Indebted agriculture will require additional subsidies for Belarusian food industry
More than 400 agricultural enterprises will undergo a financial recovery procedure. Without state subsidies, as of September 1st, 2016, agriculture counted over 1000 unprofitable enterprises. The food industry will suffer most losses due to the writing off debts of the agriculture; moreover, some enterprises will require financial aid from the state.
According to the Ministerial Council Resolution No 889 of October 31st, 2016, the government put together two lists of state agricultural organisations to be subjected either to financial restructuring, or to bankruptcy. The bankruptcy list contains 102 enterprises, which have no business plan to restore solvency. 323 organisations will be subjected to financial recovery and will obtain interest-free instalments to repay the cost of loans, debts on taxes and duties and the resulting debt for natural gas and electricity. From July 1st, 2016 to 31 December 31st, 2017, the turnover of organizations subject to financial recovery will be excluded from VAT payments, sales profits will be exempt from tax, and revenues will not be taxed if simplified taxation is applicable.
The lists were created in an effort to normalize the situation with non-payments in agriculture. As of September 1st, 2016, 1010 companies or 71% of the total number were unprofitable without the state aid, and their overall losses totalled BYN 412 million. The share of overdue payables exceeded 32% of the total debt. Due to the lower grain yield as compared with 2015, many enterprises will continue being insolvent in the coming year and they will require financial support. Financial recovery measures in agriculture mean that creditors will write off losses of such enterprises.
Manufacturers of agricultural equipment leased their equipment and the state budget paid interest on leasing schemes. Major losses will occur in the food industry, at enterprises, which made advance payments on account of future crops, and provided loans, inter alia, to repay wage arrears. Food industry enterprises may receive stake shares of their debtors, which is hardly the best solution, as those enterprises require further infusion of funds to support operations of the loss making agricultural enterprises. In the given circumstances, the food industry may apply to the state for compensation. Highly profitable enterprises and private enterprises will be prompted to write off losses at their own expense, some less profitable enterprises may receive budget subsidies or soft loans from the state.
In sum, the Belarusian state aims to use bankruptcy in order to remedy the situation with agriculture’s debt at minimal cost. The food industry will be prompted to write off the bulk of debt, and some enterprises may be entitled to a budgetary compensation for their losses.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.