Let’s speak honestly. Without hopes for 100500 billion EUR that the West will supposedly give us as soon as we get rid of Lukashenka to start a great life. Without hopes that somebody will give us the Khanty-Mansi AD when Russia collapses. Yet judging by the real state of our country and the whole region we live in.
So, as we have already understood, after Lukashenka and his pack disappear, after the democratic elections are restored, we will have to catch up with our neighbours from the level we were in the year 1994. Which is not going to be simple: Poland, for example, has become a “European tiger” with its 6% GDP growth per year since then. Other countries have also left Belarus far behind, both in the terms of the GDP and in terms of the level of personal income. Even Ukraine at war has a much healthier economy than Belarus. In addition, after the war is over it will get generous help from the West for its restoration.
What does it all mean for Belarus? It means that we will have to find non-standard variants of economic reforms, make unexpected and courageous decisions, even if they contradict the Belarusian mentality. Otherwise, Belarus is doomed to remain an “eternally catching-up” country of Eastern Europe. As an old truth asserts, if you want to have something you have never had, you need to do what you have never done. So, let’s examine several nonstandard (in our traditional understanding) variants of economic reforms.
For example, here is one of radical decisions that would allow to “wake up” the entrepreneurial potential of the Belarusian nation: it’s an idea to create a social stratum of micro-enterprise based on small family businesses. Belarus should launch economic lifts for growing national businesses, create certain steps for business growth, as it is the founders of such micro-enterprises who in a not very long time are going to become a middle class – the basis for economy and social well-being of Belarus.
In order to create such a social stratum, we need to reach something like a constitutional agreement between a part of the population and the state, that nobody owes nothing to anybody. The so-called “variant zero” for self-employed. Precisely: a family enterprise in a framework of a definite annual limit of transactions (for example, up to the equivalent of $200-300 thousand per year) gets a right to conduct its own business.
At the same time, such a business:
- is not registered anywhere (except a special bank account allowing to control the limit of transactions).
- Does not report.
- Does not pay any taxes or duties.
- Is exempt from state inspections.
- Does not comply with the requirements of the labour law.
Of course, such a variant is not possible for all types of economic activity. However, it is quite acceptable for most activities typical for Belarus, from growing and processing agricultural products to building, renovations, tutoring, car repair shops and others. The important thing is to prevent the state from getting carried away by regulatory powers. That is, not to overdo while determining what types of activity should be suitable for a family business.
What’s the idea of such approach? What’s use for the society and the state from multiple businesses that do not pay taxes? Actually, a huge number of such micro-entrepreneurs will lead to the increase in the middle income of the population. Not at the cost of the state budget, and not at the cost of injections from the state (it will have a lot to spend its scanty treasury on), but exclusively at the cost of the energy of self-employed people. People who are working without any fear that freeloaders in uniform can arrive and demand reports, certificates, licenses, taxes and a lot of other things and impose a unbearable fine on you in case you do not provide some of that.
In such situation, a new main growth driver will appear in Belarus, which is consumer demand. To put it simply, if you want your economy to grow, buy first, and produce later. More precisely, first create the demand, and then generate the supply of goods and services. While in Belarus everything is done in the opposite way. For years, Belarusian enterprises have been working “for the warehouse” receiving subsidies from the state budget. And then we listen to the demands of Lukashenka to “tighten our belts” and plug holes in the budget with new Russian and Chinese credits.
The second, let’s call it, life hack for a progressive economic growth is the following: to give voice and resources to regional entrepreneurs, to decentralize the finances so that people would be able to manage the money they earn at the local level: decide what investments to make, what to build and what to develop in the territory they live in. It would be a powerful impetus to the development of the whole country: not only of the regions, but also of the capital and regional centers.
In fact, we are saying that the taxes collected on a certain territory (region, district, city, town) should not be transferred completely and entirely to the center, but, for example, 70% of them should remain in the local budget and be distributed for the local needs in a direct, democratic and transparent manner, with participation of all the local residents of the territory. Then the Belarusian regions will literally compete with each other which one offers more attractive conditions for a new business, as every business is a payer of taxes 70% of which are staying in the region to be spent on its needs and problems.
The third life hack is a thorough transformation of the state procurement system. First of all, today the small and medium businesses are completely forced out of it: the Belarusian state does not trust it and never fails to demonstrate it. However, it should be completely the opposite. That is, “small” state purchases in the framework of a huge number of small-size tenders can become the channel supplying real money from the state budget to small businesses, including those in the regions. Why it is good has already been explained in the previous paragraphs about the consumer demand as a stimulus for economic growth.
Of course, such tenders should be organized electronically and be absolutely transparent in order to cut off corrupt officials throwing tenders to their “related” companies or dummy individual entrepreneurs. In other words, a separate digital platform for tender procurement should be started, where the customer is the state, and the contractors are small and medium businesses, family businesses and self-employed people. Everything should be simple and transparent on such a platform: it should include only digital registration of transactions and accreditation of small and medium businesses.
Second, the current state procurement system holds the localization of products back. Nevertheless, “buy the made in Belarus” should not be just a slogan in shops, it should be a key principle of state purchases. Third, correct prioritizing in the state procurement in different regions (Vitebsk, Mogilev, Grodno, and so on) will allow to competently distribute government support to local businesses. It is also very important for creating and preserving employment in the regions.
In general, it would be well advised to open state orders guarantee programs and assets safety guarantee programs for local businesses in those regions of Belarus that are losing population most rapidly. Otherwise, we are going to obtain first an economic void, which then will turn into a demographic one.
Forth, in new political conditions (after Lukashenka, when a democratic order of the country is established), new investors will want to come to Belarus. However, at least at the initial stage of activity, they will need a sales guarantee.
Such examples can be found in Poland, by the way, and they concern even quite huge businesses. For example, a famous Polish entrepreneur, Zbigniew Jakubas, attracted 100 million EUR for future production of electric locomotives and contract of his company Неваг with the railway by issuing shares (IPO) for modernization of production that he had purchased from the state. However, in Belarus such support of a domestic producer through the internal guaranteed orders system is a taboo.
Fifth, it is necessary to establish a competitive advantage for Belarusian companies at the tenders in proportion to the level of the added value. For example, if it is an imported fuel, the competition between our and foreign companies is only by the price. However, if it is, let us say, a turbine, then a “Belarusian” is going to have a competitive advantage over a “foreigner” based on added value chain, because the added value is first of all salary for our citizens and taxes to our state budget.
To be continued…