Belarus – Let Business Do the Talking

By James Wilson
On 17 November, the European Union’s Foreign Affairs Council decided to postpone the thorny question of EU sanctions against Belarus by rolling forward a suspension of a travel ban against named government leaders. Belarus is still facing challenges to undertake political reforms, and there were many NGOs in Brussels calling for these at the launch of the Eastern Partnership’s Civil Society Forum on 16 November. But the existence of the sanctions is something that punishes the ordinary citizen more than its leaders, by tarnishing the country’s image, and scaring away much needed foreign investment.

The new climate and impetus brought by the Eastern Partnership program calls for a more radical change of tack for the EU’s policy towards Belarus. We need to move away from a stale policy of political isolation and engage positively at all levels if the Eastern Partnership is to work, not at the expense of reforms, but in order to promote and encourage them through purposeful partnership. It is important not to underestimate the ability of businesses – and particularly SMEs - to build constructive dialogue between all the stakeholders and to promote sustainable change. In the EU, 70% of all businesses are SMEs; in Belarus the figure is smaller, but more than 30% of all businesses are in private hands, and many of the state- owned enterprises have good middle managers with growing international networks and ambitions. At an Investment Forum in Minsk earlier this month a leading investment banker expressed the view that we could expect to see more than 10 of the medium-to-large businesses in Belarus, such as the banks, telecoms and different industrial sectors looking to place IPOs in Europe’s stock exchanges in the next 18-24 months as Belarus moves to privatize state businesses.

Privatization and the process of coming to the capital markets is a great leveler. Management of the Belarusian businesses looking for investment finance is on a fast learning curve about the value of transparency, predictability and trust in an international commercial environment. This has the potential to translate rapidly into changes in corporate strategy and management practice. Questions such as public accountability to shareholders, customers and employees need to be addressed and taken into account in the business model when coming to market. It has been said that Belarus is a country with a better record of governance than democracy, whereas its southern neighbour Ukraine is a country with a better record of democracy than of governance.

Even if such an analogy were only half true, the EU should not miss the opportunity to move with greater courage of conviction and commit to a policy of engagement, with business leading the way to help the government of Belarus to secure maximum benefit from the process of privatisation – for the benefit of its citizens. The neighboring states in Eastern Europe have a huge amount of experience in this area which can help Belarus to learn from the mistakes, and follow the proven winning formulas. The potential for success should embolden the EU to withdraw sanctions against Belarus, unconditionally as a unilateral gesture, and with the confidence that reforms will follow as the partnership develops. Positive action should be taken to facilitate visas to enable more business to business contact. Funds should be made available from the budget for the EU’s Eastern Partnership program to undertake business support programs to promote greater business to business contact for SMEs between Belarus and EU Member States. Failure to nurture the growing business to business dialogues between Belarusian and EU SMEs risks having a negative impact on the much needed economic reforms that are at last starting to bear fruit, and the bilateral political relations that have been steadily warming over the past year. The time has come to adopt a fresh policy of direct and positive engagement for Belarus with business leading the way, and to positively help their efforts to pursue constructive privatization. There needs to be more velvet glove, and less iron fist. James Wilson is a Founding Director of the Belarus EU Business Council
  EU extends Belarus travel ban, big business looms
Even as European Union foreign ministers agreed to extend until October 2010 a travel ban respite on Belarus’ top officials amid frustration at the slow pace of reform in Minsk, there were signs the reclusive country is reaching out to the West and foreign investors and could prove a good market for the EU. “The (European) Council (of foreign ministers) notes that since October 2008, as a result of the release of internationally recognized political prisoners, new possibilities have opened up for dialogue and deepened cooperation between the EU and Belarus,” the ministers said in a joint statement. But they said the Council “deeply regrets the recent lack of significant progress in addressing its concerns in the area of human rights and fundamental freedoms.” The EU foreign ministers said they remained concerned about Belarus’s restrictive approach to basic freedoms including the right to found parties, register organizations, and operate a free press. It also criticized recent death sentences. The travel ban suspension for the 36 Belarus officials, including President Alexander Lukashenko, would be extended, however, in order to “encourage progress.” At an economic forum in the capital Minsk this month, potential investors praised the country’s plans to form a new customs union with Russia and Kazakhstan from July 2010. As part of the bloc of ex-Soviet states, Belarus could become a gateway for businesses that want to break into the vast Russian market but are deterred by Russia’s corruption and red tape, they said. Unlike neighboring Ukraine, Belarus has remained relatively insulated from the global financial crisis and offers investors a measure of political stability under strongman Alyaksandr Lukashenka, in power since 1994. Other advantages touted by officials include the country’s pool of skilled labor and its developed infrastructure, as well as recent efforts to ease investment barriers by reducing taxes and reforming property rights.

The International Monetary Fund (IMF) last month praised Belarus’ fiscal policies and response to the crisis, saying that authorities had also made progress on reforms to develop the private sector. International businessmen were upbeat at the forum. They stressed the importance of the proposed customs union in eliminating trade barriers. The EU first introduced the travel ban in 2007 in response to alleged human rights violations by the Belarus regime. The EU’s carrot-and-stick approach reflects different opinions within the 27-member bloc on how to deal with what is often described as Europe’s last dictatorship. But Sweden’s Foreign Minister, Carl Bildt, denied any divisions, saying only two ministers had taken the floor during discussions on the issue. Bildt said the EU would continue to engage with Belarus, but conceded that he had little expectations of turning the country into a “Scandinavian-style democracy” overnight. Sweden currently holds the EU’s rotating presidency.