Belarusian government shifts responsibility for economic failures to Customs Union
Speaking at a joint session of the National Assembly’s two chambers, First Deputy Prime Minister Vladimir Semashko said, “In view of imperfections in the Customs Union and Common Economic Space’s legislative framework, with its numerous exceptions and exemptions, we bear heavy costs and often lose Customs Union markets”.
The Belarusian government aspires to shift the blame for the economic failures onto external factors. Irrelevant of the Customs Union’s imperfect legislation, Belarus has gained more benefits than suffered losses in the Customs Union. Belarus attempts to improve its positions and receive additional benefits from the Kremlin by playing on potential conflicts between Belarusian and Russian manufacturers.
Both President Alexander Lukashenko and President Nursultan Nazarbayev talked a lot about the shortcomings of the Customs Union and Eurasian Economic Community legislation during the recent CIS summit. They noted a large number of exceptions and exemptions, which prevent Belarusian and Kazakh producers from penetrating the Russian market.
For example, up to two-thirds of transportation and other services fall within the exemptions. However, when Belarus signed the Customs Union agreement with Russia and Kazakhstan back in 2010, it received oil and gas at preferential prices. Oil and gas rent and subsidies from Russia are estimated at 15-17% of Belarus’ GDP, which heavily compensates the losses from inadequate CU legislation.
Meanwhile, Belarusian products lose a competitive advantage on CU markets, which cannot be compensated even if legislation changes. Belarus is losing the Russian market mainly due to the Russia’s WTO accession, which has negatively affected Belarus’ economy. Nevertheless, to avert president Lukashenko’s rage, the Government explains Belarus’ export failures by poor Customs Union legislation. On his side, Alexander Lukashenko warned government officials against lies about stocks at warehouses, “All these lies about unloaded warehouses … will result in prison terms for some”.
Claims by Russia and Belarus regarding the protection of their markets are mutual and constantly ongoing. For instance, Vladimir Semashko has mentioned a Russian regulation (No 1432, December 27th, 2012), which effectively shut the Russian market to Belarusian agricultural equipment Meanwhile Russian agricultural producers say the same about the Belarusian market. Rostselmash co-owner Konstantin Babkin said, “We haven’t sold a single grain harvester [to Belarus] for 5 years, although, perhaps, Russian combines still make up the core of the park. There is a state barrier. At the same time, the Russian market is open for Belarusian agricultural machinery, about 70 % of Belarusian agricultural equipment is sold through Russian government companies by using state banks and Rosagroleasing loans”.
Even if Customs Union and EurAsEC legislation improves, the Russian market wil continue to slip away from Belarusian producers as it opens up to manufacturers all over the world within the WTO. However Belarus uses these risks to demand additional ‘integration’ compensations from the Kremlin.
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.