Way of Investment in Belarus

This week, the subject of improving the investment climate in the country was discussed in the lower house of parliament.

Many speakers noted with regret that the investment legislation in Belarus is good, and the volume of foreign investments entering the country’s economy is scanty.

The Ministry of Economy this week announced the preparation of a strategy to attract foreign direct investment for the period up to 2025. The document suggests that by this time the amount of foreign direct investment will double.

In the meantime, the figure is quite sad. “Our share in global investment flows is very small. Today we are closer to the level of 2013-2014. – this is 0.1%, ”stated Minister of Economy Dmitry Krutoy, speaking in the House of Representatives.

At the same time, a rather paradoxical situation has developed. Experts from international organizations recognize that investment legislation in Belarus is good, new companies with foreign capital can receive substantial tax breaks, and the country receives scanty foreign investment.

“Legislation, as international experience shows, is not a sufficient factor for creating a favorable investment climate. It is important not only the letter of the law, but also the case -how it is implemented in practice. The problem of Belarus lies in the unpredictability of how the adopted laws will be applied in practice, ”stressed the head of the World Bank’s office in Belarus, Alex Kremer, speaking this week in the House of Representatives.

A vivid example of how the implementation of regulations can worsen the investment climate is the situation around decree No. 488. Recall that the document entered into force in 2013 and was intended to strengthen the state’s struggle with so-called false business entities. However, in fact, it turned out that the sanctions were also applied to bona fide entrepreneurs.

The practice turned out to be such that if the organization is recognized as a pseudo-entrepreneurial structure, all its transactions for the entire period of activity are canceled. Supervisory authorities notify the bona fide enterprises with which transactions were concluded, and expose them to penalties.

According to representatives of all business associations, the enforcement of Decree No. 488 impedes investments in Belarusian enterprises.

Representatives of the business community point out that an investor runs the risk of facing major financial sanctions if it turns out that the company he bought had ever had a business relationship with an organization that the state had blacklisted.

All the leaders of the Belarusian business unions speak with one voice about the need to cancel decree number 488, which worsened the investment climate in the country.

“Decree number 488 is not only a trap for investors, but also a big scarecrow. This document creates a negative image of the investment climate. The application of this decree gave rise to practice when sanctions are applied to bona fide entrepreneurs without a court decision, ”said Vladimir Karyagin, chairman of the High Coordination Council of the Republican Confederation of Entrepreneurship, in a commentary for Naviny.by.

The leaders of the business unions say that it was very easy to get into the mentioned registry – a commercial organization can blacklist for formal reasons.

“Of about 8,000 organizations that are on the register, only about 260 are by decision of the court. Many (about 5,000) business entities are entered into the register on formal grounds – they did not submit a tax return, they were not at the place of registration of the legal address, ”the director of the Business Union of Entrepreneurs and Employers named after N. Y. Kunyavsky Zhanna Tarasevich.

In her opinion, it is necessary to exclude the practice when business entities are blacklisted for formal reasons. In order to reconsider the approaches to combat pseudo-business and remove the traps that the document has placed in the way of bona fide entrepreneurs, the business community proposes to repeal Decree No. 488.

“As a result of the law enforcement practice of Decree No. 488, this regulatory act has become a tool of economic repression in the country, a negative factor for both Belarusian and foreign investors,” said Alexander Kalinin, chairman of the Belarusian Union of Entrepreneurs, who published the point of view of the Business Development Council.

The International Finance Corporation, which provides support to the private sector in Belarus, proposes to introduce in Belarus legislation a rule on the responsibility of government officials for damage caused to business.

“We propose that a clear procedure be established for investors to compensate for the damage caused by the unlawful interference of government bodies and their officials,” said Jason Pellmar, head of the International Finance Corporation’s regional office, speaking this week in the House of Representatives.

Representatives of business unions fully share this proposal.

“We have prepared a similar proposal in 2015, and it is still relevant. If there is a clear mechanism for recovering damages for the unlawful actions of an official, government officials will begin to think about their decisions. In this case, representatives of the inspection bodies will begin to feel personal responsibility for their actions or inactions, ”Zhanna Tarasevich believes.

Representatives of the Belarusian business also come out with other initiatives to improve the business environment.

“I propose to replace the high-profile landings that occur with businessmen with home arrests. New technologies are there – bracelets have appeared, with the help of which one can track the movement of a person, ”said well-known Belarusian entrepreneur Oleg Khusaenov, speaking this week in parliament.

Representatives of the Belarusian business suggest going further and freeing those who have been convicted of economic crimes.

“We need to make a decision on a mass amnesty for entrepreneurs. This would allow the release of several thousand people who could create new projects and make a positive contribution to the economy, ”Vladimir Karyagin is convinced.

Tax disputes of the state and entrepreneurs can and should proceed without extreme measures. The Belarusian business tried to convey this idea to the authorities during the parliamentary hearings on improving the investment climate this week. Time will tell whether entrepreneurs have been heard.