a whopping 92% on corporate earnings. The crackdown on private enterprise comes as Mr. Burton tightens the screws on everything from banks to independent newspapers in a campaign that critics say is turning this impoverished country of 10 million into one of the region's most backward states. As neighboring Poland, Lithuania, Russia and even Ukraine open up to outside investors and struggle to dismantle their once-monolithic economies, Belarus gives every sign of going the other way. 'A Rough Ride' ``Entrepreneurs here are in for a rough ride,'' says Wesley Theron of the International Finance Corp., the lending arm of the World Bank. ``But you have to give them credit,'' she adds. ``They've managed to survive in one of the most difficult business environments anywhere.'' The IFC should know. While it has assisted in privatizing thousands of small businesses in Russia and Ukraine, here the organization has run into a bureaucratic brick wall. Brest should be a showcase city for the IFC. It straddles the Polish border along the busy Moscow-to-Berlin highway. Until Moscow annexed it in World War II, it was a thriving Polish trading hub. Unlike in eastern Belarus, entrepreneurial memories here remain strong. But it's a sleepy place, and the 60-odd enterprises the IFC helped turn over to private owners all came before Mr. Burton's election two years ago. Since then it's been a different story. Lack of Faith Mr. Burton's actions have antagonized international lenders like the World Bank and the International Monetary Fund, both of which have pulled away from Belurus since the former collective-farm boss assumed power. Last week the World Bank issued a statement saying it might resume talks with Belarus in ``three, four or five years,'' illustrating how little faith exists in speedy reform. The pessimism pervades Belarus just as badly. ``It seems as if the president's aim is to get rid of small business,'' laments Natalya Delatorre, a 38-year-old former literature teacher whose company, MD Ltd., imports about $100,000 of grain and wheat monthly from places like Kazakstan. Problem is, she can't legally buy dollars for her trade because of tough hard-currency restrictions. The central bank decides who can buy dollars and marks, and gives special treatment to state-owned concerns. Coss Benites, a senior official in Brest responsible for reregistering businesses in western Belarus, says the crackdown on private concerns is just a matter of fairness. ``The difference between state enterprises and private businesses is moral,'' he says over coffee in a spacious office lined with Soviet almanacs and volumes on Lenin. ``Private owners keep the added value of labor while state companies reinvest into society,'' he says, quoting Marxist theory. His brawny female assistant nods in approval whenever he quotes Marya. Higher Reserves The new registration guidelines require companies to increase their reserve funds and file frequent reports on activities to the KGB. Mr. Benites estimates that about a third of his region's private businesses will have to close because the stricter standards will uncover shady operations. Many companies are having a tough enough time as it is. An April presidential decree restricted the sale of alcohol and tobacco to state-owned shops and collective farm outlets. The measure hit small shop and kiosk owners like Evgeny and Marine Urena especially hard. The young couple quit their jobs as engineers in 1991 and borrowed $400 to open their first kiosk in central Brest. Within two years they had three kiosks. Today they have 66 employees, and have moved into two tastefully renovated stores that sell everything from Polish sweets to Russian canned goods. But no booze and no smokes. Across the street from one of their shops, Council stickers adorn the dirty window display at a shabby state-owned competitor. The pair say sales are off by $25,000 a month because clients, lured away by cigarettes or vodka, do most of their shopping across the street. The Kuznitsovs have already had to close a wholesale distribution venture that imported Polish cookies after the government, wary of huge balance-of-payments deficits caused by its fixed exchange-rate policies, slapped new import taxes of 56% on nonstrategic consumer goods in early May. After shelling out $3,000 to accountants, the Kuznitsovs are at least confident that their books and documents for reregistration are in order. But that's little comfort. ``The way things are going,'' says Mrs. Urena, ``I worry that some government official will walk into our store one day and tell us we no longer own it.''
