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Complex Administrative Procedures Hold Back the Small Business Sector in Belarus


In Minsk:
Nadezhda Sinelnik
Phone: +(375 17) 219 7811

E-mail:
nsinelnik@ifc.org


Minsk, May 30, 2006 — The business climate in Belarus has not improved over the past year, according to nearly 80 percent of entrepreneurs polled for the International Finance Corporation’s annual business environment survey in the country.

The IFC survey also reveals that tax administration and permit issuance were significant barriers for Belarus’s business community in 2005. Issuance of a permit became significantly more difficult, with both time and cost doubling in comparison with figures from 2004. In Belarus, it now takes just under four months and costs $345 to obtain a permit. The typical small or medium enterprise has to obtain a total of six permits to operate in Belarus.


The unwieldy tax system also exacts a high cost on entrepreneurs: private firms in Belarus spent about $15 million paying accountants for overtime work in 2005. This figure is ten times higher than the amount the government allocates to promotion of private enterprise development.


There were, in contrast, some positive developments in inspections and licensing in 2005. The average amount of time needed to obtain a license dropped from 45 to 27 working days. Meanwhile, the frequency of inspections also decreased: the average smaller business hosted seven separate inspections in 2005, down from ten the previous year.  


Registration of a business in Belarus continues to be a long and expensive administrative procedure, averaging about two calendar months and costing $736. To address this situation, the Cabinet of Ministers  adopted a decree in April that will significantly simplify entry procedures in Belarus by introducing a one-stop shop for registration procedures and cutting the duration and cost of the registration process. IFC estimates that the decree will result in $25 million of additional sales for the country’s small business sector and in turn generate increased tax revenue for the government and bring additional investment into the economy.


Ivan Ivanov, project manager of IFC’s Business Enabling Environment Project in Belarus, said, “If the objective of doubling the contribution of small and medium businesses to GDP is to be met, the government should take more decisive steps to reform small business regulation. The government is currently tackling this issue, with the area of business registration being an excellent example. However, the pace of reform leaves much to be desired.”


IFC’s SME survey, conducted in January-February 2006, polled 1,100 company directors and 200 individual entrepreneurs. Independent experts and state officials were also interviewed. The survey sought to define the administrative burden borne by smaller firms and develop recommendations for improving the business environment.


The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.


The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications.  For more information, visit
www.ifc.org.

The Swedish International Development Cooperation Agency (Sida) is a government agency that reports to the Ministry for Foreign Affairs of Sweden. Sida is responsible for most contributions of Sweden to international development work with the goal to improve the standard of living of poor people and eradicate poverty.