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meetings of 31,3 % of joint stock companies; besides, it owns the
controlling interest of 48,4 % of these companies;
• the privatization significantly slowed down because of
the government’s changed attitude to the privatization after the
introduction of the mechanism of the so-called "golden share"
as well as other regulations allowing state bodies to interfere
with decision-making processes.
Other problems having to do with the privatization pro-
cesses in Belarus are as follows:
• a poor private sector;
• a small number of potential customers;
• insufficient financial legislation;
• immature credit mechanisms of underwriting securities;
• technical complexity of and high costs for the privati-
zation, which is especially typical of transition economies having neither funds nor qualified specialists.
The low rates of structural transformations make the Belarusian economy less attractive for investors. As a result, a
considerable part of the production potential is not updated
whenever necessary, and the wear and tear on plant and
equipment makes up over 60 %, which is a critical indicator.
The financial standing of many business entities is characterized by low profitability and liquidity. Products of many Belarusian enterprises are squeezed out of the national market,
though prices for Belarusian products are lower than those for
foreign analogous goods. All these things negatively affect the
human capital assets of state enterprises — their index is get-
ting lower and lower.
Thus, nowadays, the issue of privatization and denation-
alization is getting more and more urgent. Therefore, a toppriority problem both today and for the nearest future is to de-
cide well what state enterprises are to be transformed into pri-
vate ones. At the same time, it should be noted that there are no
"good" or "bad" forms of ownership. Any form of ownership
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has its weak and strong points and can be socially controversial. State ownership that was dominating during the socialism
period seemed "fair", but in practice it appeared to be less effective than private ownership. Therefore, the fact that we can’t
find an impactful owner undoubtedly aggravates the situation.
Although Belarus lags behind other countries in terms of
privatization, it stands a good chance to succeed in privatization today:
• a considerable number of recently-launched enterpris-
es for working for the Union market generally hold their position in the markets of the CIS-countries;
• enterprises still have a large number of highly quali-
fied specialists capable of achieving challenging technological
objectives;
• recent institutional transformations create proper con-
ditions to make the privately owned capital be involved.
The problem of small and medium-sized business devel-
opment is most urgent for Belarus. These types of business are
important for our economy because they have to:
• help to take a full advantage of Belarus’ human capital
assets — a basic element of the national wealth;
• to make the economy more flexible under the condi-
tions of fluctuating demand;
• to draw resources (inefficient for large-scale produc-
tions) into production;
• to intensify innovation activities and to develop high-
intelligent services;
• to create a competitive environment, to struggle with
sizable monopolists;
• to saturate the market with various domestic goods,
promoting thereby import substitution processes;
• to draw considerable personal savings for making in-
vestments into the economy.
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Small and medium-sized business development has nothing to do with dividing large enterprises into a number of
smaller ones. The size of an enterprise should make economic
sense. The world’s practice shows that large national and
transnational corporations that are highly competitive share a
considerable part of the worldwide market, and only firms,
armed with equal funds, can compete with them. At the same
time, both small and medium-sized enterprises successfully
operate in the market either through cooperating with large
corporations or through creating markets typical of this type of
business (bakeries, cafe, hotels, etc.), and also develop and
make innovative goods.
Thus, it would be reasonable for Belarus to combine such
economic trends as establishing large national corporations (on
the basis of industrial, geographical or other characteristics),
incorporating small and medium-sized businesses into international corporations (transnational corporations, FIGs) and
maintaining these businesses. It will allow to make the econo-
my stable and flexible, to increase the degree of its structural
competitiveness.
The following things are to be done to intensify transformation of ownership forms:
• to accelerate and encourage (in every possible way)
small privatization through using market-related (but not cost-
ly) instruments of property evaluation, i.e. to set prices taking
into account the demand and supply rates;
• to hold auctions or competitive biddings as well as to
make the system of ownership transformations simple and open.
With regard to the problem of privatization, it is important:
• to intensify denationalization for the sake of gaining
profit, to focus efforts on finding strategic (mainly foreign) in-
vestors that will bring new technologies and modern business
methods to the country;
• to develop the relevant regulatory basis;
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• to specify the owner;
• to reduce the government stake in authorized funds of
an enterprise;
• to tighten the budget restrictions, to force enterprises
to comply with the terms of the agreement, i.e. to stimulate and
motivate ownership transformations on a regular basis;
• the State should intensify efforts so as to create an ef-
ficient financial market allowing to estimate a daily performance of enterprises and to finance the most powerful of them
for their further restructuration.
11.6. THE MAIN PROBLEMS AND DEVELOPMENT
PROSPECTS OF BELARUSIAN COMPANIES
The main problems of the Belarusian economy and, con-
sequently, of most domestic enterprises are:
• most inventories of enterprises are physically and
morally outdated;
• outdated technologies that do not work towards a high
quality and competitiveness of products;
• a lack of investments for the development and mod-
ernization of production;
• critical innovation potential;
• high materials-output and energy-output ratios;
• imperfect foreign trade infrastructure, etc.
To intensify structural transformations in the economy
and improve the investment environment in the country, it is
necessary to solve the following problems:
• to increase the investment potential of industrial
enterprises;
• to develop security (bonds) regulatory system;
• to extend guarantees (on the part of the state) to pri-
vate investors;
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• to develop inputs and to transform them into the in-
vestments necessary for carrying out a rational industrial policy
intended to provide support on the part of the state to top-
priority industries and enterprises that are producing competi-
tive and socially significant products;
• to develop a healthy competitive environment in the
investment sphere;
• to improve the mechanism transforming savings into
investments;
• to optimize the taxation system of real economy
enterprises;
• to provide detailed and integrated information about
economic opportunities.
The current problems of small and medium-sized busi-
nesses in Belarus are as follows:
1. High tax rates and frequent changes in tax accounts.
Heavy taxes are one of the major factors hampering the development of small and medium-sized-businesses. A tendency to
minimize tax payments will further facilitate different forms of
shadow markets and capital flight. Every legal prohibition involves some legal ways to escape it. As a result, taxes do not
go into the budget, jobs are not created, explicit and implicit
transaction costs increase the cost of final products. Eventually,
all the expenses implied by this kind of policy are covered by
an ordinary consumer.
2. Poor legislation regulating business activities (that does
not ensure medium-term and long-term business planning).
3. High market entry costs (entrepreneurs are completely
dependent on the government as they are constantly applying
for licenses, certificates, permissions and approvals that can be
terminated or revoked any time). Free borders, lower costs and
more liberal legislation in the neighboring countries (Poland,
Lithuania, Russia and Ukraine) cause disinvestments and in-
corporations in these countries. Complicated and expensive
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procedures of business registration in Belarus can be explained
by the government’s aiming to intimidate shell companies.
4. Sluggish consumer demand.
5. Supervisory agencies’ control and local authorities’
pressure (there are over 20 monitoring bodies in here).
6. Limitations of entrepreneurs to further their own busi-
ness interests. About 80 % of small and medium-sized busi-
nesses are not part of business associations aiming to advocate
their interests. Entrepreneurs’ inability and/or unwillingness to
cooperate and protect themselves makes authorities consider
businesses as a source of the budget replenishment and helps
officials to line their own pockets (the vast majority of entre-
preneurs declared that they had to offer bribes either occasion-
ally or on a permanent basis). The force that can change our
society’s attitude to entrepreneurship is mass media.
7. A destructive factor in the development of small and
medium-sized businesses is a lack of confidence on the part of
business leaders about their future. About half the heads of
large and small, long-standing and recent, metropolitan and
local, trade and production enterprises cannot predict the nearest-term development of their own business (i.e. at least for the
year to come).
The factors promoting the development
of small and medium-sized businesses
To change things radically, what is needed it to up-end
the attitude of state administration bodies to the private sector.
The market-related tools promoting economic growth are as
follows:
• guaranteed property rights;
• an extensive financial and bank network (stable cur-
rency and steady prices);
• competitive markets;
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• free trade with foreigners, open economy;
• confidence in other agents of the economy, partners’
commitment;
• legitimateness and law enforcement; primacy of legal
solutions (to business problems) over informal and forced ones;
• high level of corporate management;
• business transparency, international accounting
standards.
It is necessary to comply with the following recommen-
dations to decrease the regulatory burden on the Belarusian
private sector and to stimulate its development:
• to simplify procedures of establishment and liquidation
registration of enterprises; to make it to be a registration as simple
notification rather than licensing, to conduct registration at the
home address, to set small amounts of the authorized fund and
provide options in choosing a type of economic activity;
• to unify a set of documents needed for registration and
to establish a one-stop principle, as well as to register a busi-
ness entity with tax and other authorities;
• to modify the Tax Code for simplifying the taxation
system and reducing the tax burden to enterprises;
• to legally interdict all forms of administrative price
and tariff regulation, apart from that for a narrow list of goods
and services;
• to enact legislation regulating the intercourse with the
state (owner) with regard to non-residential and land lease
(market-related rent of using; revocation of state monopoly on
residential, trade and production lease; introduction of schemes
of land ownership);
• to greatly reduce the number of licensable activities;
• to liberalize the legislation in the field of products,
work, services certification (to simplify certification proce-
dures and reduce their costs);
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• to pass the law "Concerning Unified Procedures of
Imposing Economic Sanctions" that is to be proceeded by abo-
lition of other regulations related to this issue;
• to revise the legislation regulating sole proprietorship ac-
tivities for simplifying taxation and reporting procedures as well
as for providing and protecting the rights of business people;
• to make the state get more highly involved in business
support through assisting local authorities in creating the necessary infrastructure as well as through consulting and information services in the field of business activities.
These and other actions will allow to eliminate market
entrance barriers and to reduce transactional costs of most
small and medium-sized businesses, which will be the best
thing to intensify internal and external investors’ activity.
According to entrepreneurs, key measures promoting
sales include factors that are endogenous for their business,
among which are changes in the assortment, shifts in productivity and quality as well as in sales and promotion schemes.
The fact that the external environment will be changing slowly
necessitates the enterprise to pay as much attention as possible
to its HR polices. Personnel training, motivation promotion and
growth in competence are becoming the most important factors
facilitating a competitive potential. In this regard, a reinforced
competition for the most skilled work force can be expected in
the labour market.
11.7. COMPETITIVENESS AND ECONOMIC
TRENDS OF THE REPUBLIC OF BELARUS
In the 21st century, it has become a scientific challenge
for Belarus to decide what economic development strategy
should be implemented and followed. This problem requires
new approaches and new research methods that should be dif-
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ferent from those that were applied during the Soviet period
and are still being used today.
The prognostic analysis requires consideration of the
world globalization trends that are relevant to the socioeco-
nomic sphere as a whole . It is possible to understand and com-
prehend the problems of our country only taking into account
the painful issues of today as well as through analyzing and
generalizing the relevant factors, processes, tendencies; thus,
finding ways to solve the problems involves absolutely different horizon periods. Today, as we know, the look-ahead period
in Belarus takes 15 years (the National strategy of Sustainable
Social and Economic Development). However, it is impossible
to solve overarching problems within a 15-year period. These
problems include:
• depopulation and high incidence of diseases;
• outdated communication and other life-supporting
systems;
• domestic production competitiveness, etc.
Top-priority problems are as follows:
• to improve the financial standing of enterprises and or-
ganizations through increasing production efficiency, implement-
ing flexible budget, taxation, monetary, and pricing policies;
• to intensify structural transformations of the economy
and to restructure enterprises in accordance with the needs of
internal and external markets, requirements of scientific and
technical progress through implying advanced technologies and
updated machinery and equipment, as well as through reducing
material-intensive and energy-consuming production;
• to take measures to intensify innovation and investing
activities, mobilize internal financing sources and to create favorable conditions to attract foreign investments and credits;
• to boost the real income level of the population and
labour remuneration rates in terms of GDP, which is the most
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important factor of increasing both the output and production
efficiency growth;
• to create the necessary conditions for promoting entre-
preneurship and developing small and medium-sized businesses,
which is one of the important factors of economic recovery;
• to modify the legislative regulatory base for providing
a balanced sustainable development of the economy.
The main economic tendencies and problems
The social and economic strategic objectives include
health and life standards improvement of the population on the
basis of a balanced and sustainable economic development, en-
suring efficient employment of the population and making the
social security system reach the level of economically developed countries. Achieving strategic objectives has to do with
acceleration and improvement of qualitative parameters of the
development of the national economic complex as a whole.
During the forecasting period, the basis of a new postindustrial society is expected to be formed, and the mechanism of
a socially oriented market economy is expected to be developed.
A primary goal of the second five-year plan (2016–2020)
was to achieve a sustainable economic growth and, thus, im-
prove the population’ health and living standards.
The basic objectives of the second five-year plan were as
follows:
• to intensify structural transformations of the economy,
to accelerate the development of the branches of the social and
consumer complex, of the knowledge-intensive resourcesaving export-oriented, import-substituting and environmentally friendly productions;
• to expand markets in the CIS-countries and foreign
countries through improving the quality and competitiveness of
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