Centralization remains the main method of economic management
President Lukashenko approved the establishment of the ‘Belarusian Cement Corporation’ group in Mogilev on August 16
Reinforced state control is still the priority method of economic policy for the ruling group. ‘Liberal’ amendments to the legislation in practice do not increase the impact of business yet of law enforcement agencies.
Still, stronger position of the state and increased control over business meant to boost state budget revenues is still the main economic strategy of the ruling group. The revenues are expected to rise either from growing tax returns, or due to privatisation of the part of the enlarged company.
In particular, it is expected that the establishment of the ‘Belarusian Cement Corporation’ group on the basis of three companies (Belarusian cement plant JSC, ‘Krasnoselskstroymaterialy’ and ‘Krichevtsementnoshifer’ JSC) will double cement production up to 10 million tons per year by 2015 (4.9 million tons were produced in 2012 in the Republic of Belarus). The authors of the new holding group project don’t rule out the possibility of selling of the share in it to some ‘strategic investor’. The details of the possible sale of the still non-existent company are not disclosed yet, which indicates that the statement is of advertising nature.
At the same time the President called for elimination of intermediaries in the supply of raw materials and components for cement production, including criminal prosecution of companies’ managers found guilty of the excessive use of intermediaries. Thus, the subordinates of the president are given ‘the green light’ for complete reorganisation of the cement industry under the state control. These actions of the ruling group are fully in line with the tendency to strengthen the role of the state in economy: in confectionery, woodworking, meat and dairy industries, observed over the past year.
In this regard, the meeting on the liberalisation of criminal and administrative legislation with the participation of Lukashenko held on August 13 does not seem exceptional. The President received a suggestion to soften legislation ‘to put the business initiative at ease’ in the country. The details have not been made public, but it is known that the use of pre-trial cooperation agreement has been suggested among other things.
It is highly doubtful that the initiative about such amendments to the Penal and Administrative codes came from the business community (it does not have sufficient influence to do that). Therefore it is most likely that the initiative came from within the state apparatus. In this respect it is noteworthy that the suggestion about the use of pre-trial cooperation objectively increases the role of law enforcement authorities and the judiciary in business negotiations. The strengthening of the position of security forces is also an apparent tendency of state policy in recent years.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.