The government puts off liberalization while negotiations with Russia continue
Today’s focus of the Belarusian authorities is on negotiations with Russia about economic preferences within the Customs Union and they do not intend to use the parliamentary elections as a foreign policy instrument. Preferences and direct funding, which the Belarusian authorities hope to receive as a result of negotiations with Russia within the Eurasian Union by far exceed the hypothetical benefits from the liberalization.
On June 21-22, senior government officials expressed their readiness to implement a number of joint projects with Russian investors.
As part of economic cooperation with Russia, Belarusian negotiators become more active and they not only defend their positions but also use “cautious attack” tactics. In particular, on June 21st, on the eve of the anniversary of the Great Patriotic War, Prime Minister Myasnikovich announced that Belarus was ready to buy Russian agricultural machinery manufacturer Rostselmash and merge it with Belarusian enterprise Gomselmash.
On June 22nd First Vice Premier Vladimir Semashko announced the imminent assets merger between Belarusian enterprise MAZ and Russian KamAZ. Mr. Semashko assessed MAZ market value at USD 1.1 billion, or about 30% higher than the previous valuation carried out by international experts. Clearly, these ambitious plans are in fact only a stake in the negotiations with Russia and likely to be corrected substantially. Another subject of negotiations in the near future will be amendments to the common customs tariffs on some goods in favour of Belarus and Kazakhstan in connection with Russia’s WTO accession.
Belarus’ June “offensive” on the Russian market was rather adventurous, as it was accompanied by simultaneous loss of rather important negotiating positions.
In particular, last week Belarus announced cancellation of Venezuelan oil deliveries. The economic feasibility of the project was dubious from the start, but it provided the Belarusian leadership with the necessary levers which they used to gain success in negotiations on preferential oil supplies with Russia (Deputy Prime Minister Semashko publicly confessed about this). In political terms, the closure of this project implies that Russian oil suppliers won and that Belarusian negotiating position weakened for the future.
Even more importantly, Belarusian negotiating position is compounded by the lack of clarity about the beginning of construction of the Belarusian nuclear power plant. General contract was to be signed before the end of June, but recent information implies it will take place one month later. The slowdown with this project is particularly unpleasant for President Lukashenko personally, as he has already proclaimed Belarus to become a future leader on the regional energy market. In addition, ‘no’ contract means ‘no’ loan from Russia for the NPP construction, which is equally important for the Belarusian authorities.
Therefore, there are two main trends. Firstly, Belarus attempts to move away from a passive self-defense to become more aggressive in the area of economic cooperation with Russia. Secondly, ‘frozen’ dialogue with the West trend remains unchanged.
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.