News 05.03.2015

Will small business owners remain in Belarus?

Starting from March 1st, 2015 Belarusian small business owners can cease to exist as a social class. The reason for this is the famous Presidential Decree №222, which was adopted a year ago. According to the decree, entrepreneurs must have a set of documents and certificates for every product, which is imported from abroad. This rule is regarded by the entrepreneurs as the actual elimination of small businesses.

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However, according to the officials, the adoption of the Decree №222 was inevitable. Belarus is a member of the Eurasian Customs Union, which, in its turn, has very strict rules regarding the products of light industry. According to the experts of the Customs Union, about 2/3 of all products currently sold in Belarus, Russia, and Kazakhstan have no documents.

Entrepreneurs seem not to be against trading certified products, but they emphasize the following facts.

First of all, even the wholesale prices of such goods are significantly higher. Which, accordingly, makes goods unattractive to customers. Secondly, those entrepreneurs who agree to work with the new rules are left alone to meditate on the question: where should they get the certificates?

The fact is that the vast majority of wholesale purchases takes place in Russia, where suppliers have never required additional documents. Nobody is going to adapt to the needs of the Belarusian entrepreneurs. As a result, goods for Belarus can receive either super-expensive or simply forged certificates (which is quite accepted by the Russian officials, but not by the Belarusian ones). Alternatively, entrepreneurs are forced to organize their own certification process (which further increases the price of goods to customers).

Entrepreneurs are, therefore, quite skeptical. The meeting with the representatives of the authorities at a forum in Minsk held on February 16th did not bring about any solutions. The officials listened to the entrepreneurs and promised to consider their comments, while they also assured that there will be no changes in the decree.

The entrepreneur movement has already demanded an urgent meeting with Lukashenko, but it is unlikely to be a success. The previous experience of similar claims was quite negative. For example, in 2007-2008, together with opposition movements, entrepreneurs protested against another decree – №760. According to that decree, entrepreneurs lost the right to hire anyone other than their family members. Rallies ended in mass arrests and the criminal case against 14 opposition activists. The decree is valid to this day.

The second option, which is being considered, is an appeal to supranational Eurasian Economic Court demanding the cancellation of the decree. The authors of the idea believe that the adoption of the decree contradicts a number of rules of the Customs Union, and therefore it should be abolished.

It is more likely, however, that those who wish to keep their business will have to work under the new rules. Starting from  March 1st, the violation of the decree will be subject to a fine of up to 9 million Belarusian rubles (over 4,000 EUR) and confiscation of goods. The activists of the entrepreneur movement predict that out of approximately 70,000 entrepreneurs only 2000 will continue to work. The rest will simply close their stalls and move on to work in Russia or Ukraine.

P.S. The only thing that entrepreneurs have succeeded to achieve so far is the possibility of an additional three months of work without the required certificates. However, this measure is considered to be temporary. It is unlikely, that it will fundamentally solve the entrepreneurs problems, or the challenges which are ahead of the authorities. In 3 months the country will be in a full swing of election campaign, one of the topics of which might as well be the future of small business in Belarus.