This article is from the new issue of the ETF magazine Live&Learn.
How young entrepreneurs in Belarus try to build their businesses and how their country - with little tradition of free enterprise - responds to it. Our report from Minsk.
100 micro firms
You wouldn’t give much thought to a squat grey three-storey building at Chapayeva 3 Street in the centre of Minsk. When it comes to shades of grey, Belarus’ capital is a place of great wealth. Yet the inside of this house is different: an open plan office, cubicles, flickering computer screens and a tapping of keyboards. It’s the home of ten dozen start-ups.
From fashion design to venture capital to mural painting – by the end of 2013 this business incubator will have hosted 125 micro companies. There is an age limit for the owners – 31 – and they can stay in the incubator for up to three years. The city provides subsidised office space, basic equipment, and low-cost services, like accountancy and legal support.
“If you have a good idea, Belarus is not a bad place to do business,” says Vladislav Androsov, 25, the owner and CEO of MedTravel Belarus, which claims to be the first Belarussian medical tourism agency. After two years in the incubator, Androsov’s company employs five people and is seeing a rising demand for its services, especially in the ex-Soviet countries, but also in the EU.
“There are problems in this country, and if I had wanted I could have stayed abroad with my family,” says Androsov, who studied at the European Humanities University, an exiled Belarusian university in Lithuania. “But I wanted to stay here, do something. And if you find your niche, you can be successful.”
Sviatoslav Parfionov is a member of an eight-person team of Youth Social Services, which manages the incubator on behalf of the city. “It’s a place where young people have opportunities to learn from each other and from business mentors,” he says. “Whatever happens, you can only benefit from making a start-up here, even if you fail. And through failure you can learn more about yourself, be forced to find creative solutions.”
Promising signs for entrepreneurship
Belarus is not an entrepreneurship poster child, but the recent SME Policy Index: Eastern Partner Countries 2012 that assessed policies and practices in Belarus (among other countries) against the criteria of the EU’s Small Business Act (SBA) for Europe, acknowledged that the country “has taken a more liberal approach towards the development of the private sector.”
The Directive of the President of the Republic of Belarus on Entrepreneurial Initiatives and Encouraging Business Activity and other legislative acts eliminated some of the administrative burdens and streamlined procedures.
2011 was heralded as a Year of Entrepreneurship. However, according to the report to which the ETF contributed, liberalisation is “progressing at a slow pace, and more far-reaching reforms are required to support SME growth”. Dealing with public authorities is complicated and laws are introduced with limited prior consultation with social partners. In 2010 the private sector contributed only 30% of the country’s economic output.
Parfionov confirms this: “Starting a business in Belarus is not difficult nowadays, but what is lacking is support from the authorities and financial institutions that still favour big companies over SMEs.”
“The problems usually start when new companies get involved in more complex business activities, requiring better financing or more office space,” says Tatiana Laputskaya, head of the planning and forecasting division, in the department for business of the Ministry of Economy.
“The government would like to see more small and medium-sized enterprises in industry, services, oriented towards innovation and export. Unfortunately small businesses are involved mainly in small trade and food production,” she says.
Solution to unemployment
Laputskaya says entrepreneurship could be one of the policy responses to a possible rise in unemployment. Officially, Belarus has virtually no joblessness – 0.6%, but international estimations, which include all jobseekers, give a much bleaker picture with rates reaching 24% (Gallup survey in 2011). The economic and currency crisis in 2011 exposed the weaknesses of the system.
“The modernisation of state-owned enterprises will result in layoffs, there will be more people without work, and one option for them will be to start their business,” she says. “Of course not every good worker can be a good entrepreneur. But our task is to help them. The incubators and centres of entrepreneurship support can help.”
The innovative business incubator at Chapayeva Street, which specialises in youth start-ups, is one of 14 such organisations in Belarus. It was selected by the ETF as a good practice that can inspire organisations in other ETF partner countries. There are also 80 entrepreneurship support centres throughout the country. The centres provide information on legal matters, regulations, but Laputsakaya admits that the staff members of these institutions often lack hands-on business experience or skills.And indeed on entrepreneurial learning and skills Belarus scored lowest in the SBA assessment.
Need for entrepreneurial skills
While government directives and commemorative years surely stimulate an entrepreneurial mind-set, they do not integrate entrepreneurial learning in the education and training system. Entrepreneurial learning is currently provided in Belarus through non-compulsory classes in secondary schools and through casual projects or ad hoc initiatives in vocational schools and universities.
“Now is the time to move from these individual efforts to a national policy framework for lifelong entrepreneurial learning,” says Olena Bekh, expert on entrepreneurship and the ETF’s country manager for Belarus. “Good practice needs to inspire adoption of new policies with a strong element of social partnership.”
“Belarus has this window of opportunity to support entrepreneurship,” says Bekh. “The old big industrial complexes are no longer competitive. The country has few natural resources. But it is strategically positioned between the big markets of the EU and Russia, and has a skilled workforce. It has huge potential.”
EU policy toward Belarus
The EU remains committed to a policy of critical engagement towards Belarus. This includes cooperation through the multilateral track of the Eastern Partnership and technical dialogue on specific topics of common interest, as well as support to civil society and the Belarusian population as a whole. At the same time, the EU has imposed restrictive measures against those responsible for serious violations of human rights, the repression of civil society and democratic opposition, or whose activities otherwise seriously undermine democracy or the rule of law in Belarus.
Source: European Commission Memo “European Neighbourhood Policy Package – Belarus”, March 2013
Text: Marcin Monko, ETF
Photo: Marc Veraart, Flickr Creative Commons