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IFC’s Survey of Belarussian SMEs Reveals Barriers to Business Development, Outlines Areas for Reform
IFC, Minsk
Nadezhda Sinelnik
Phone: (375 17) 219 7811
Fax: (375 17) 222 7440
E-mail: nsinelnik@ifc.org
Minsk, Belarus, March 6, 2006—The
second annual survey of the business climate in Belarus revealed that it
takes, on average, 118 days and $976 to register a business and obtain
all necessary operating permits. Complex regulatory procedures, including
tax administration, business registration, business inspections, and obtaining
operating permits impede private sector development of business in Belarus.
These are some key findings of an SME survey conducted by IFC with financial
support from the Swedish International Development and Cooperation Agency
(Sida). The survey polled 1,200 Belarussian companies and individual entrepreneurs
operating in the small and medium enterprise sector across the country.
The IFC survey gives the country’s policy makers an entrepreneur’s view
on regulatory procedures as well as recommendations on how to address regulatory
constrains to SME development.
The latest report shows that Belarus made some progress in reducing some
regulatory barriers, namely those caused by business inspections. In 2004,
the total share of SMEs inspected fell to 66% (from 90% in 2003), while
the average duration of an inspection was halved. Yet despite such welcome
developments, inspections in Belarus remain some of the most time-consuming
the CIS region: the average firm spends over a month being inspected, and
undergoes 10 different inspections annually. For comparison, the average
number of annual inspections per firm in Ukraine is 9, 3 in Georgia, and
1 in Uzbekistan.
The Belarus SME survey identifies regulatory procedures that hinder the
development of the SME sector. These include:
- Permits:
Two-thirds of respondents who obtained permits in 2004 described this process
as either complex or exceedingly complex. On average, an SME needs five
permits before it can begin operations, while it takes 2 calendar months
and $230 to obtain each of these permits.
- Registration.
Two-thirds of SMEs that registered in 2004 described the procedure as complex.
On average, it takes 3 months and $750 to register an SME in Belarus. Entrepreneurs
cited the key problems as involvement of an excessive number of state agencies
in the registration process and the significant number of documents required.
- Licensing.
The list of activities requiring licensing remains lengthy: it includes
49 types of businesses and 350 subtypes. Some 70% of applicants find licensing
procedures complex.
The IFC study and recommendations on how to improve the business climate
were welcomed by the government, particularly the Ministry of Economy,
which has invited IFC to collaborate further in this area. As a result
of interaction in 2005, the government started work on permit system reform
in cooperation with IFC. In addition, IFC-drafted proposals on how to streamline
the permit system were included in the Economic Ministry’s working paper
on “Support for Entrepreneurship in 2006-2010.” IFC also cooperates with
the State Control Committee to boost the efficiency of inspections and
with the Ministry of Justice to improve business registration procedures.
The International Finance Corporation
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 and Cooperation Agency (Sida)
is a government agency that reports to Sweden’s Ministry of Foreign
Affairs. It is responsible for most of the country’s contributions to
international development work, with the goal of improving the standard
of living of poor people and eradicating poverty.
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