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Belarus: Entrepreneurial Spirit Dwindling

Minsk, 24 May 1999 (RFE/RL) -- An expert on the Belarusian economy says that in the five years since President Alyaksandr Lukashenka came to power, Belarus has lost half of its private businesses, or roughly 1,500 entrepreneurial ventures.

Alexander Potupa, a trained economist and former president of a publishing company, was at one time considered to be one of the country's most prominent private businessmen. Speaking to our correspondent in Minsk recently, he called recent setbacks to entrepreneurship "a catastrophe that you can not imagine".

He says the country has lost many of its best and brightest businessmen and women, who might have been able to lure future foreign investment to Belarus. Many entrepreneurs have moved their businesses to Germany, Poland and the United States in the West or to Russia in the East.

Today, Potupa is the Deputy Chairman of the Union of Entrepreneurs of Belarus. He says the Union is working hard, against all odds, to try to institute democratic reforms in Belarus and bring back a market economy.

He said the Union participated in the development of a Helsinki Commission Report on the violation of human rights -- chiefly concerning the violation of property rights in Belarus. He said this year the section would be much larger because, as he put it, "Lukashenka uses lots of violations against businessmen."

"Right now more than 100 legal cases are underway and the charges which are raised against the businessmen are very doubtful and we can consider that now a fight of classes is underway between Lukashenka and the businessmen. In this respect, the perspectives of business development are very vague because now only people who are somehow connected with the President or his administration can do business in Belarus. The situation was bad in the past as well, but now the political and legal environment of reform has been totally destroyed."

Potupa characterizes the current Belarusian business scene as a return to Soviet times, heavily regulated and highly corrupt. To that end, he notes that the average monthly salary of a Belarusian is under $30, while the monthly turnover of goods is twice as high. He argues that this means money is being gained and changing hands in Belarus by illegal means. Potupa said the second factor worthy of note is that the average monthly salary of a state official is around $60 to $70.

"No official can exist on $60 to $70 so officials have to take huge fees to exist. There are no miracles in the world. And today the power structure (the government) is like the militia, it gets business people as a source of income for the authorities. And by that I mean they can come to business units and require or demand any fees for their activities. This situation is especially bad because the authorities have total control of both businessmen and state authorities so, as they are all doing something illegal, the government can come and make demands at any time."

Economic analyst Yaroslav Romanchuk adds support to the charge that the current business environment in Belarus serves the government functionary, rather than the entrepreneurial businessman or woman. In a recent analysis for Belarus Now, Romanchuk said the person with the power is also the one with the power to choose to whom to give privileged credit, property rights or priority credit assistance. And, as he put it, "the more inequality and special conditions for businesses there are, the more corruption and economic criminality results."

The European Bank for Reconstruction and Development (EBRD) some six months ago said in its transition report that the Belarusian government was increasing its control over decision-making at the enterprise level. It highlighted a presidential decree giving the state the right to veto enterprise decisions on reorganization, liquidation and managerial changes.

The EBRD said another presidential decree added further uncertainty to the investment climate in Belarus by canceling existing tax and customs privileges to foreign investors and giving President Lukashenka direct responsibility for granting such privileges. According to the EBRD, increasing isolation from the international community and growing macroeconomic instability are likely to constrain further inflows of foreign direct investment.

Meanwhile, the World Bank last month announced that it was stepping up its work in Belarus on education and public awareness. World Bank official Ruth Bachmayer said the Bank would arrange workshops and training courses for businesspeople in Belarus, as well as move closer to the Presidential Administration building for closer government contact. The World Bank has long recommended a series of economic steps to the government, including friendly treatment of private businesses as a method to attract much-needed foreign investment.

According to Potupa, the only businesses which manage to survive comparatively well in the current environment are those focusing on small-scale retail trade and the trade of foodstuffs. As Potupa put it, "People always need to eat something and wear something cheap."

He said bigger businesses are almost always related to contraband or other illegal activities and said even those that arent were long ago grabbed up by the government. Potupa said the biggest problem facing Belarus -- like other former Soviet countries -- is the lack of direct foreign investment.

Potupa said the Union of Entrepreneurs of Belarus is fast losing members, many of whom can no longer afford to pay the fees to support its efforts. He said a Congress would be held in Minsk in a few days to address the issue. As for the long-term future, Potupa declined to speculate saying, "All we can try to achieve now is to bar Lukashenka from worsening the situation too quickly."

Observers say that Belarusian authorities often send mixed signals regarding the treatment of private businesses. At times officials have expressed tepid support. But at other times, officials seem hostile.

This week, the parliament loyal to Lukashenka voted overwhelmingly to ban what it termed 'speculation' and the speaker (Anatole Malafejeu) called for the ban to be included in the criminal code. Lukashenka himself has referred to entrepreneurs as "lousy fleas which should be shaken off."

RFE/RL contacted Belarusian officials in an effort to get their comment on laws and practices affecting private businesses in Belarus. But no response is available.