Confectionery industry problems are tackled by old means – with import restrictions
As of April 3rd, Ukrainian confectionery manufacturers cannot access the Belarusian market.
Income growth has resulted in Belarusian consumers’ reorientation towards foreign confectionery producers. The government attempts to solve the problem of reduced production volumes and piling up stocks in the confectionery industry by restricting domestic market competition. Instead of improving the quality, the government uses administrative means, which are ineffective given border free communications with Russia.
Income growth has resulted in Belarusian consumers’ reorientation towards foreign confectionery producers. According to the National Statistics Committee data, in Q1 2013, the share of confectionery made from foreign sugar increased up to 29.8% of all sales. In Q1 2012 the share of foreign products was 21.6%. Foreign trade in goods statistics in January-February 2013 shows a more than twofold increase in imports of chocolate and other food products containing cocoa.
Confectionery industry statistics also deteriorated. Production of chocolate and confectionery products from chocolate declined in Q1 2013 by 17.6% compared to the same period in 2012. Stocks increased by 20% since early 2013. A negative impact on the confectionery industry performance has had the nationalization of Kommunarka and Spartak confectioneries and the need to restructure the foreign sales network. The government decided to support the domestic confectioneries by limiting the supply from Ukraine – one of the largest confectionery suppliers to the Belarusian market. Restrictions on Ukrainian confectionery imports were introduced on formal grounds.
An additional measure to improve the situation in the confectionery industry is a Trade Ministry resolution No 6, which extended the list of sweets that must be sold in retail outlets. Against import restrictions, Belarusian shops will be overloaded with domestic confectionary products. This measure’s effectiveness is questionable in the context of open borders with Russia and the inability to apply similar measures against Russian confectioners, which are leading importers to Belarus in 2013.
Thus, instead of improving the quality, the government has once again used its administrative tool. Preservation of favourable conditions for Belarusian producers by using old means is not feasible due to open borders within the Common Economic Space. In fact, the launched unproductive trade war could result in retaliatory actions by Ukrain for a number of highly sensitive Belarusian exports.
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.