INTRODUCTION Why Our House and the People of Belarus Need It

An economic program is a program of a country’s development. Unfortunately, in our

case it is more a catch-up program with an objective to show the ways in which Belarus will be able to catch up with Europe in terms quality of life, economy and technology in a relatively short period of time.

Three reasons why our country needs to implement the economic program offered by

Our House: 1. Rejection of privatization and depreciatory attitude towards private business put the

Belarusian economy every year more and more into dependency from state investments, reducing capital productivity and export performance, which makes the economy unstable.

2. Growth in incomes over the past 15 years significantly outpacing the growth of productivity and labour efficiency means that the economy is approaching its technological frontier. If the current economic model is maintained, further catch-up growth will be limited.

3. Demographic trends suggest that the working-age population will be declining in the next few years. It is already happening in the regions.

Success factors of economic reforms in Belarus: 1. We need to increase labour efficiency while increasing energy efficiency of the real

sector. This will be a key factor to sustain the economic growth. Belarus will have to start structural reforms and increase its innovations level. At the same time, it is necessary to pay more attention to the development of human capital (including entrepreneurship) rather than to investments in equipment or buildings, i.e. improve quality of education, create equal opportunities for employment and encourage labor mobility.

2. To mitigate the impact of public policies promoting large-scale industry and its influence on the GDP growth, it is necessary to increase the consumption of households. Politicians should learn to make quick decisions and implement them immediately to stimulate the demand. This will be of high importance.

3. To balance out the economy, it is necessary to create conditions for a stable and sustainable growth of the share of the household income in GDP by increasing wages (with the adequate productivity growth) and real interest rates on deposits, as well as developing small and individual businesses. Social services such as education and health care are to be optimized. The government will need to refocus investments into production with higher added value and develop more actively the service sector, which, by definition, provides more opportunities for the private sector.

Values and Principles of the Economic Program

Our House believes that the economic program for the revival of Belarus should be based on the principles of the present, adequacy and acknowledgment of the primacy of private property as the basis of the social development.

Moreover, the economic program should be based on such social principles as: - Morality, which is an obligation to act according to Christian values. - Responsibility, which is taking care of the situation in the country, the fate of the

people and prosperity of their families.

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- Personalization, which is a balance between individualism and collectivism that prioritizes a unique individual and small communities.

- Solidarity, a sense of mutual understanding and cooperation which should penetrate all levels of society. This is a priority of the national well-being that allows full development of both the nation and the mankind.

- Transparency and openness, without which any reforms (not just economic ones) will inevitably fail.

Development of Belarus in the Context of the World Economy

In the 2000s, wealthy countries accounted for 73% of the world production and developing economies only for 27%. Over the five years from then the index for developed countries fell to 69% and by 2011 the balance of power changed completely: The developed countries accounted for only 54% of the world production.

The immediate reason for this is the impact of China and South-East Asia. If in the 2000s China's share in the world production constituted 7%, by 2005 it grew to 9.8%. Then, during six years it actually doubled to 19.8%. Now, China’s share in the global production of industrial products is higher than that of the U.S. It is a historic event because until 2011 the U.S. has held more than a century’s long strong leadership in the world production.

However, the world's leading economic experts believe that in the next few years the industrial leadership of China will be gone. Economists name the following reasons to return industries to the developed countries:

- New technologies. There is a new technological shift in the world. For example, the United States and Western Europe succeed in the technology of 3D-printing. It gives them a chance to open up entirely new types of production. They also possess new opportunities to robotize the production.

- Customization of goods. Consumers no longer want mass product. What they need is that everything – from modern electronic devices to industrial machines – was consistent with their specific personal needs. If a manufacturing plant located in the area where the product is to be sold, making necessary changes into the product becomes easier. Companies will have to produce goods in the developed countries if they want to sell them to residents of those countries, who remain the wealthiest inhabitants of the planet.

- Too complex supply chains. To manage supply chains on long distances is becoming more and more difficult: logistics costs are high and cause a lot of related problems, such as economic ones.

- Wage growth in developing countries. Production costs in developing countries are growing rapidly due to rising wages, depriving these countries of their only competitive advantage. As a result, companies have fewer reasons to transfer their manufacturing plants into these countries.

All these factors can be applied for Belarus. We are located directly on the border with the European Union, one of the largest markets in the world. At the same time Belarus has a great potential for modernization of the real sector of the economy and highly skilled labour force not spoiled by too high wages.

The Human Capital

It should be particularly emphasized that putting priority into the human capital means that the country is aware of the nature of the post-industrial challenges facing it and is in

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search of a development model not in the past but in the future. Not long ago, the debate on national priorities revolved mainly around traditional stories of the last century. Aircraft construction, machinery, electronics, agriculture and other industries were called out by politicians and economists as development priorities of the country and, most importantly, budget priorities in expenditures. Only in the mid-2000s the elite turned its attention to the problems of the human capital.

This challenge applies not only to Belarus. Drafting a modern and efficient system of the human development is an urgent problem for most of the developed countries in the modern world. Postindustrial challenges causing demographic problems have led to a crisis of the traditional “welfare state” and have set a task of a profound transformation of the social area for many countries. Now, when aging is a persistent problem and the demand for social services is steadily increasing, it is necessary to create a radically new model of the welfare state. In other words, Belarus is faced not with the problems of the crisis in the Soviet social system but with a much deeper problem of the crisis of the industrial society. Therefore, the search for and the development of new economic and social models does not necessarily mean the catch-up development. It is a common problem for all developed countries of the world, to which Belarus belongs by this criterion, too. The very collapse of the Soviet system was a result of the crisis of the industrial system with its characteristic institutions of the welfare state.

Therefore, a country can take advantage the world’s experience when in search for the optimal model of the development of the human capital since there are no effective systems in the world that meet today's challenges. Moreover, a country that will be able to build a modern efficient model of the human capital development will get a powerful advantage in the post-industrial world.

The nature of the problems of the human capital development in modern Belarus roughly corresponds to the problems faced by the developed countries despite the significantly lower level of the GDP per capita in Belarus. To a large extent this situation is driven by the legacy of the Soviet era: In the 1960s and 1980s, the demographic, reproductive and gender behavior in the Soviet system reproduced the standards of the developed countries.

There are five characteristics (or principles of operation) of these industries, which need to be taken into account when implementing their structural modernization. These features reflect the character of the modern technology – their dynamism (a quick update) and the deepening customization of the technology solutions.

The first one is the continuity of social services. In the past, education was to a considerable extent a function of an age – a man studied up to a certain age, then worked. Only patients were involved in the health care system. Now, education and health care are in great demand throughout the course of life, that is, people learn and get medical services continuously.

Understanding of work and retirement has been also significantly transformed. Reducing the role of large-scale production and the role of the service sector coupled with the rejection of such a Soviet-industrial relic as a criminal punishment for parasitism lead to the erosion of the concept of retirement and especially of the age when it is suitable to terminate working (continue working).

Accordingly, the retirement age is becoming a personal decision. With respect to the pension system, it will mean a significant diversification of the forms of support for older

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people. In today's society, the role of private expenditure on human capital development is

increasing. With the growing ability of people to buy services they need, the role and the share of private consumption will grow outstripping the amount of government spending in the relevant sectors. Private payments or co-payments are not only natural but just inevitable consequence of technological modernization and welfare growth. The growth of private consumption is also related to the fact that the rapid growth of government spending bumped at a natural barrier at the end of the twentieth century: It became impossible to collect more taxes and the population's social services continued (and continue) to grow as does the social progress.

All the above provides a basis not only for the modernization of the human capital in Belarus but also for the economic and political modernization of the country, including its technological base. And vice versa: ignoring these principles creates a risk of worsening the backlog of the social economic development of Belarus and the developed countries.

This implies that the country's modernization requires not the recovery of the Soviet model of the social sector, not “return to the basics” but a qualitatively new model of the functioning of the human capital, basic principles of which we are only beginning to understand.

Mechanism to Stimulate the Economic Development

Economists at the International Monetary Fund put an end to the nearly century-old debate about the role of the government spending to stimulate the economy. They proved that the budgetary infusions increase output and stimulate economic growth and their reduction leads to a deepening recession and crisis.

How to save the global economy from recession and decay? Of course, this is the main question today for politicians, businessmen and ordinary people all over the world to ask the economists. Should we treat an illness by a long diet, i.e. by consistent reduction in government debt and declining public spending? Or should we all do the opposite and fill the economy with funds and government contracts?

Some people, including supporters of John Maynard Keynes’s theory, believe that only the government and central banks could pull the economy out of the mire of deep recession, increasing costs and easing monetary policy. Others say that the budgetary costs is not a panacea or even a cure, and the economy can only be saved by a diet and budget cuts that will eliminate imbalances and return markets to the path of growth.

The IMF has been a supporter of the second point of view and has been insisting on programs to reduce costs. But not so long ago, its policy has changed dramatically. Now, the Fund's management requested a relief to European debtors and mainly to Greece and started to criticize austerity measures, which had not turned to be the best way out of the crisis.

These changes are associated with the study of IMF’s economists Jean Carlo Corsetti, André Meier and Millstone Muller. It is a rigorous mathematical proof why conservation programs are harmful.

Researches focused on a “fiscal multiplier” – a correlation between dynamics of budget expenditure and output. It was found that multipliers can reach 0.9-1.7 depending on the economic conditions. They are especially high for economies with inflexible exchange rates. This means that it is cost-saving measures that have caused the current recession in the eurozone. On the other hand, it means that fiscal stimulus saved the world during the crisis.

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In recent years, the state has actively used fiscal stimulus. With the growth of budget expenditures, they are trying to get the economy growing again. However, Europe has been implementing a different policy – tough budget cuts, which were to help European countries to regain the trust of markets. However, this policy has clearly undermined the growth in Europe.

On this basis, a new round of debate on multipliers commenced. If the multiplier is equal or close to zero, then all attempts to stimulate the economy do not make sense. Proponents of the Keynes’s theories argue that multipliers should be very high and, the worse things are going in the economy, the higher the multiplier. The main way to stimulate the economy is the rapid growth of budget expenditures.

Calculations for each country should use country-specific multipliers, which would take into account financial development, capital mobility, economic dependence on international trade and exchange rate policy.

The general conclusion is that the increase of government spending positively affects the growth of GDP but practically does not affect the consumption. Government spending partially replaces private investment. Nominal exchange rate temporarily strengthens but the real exchange rate reduces. In countries with a flexible exchange rate and low public debt, where there is no financial crisis in the acute form (that description fits Belarus in many ways), the effect of consumption increase intensifies. However, stimulation has almost no affect on investments.

At the same time, the stimulation appears to be the most effective during the financial crisis. The multiplier increases to 2 and this also applies to the GDP growth and consumption. In other words, a unit, by which the costs are increased, gives a double increase in output and consumption. However, a country pays for it with deterioration of the trade balance, inflation and depreciation of its currency. Central banks have to raise rates to support the stability of currencies.

Budget expenditures increase is an effective way to stabilize the economy. The crisis of 2008 could have been much more severe if the governments of various countries had not started fiscal stimulus. For example, in 2008 and 2009, the U.S. Congress approved a stimulation program 5-6 months after the deterioration in the economy.

One may recall that in 1930s, during the Great Depression, fiscal stimulus was also applied but in a rather sophisticated way. In Japan, Germany and Italy military spending increased, and in the United States so did the volume of public works. The multiplier for the defense spending amounted to 1.2 immediately after the start of stimulation in 1930s and to 2.5 after a while. The world paid for it in the World War II. Today, a similar success can be achieved by quite peaceful means – for example, by an advanced funding of “green” energy technologies.

Taxation Reform

A tax reform is one of the most important measures which we propose to take in order to overcome the financial problems. Our country lacks a coherent and long-term fiscal policy. Values and principles that should be applied to the taxation institutions and the fiscal system are not defined. Our fiscal policy is implemented only from the point of view of the fiscal authorities, without regard to the rule of law, respect for taxpayers' rights, transparency and clarity, efficiency and equity. Meanwhile, the national tax policy should be predictable. Taxpayers cannot be subjected to sudden changes in the tax system and cannot live

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permanently in a state of uncertainty. Today, we may observe serious violations of the principle of fair taxation and equality

of taxpayers. It happens that two economic phenomena which are in essence the same are taxed differently depending on the type of activity. A particularly egregious example is the discriminatory understanding of the tax legislation in respect of the working conditions compared to the so-called self-employed and civil law contracts.

In Belarus, the principle of cheapness of the tax system, which means that the system of tax collection should not cause excessive costs to taxpayers and the government, is regularly being broken.

Failure to comply with taxation regulations in a real business environment and failure to tax the income derived from business and assets adequately and effectively creates a situation when work and consumption are heavily burdened by taxes (VAT and excise duties).

In view of the above disadvantages of the former system, we should build a new tax system in Belarus – simple, transparent and predictable, friendly to taxpayers and at the same time protecting financial interests of the state and promoting economic activity. New tax legislation, which we propose to implement, will be applied equally for everyone, will be clearly defined and will not allow different interpretations. Our reform will facilitate the legitimate collection of taxes. It will also go hand in hand with the tax education, which, in turn, will be of benefit for both the state budget and taxpayers, and especially entrepreneurs.

The reform will be based on two basic principles. The first one is the equality of all in the taxation area and, above all, in understanding the fiscal policy. It is the equality not only declared but implemented in a daily routine. The second principle of the reform is changing current repressive character of taxes to high efficiency of the tax system.

Value added tax, income tax for individuals and businesses, excise taxes are the most important sources of government spending financing. However, the tax law requires a major reform which would get rid of today's shortcomings. These shortcomings cannot be removed by mere cosmetic changes in the existing tax law – new laws and regulations are required.

Project Focus of the Program

While there are many elements in the program to improve the Belarusian public administration, we will strive to work on the project management skills of state officials, as well as their focus on realization of the goals. In today’s Belarus a traditional bureaucratic approach is dominant, which is in the essence the day-to-day administration rather than the control over the process in order to achieve the goals in a short time and at the lowest possible cost.

The program of Our House is based on the principle of possibility of rapid resettlement of various types of infrastructure. It is mandatory to determine the priority areas of the economic development (so-called “points of growth”) and to finalize independent economic programs for the regions as the funds allocated for the reform are limited.

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Section 2. Privatization

Privatization is that part of the economic reform that creates conditions for other reforms implementation. Privatization takes place in a changing political environment, in a transition stage from the authoritarian model of “manual control” over the economy to a model of the reasonable balance between public and private interests. The only alternative to privatization in Belarus is to incorporate the Belarusian economy into the Russian economy.

Although more than 20 years have passed since the collapse of the Soviet Union and the beginning of economic transformations in Belarus, the ownership structure in the Belarusian economy still suits rather planned economy than a free market. According to the assessment of the European Bank for Reconstruction and Development, in 2011 state-owned or state-controlled enterprises accounted for 70% of the nation’s GDP. At the same time, this figure in the neighboring countries, such as Poland, Lithuania, Latvia, Russia and Ukraine, ranged from 40% in Ukraine to 25% in Lithuania and Poland. Moreover, Belarus ranked second by the share of the state property among 29 countries of the former socialist bloc, including the countries of Central and Eastern Europe, the Caucasus and Central Asia, with only Turkmenistan ranking higher.

To compare, in 1989, before the communist regime had fallen in Poland, it had the same share of state ownership in the economy as today’s Belarus – about 70%. This means that now there is a great potential for privatization of state companies and improvement of the efficiency of the Belarusian economy.

Privatization of the state-owned assets should be conducted on a fee basis: The state companies are converted into joint stock companies with the subsequent sale of their shares to strategic investors or on the stock exchange where they are available to small investors. At the same time, one should adhere to the basic principle common for all reforms – “do no harm.”

It turned out that the free distribution of shares to the companies’ employees does not always work. It is generally known that people do not value what they receive for free. Therefore it is very unlikely that the state companies will find owners who can effectively manage their assets.

The funds received from the sale of state-owned enterprises cannot be spent to maintain the current economic model. Proceeds from the sale of state property shall be credited to a non-budgetary state privatization fund and be sent to reimburse costs associated with privatization, to finance modernization of other state-owned enterprises, infrastructure projects and support small businesses.

In other words, privatization in general and so-called “large-scale privatization” in particularly should facilitate investments into the country’s economy to achieve a certain social outcome – increased production efficiency, economic restructuring or development of infrastructure (energy, transport, telecommunications, environmental, etc.).

Based on the recent experience in the countries with the effective market economy (the Czech Republic, Poland, Slovakia and Hungary) one can identify the principles of privatization:

1. Privatization should not be a dogma or a universal answer to all economic problems. The

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state property should co-exist alongside with market mechanisms. Therefore, the companies to be privatized should be selected very carefully, taking into account public interests.

2. Privatization should follow the restructure or destruction of the unjustified monopolies (such as Beltelecom) that hinder competition and reduce cost-effectiveness of the entire industries.

3. Ownership structure should be changed gradually so as not to disrupt the established economic ties.

4. The companies should be privatized under certain mandatory conditions, such as investing additional funds, improving administration mechanisms, maintaining a certain level of employment and social security in the company, supporting middle class.

5. Privatization should take into account questions of the national security.

6. Each privatization transaction should be reasonable, open and available for public control.

Belarusians, foreigners and stateless persons, legal entities registered in Belarus, legal entities of other countries should have the right to buy state assets. State authorities, employees of the State Property Committee of Belarus and its subsidiaries/ affiliates, legal entities in which the state owns more than 25%, as well as other entities as determined by the law may not be allowed to buy shares of state enterprises.

Both the companies which still have the status of RUP (a republican unitary enterprise) and those which were converted into joint stock companies may be privatized if from 50% and 100% of their shares belong to the state. In this case, privatization (if necessary) is reduced only to the sale of the shares owned by the state.

Developing a strict technique for the calculation (and the regular reassessment) of the state-owned companies capitalization should precede privatization. This technique should be designed in such a way that it allows no other interpretations. Then an audit of the companies and creation of a database follows. In the future, this will permit to drop back an archaic system of industrial management with its cumbersome and inefficient ministries and state corporations.

Once a decision on privatization is taken, strategically important enterprises should be assessed by the international audit companies.

In case of strategic investments (either foreign or local) only “controlled privatization” (or “conditioned privatization”) should take place in Belarus. It means that an investor (or a pool of investors) will sign a contract with an authorized representative of the state (for example, with the State Property Committee), the contract specifying conditions under which a new owner (or a group of owners) takes over the company.

An objective of “controlled privatization” is to keep the company going as a business entity and as a tax payer and to provide social guarantees to its employees. The government may not prohibit the new owner to lay off employees at the company’s restructuring. But the government may (and should) set measures for the social protection of employees as one of the conditions for the company’s privatization. Each employee should receive a one-time severance payment in the amount of his average three months salary. A new owner of the company must finance re-training of anyone willing from laid-off employees, so that they may obtain a new job demanded on the labor market, similarly to what the state employment

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agency does. An employee should be able to choose from a number of jobs.

Privatization of state-owned banks is a separate issue. Such financial institutions such as Belarusbank and Belagroprombank being the most important banks of the Belarusian financial system should remain in state ownership or be privatized in the last turn. The banks that do not affect the financial system strongly (such as Belinvestbank or Paritetbank) can be privatized in the first stage. These issues are discussed in more details in the section Financial System.

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Section 3. Industrial and Investment Policy

Over the last decade any type of business in Belarus has been burdened by the bureaucracy. It has been suppressed, and sometimes even blocked, by the huge amount of paperwork and all kinds of permits and licenses. In such circumstances, small and medium-sized companies that are engaged in (or attempt to engage in) industrial production suffer most. At the same time, brokers and resellers easily adapt to changing conditions as they are not burdened by production assets. One can easily be close a trading company or a real estate agency, an advertising agency or a websites building company in Mogilev today and open it in Grodno or even in Bryansk tomorrow. Minimal costs are associated with such a transfer whereas a small but very modern cheese production, running somewhere in Ivatsevichy, is really difficult to relocate to Vileika or Lepel. Manufacturers are by nature much more dependent on the officials than middlemen.

The main obstacle to industrial development in Belarus is highly depended on the state apparatus, to which a number of pathologies is inherent, including corruption and the general level of criminal fraud, provoking illegal monopolies and closed economic areas, collection of a sort of "tribute" (far not always in terms of money) or subordination of almost entire economic life to the control of those in power.

Another obstacle is the lack of the developed transport, telecommunication and financial infrastructure. All these factors reduce attractiveness of Belarus for foreign investors and, above all, significantly weaken economic activity of the Belarusians. Besides, this phenomenon limits possibilities to create favorable economic ties across the country and hinders the development of international exchange, especially with the countries directly bordering Belarus.

However, the government continues implementing its policy, developing large industrial enterprises, i.e. the most centralized vertical holdings and industrial clusters. Meanwhile, the modern economics believes that the economic development goes hand in hand with diversification. Poor economies are not just smaller versions of the rich ones, they are structurally different. Their main characteristic is the lag in productivity. The growth of a country depends on the ability of the government to remove restrictions and facilitate movement of labour force from obsolete industries to the modern ones. Usually, as soon as the economy becomes wealthier, it becomes more diversified.

Although it is generally believed that we already live in the post-industrial world, yet the industry and industrial export remain the most solid foundation for the economic growth. Manufacturing lies at the heart of the economic miracles happening in Japan, China and South Korea, of the spectacular success of Mexico and Brazil, of the stable position in Poland, the Czech Republic and Slovakiam while Europe crumbles in crisis. Except for the resource-exporting countries, almost all economies that have long been able to maintain high growth, experienced either industrialization or the technological structure change: They had been growing for almost three consecutive decades at least 4.5% per year.

As one can see, the development of the industrial production helps less developed countries to catch up with the world leaders. Of course, in general, the developing countries do not always catch-up with the developed countries in terms of growth and productivity, except for countries undergoing industrialization. The countries in which the industry has been growing at a double-digit pace experienced a rapid growth in the labor productivity and the economy. The effective policy or good public institutions have had a limited impact on the

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growth. Our House suggests a balanced model of the economic development which takes into

account assessment of the industry role and the local capital, both private and public. Our taxation proposals will include the possibility of immediate simultaneous reduction of taxation burden of investments to the industry and at the same time an increase in appropriations for research and technical development carried out and co-financed by the industry. We want to ensure the new technologies to occur in our country, apart from the ones being imported.

Under the new government policy, growth and support of the reforms should be in focus: to create infrastructure banks and issue housing bonds in order to finance important projects that enhance competition and economic growth, to make the capital (investments and cheap long-term loans) available for small and medium-sized businesses engaged in industrial production or directly associated with it, to support experienced employees, to develop programs which improve energy efficiency of industrial and commercial property, to improve quality and accessibility of the education.

The government should take measures to provide training for unskilled and low-skilled workers. Both the young and adults should have access to the state-subsidized professional education during their lifetime. Of course, the education is not a panacea for all ills. The education itself cannot guarantee high level of employment, higher wages, widespread prosperity, but the more attention we pay to education, the more people will be able to work at high paying jobs.

Investments should be directed to building new infrastructure, clean technology, education and research to make the transition to the sustainable economic growth.

The government needs to create more quality jobs and improve working conditions, stimulate “ideal jobs” in both private and public sector. This type of jobs is very productive, innovative and competitive for companies and institutions.

For those European countries that have gone the way of economic reforms after 1989-1990, small and medium-sized businesses became an engine of the economic growth, industrial development and employment in the recent decades. Belarus can catch up in a relatively short period of time, opening credit lines, assisting in organizing training programs, creating innovations and business processes at the junction of the state agencies and private partners.

It is well known that governmental investments generate 50% more of GDP growth compared to other investments. Accordingly, the fiscal stimulus will increase employment and income in the first place: The government can focus on social projects, railways, roads, communications, renewable energy sources, etc.

At the same time, cross-border migration, technological change and population aging require investments in continuing education and training, as well as in health care. A rigid fiscal discipline is required in spending, as well as investments which do not increase the production potential of the country should be avoided. New priorities in health care and social security should not occur at the expense of new or raised taxes, but at the expense of transferring taxes to the local level.

Over the last decade, many Belarusian ministers have actually turned into corporate executives, and ministries – into managing companies. The ministries supervise the work of the subordinated public and even private companies, “implant” production plans and monitor their implementation, look for investments, etc. In other words, they do what they should not

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be doing. The situation can be dramatically changed by creating a completely new ministry in Belarus – the Industrial Policy Ministry. The management functions should be passed over to completely different structures.

The governmental policy called The Development Program of the Industrial Complex of Belarus for the Period up to 2020, adopted in 2012, provides for it. However, this policy was written based on the presumption that no reforms are envisaged, in the situation of a paternalistic state and the overwhelming dominance of the state-owned assets in the industry. The objective of this program was to improve management of industrial assets in Belarus, fully or partially owned by the state.

Our House suggests radically revising The Development Program of the Industrial Complex of Belarus for the Period up to 2020 and introducing provisions about gradual privatization of the country’s industrial enterprises under the conditions set out in Section 2 of this Economic Program. In addition, the new development program should provide for the change in the government priority: Attention and concern of the state should not focus exclusively on the large ("GDP-generating" and publicly important) companies, but should be equally distributed among all the businesses in the real sector of the economy – large, small and medium, both privately owned and those owned by the state (municipality).

The purpose of the updated program will be a gradual withdrawal from the direct management of companies and imposing target plans to the property management based on the market principles.

Currently, the Belarusian government has been implementing the first phase of the Program, when a transition to the quality indicators in management is stipulated. This is achieved mainly through consolidation of businesses, establishment of corporate structures and holdings, and in the future of industrial clusters. “The task of the holdings in terms of improving the management is to unload our ministers from the day-to-day work related to managing the business, so that their main task were strategic development of the industry and attracting strategic investors”, they say in the Ministry of Economy.

All over the world, the day-to-day management of the companies is focuses in corporate structures. However, in today’s Belarus these corporate structures are almost entirely owned by the state, which, as the economic history shows, is rarely an effective owner.

Instead of the Ministry of Industry and a number of other departments in other ministries (of economy, agriculture, forestry, natural resources, architecture and construction, transport, energy), the Industrial Policy Ministry should be founded. It is logical and even inevitable at a time when state enterprises are being converted into joint stock companies and industrial holdings are being created.

Without doubt, transition to the new management style will be very difficult and time consuming. It is very likely that not all current heads of the state companies will be willing to accept such changes. The ministries will be having hard time getting away from imposing target performance and demanding its implementation – new people with a new type of thinking will be required. However, a new management system is desperately needed.

The new The Development Program of the Industrial Complex of Belarus for the Period up to 2020, like the present one, should envisage two stages for its implementation. During the first stage (2014 – 2016), the basic industries should be modernized, and the export-oriented and import-substituting production developed. This stage must be combined with privatization. The funds received from investors (domestic and foreign) should be used

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in the high-tech sector based on the high-tech industries of the 5th and 6th technological structure. As a result, experts say, the productivity should grow 1.6-1.7 times, material consumption should reduce by 5 – 7% and about 220 thousand high-performance workplaces should be created.

Management functions in the real sector of the economy should be transferred to the Industrial Policy Ministry and management of specific industries – into the hands of professional managers.

During the second phase (2017 – 2020), modernization of the basic industries should be continued. The main objective of the second stage is a gradual shift from the energy-intensive industrial production to the "green" economy based on the energy efficiency, recycling, clean technologies and renewable energy sources. As a result, the share of the high-tech industrial sector is expected to grow up to 15%, the level of the labor productivity – at least 50% from the European average.

When drafting and implementing a new industrial policy, one should take into account that soon foreign investors, including from Russia, will not be interested in Belarusian factories, even for free. Recently, Russia started creating and developing industries similar to the Belarusian ones. In a few years from now, unless the reforms set by this program are implemented, the Belarusian companies will not be able to compete in the post-Soviet countries, which remain the main market for the Belarusian producers.

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Section 4. Agrarian Policy

The agricultural production crisis, unemployment in the rural areas and the undeveloped social and physical infrastructure have aggravated social problems in Belarusian villages. The demographics statistics showcase constant population decline. Villagers, especially the youth, actively migrate to the city. Today, less than 20% of Belarusians live in the countryside, and almost half of them are of the retirement age.

Besides, villagers keep earning very little, which, among other things, bolsters internal migration to the city. According to the National Statistics Committee, average accrued wages in agriculture in January - April 2013 amounted to 3,315,000 Belarusian rubles – the lowest among all sectors of the Belarusian economy. The real wages, respectively, are even lower.

As of May 1, 2013, agriculture accounted for 27.9% of overdue accounts payable in the country. Overdue accounts payable 5.9 times surpassed overdue accounts receivable. These numbers are disappointing, and this is only the official data by the National Statistical Committee.

Back in 2011, Deputy Prime Minister of Belarus Valery Ivanov stated that at that time the total debt of the agricultural sector amounted more than $13 billion. By mid-2013, according to experts, the debt of the Belarusian agricultural industry accounts for over $18 billion. This amount is so high that even if to sell all Belarusian agricultural companies at their market value simultaneously, the funds thus obtained will not pay for even one fifth of the total debt.

A traditional way of solving problems in the Belarusian agricultural industry preferred by the government is a cut and dry write off the debt, followed by the release of the next portion of state subsidies and setting the printing press of the National Bank to operate in higher capacity. This being said, although keeping issuing new subsidies, the government clearly understands that it will never get $18 billion of debt back from the today’s Belarusian village. Therefore, there is no point in further expanding this ballast that drags the whole economy, and not only the agriculture and the banking, driving inflation and increasing pressure on the foreign exchange market.

Case studies of agricultural enterprises, expert surveys, analysis of agribusiness in Belarus and abroad highlight the following reasons for the poor state of the domestic agriculture:

- inadequacy of the financial and credit systems in agriculture, chronic shortage of working capital;

- excessive power of state officials who give instruction to agricultural producers, set so called “target indicators,” etc;

- outdated machinery and industrial infrastructure; - undeveloped market infrastructure that makes it hard for agricultural producers to

directly access financial, material, technical and information resources; - shortage of skilled labour caused by low quality of life in rural areas. Eventually, Belarus will enter the World Trade Organization, which, of course, would

further complicate the situation in the agricultural sector. Improving the life in village is one of the priorities for The Civil Campaign Our House. By all available means we will strive for agriculture reforms according to the principles of market economy, social justice and regional interests to create decent working and living conditions in village.

Global trends play into the hands of Belarus when talking about revival of the village

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and reforms in the agrarian sector. If properly reformed and equipped with the new technologies, the agriculture has a potential to become one of the key industries, which will ensure prosperity in our country in the coming decades and can be a stepping stone for the future.

In the next 10 years, food prices will rise by 10 - 40% due to the increase in demand for food, according to the report Agricultural Outlook 2013 - 2022 presented by the Food and Agricultural Organization (FAO) and the Organization for Economic Cooperation and Development (OECD). The report illustrates how food production has slowed over the past 10 years, while the incomes in the developing countries are growing. “We're observing slower growth in production and productivity, and that is a concern,” said FAO’s economist Merritt Cluff. Price increase will primarily affect developing countries where a family spends more than 60% of its income on food, Cluff said.

In order to avoid undesirable development of the situation, governments should provide farmers with the access to technology, which will increase harvest and production of food, the report said. However, the authors of the report asked the governments not to interfere in market processes, namely, not to raise prices paid to farmers for their production. According to Ken Ash, Director of the OECD Trade and Agriculture Directorate, the meat price is expected to grow much faster than the grain price.

Moreover, a recent study by researchers from the University of Minnesota demonstrated that the majority of the world’s population in the planet will face hunger in the next half century. According to demographic models, the world’s population is projected to increase by 2.6 billion to 9.6 billion people by the middle of the 21 century. Therefore, scientists are seriously concerned how to feed people in the coming decades.

In other words, there is a market for food produced in Belarus – we just need to secure sufficient quantities and decent quality.

Under these circumstances, the most realistic way to resuscitate the Belarusian village is “to turn over a new leaf” – a one-time cancellation of all debts accumulated, pre-sale preparation at the government expense and consequent sale of the agricultural enterprises that may be of at least some interest for investors on the condition to ensure public procurement and preserve social security, and reorganization of other enterprises or their consolidation with more successful ones. At the same time, the state should provide active support for farmers and new types of private farms.

Of course, a full set of reforms should be first implemented in the agricultural sector. We are suggesting the following key reform directions while supporting agricultural production and rural residents of Belarus:

I. Formation of Real Estate and Property Owners

In Belarus, collective farms and state farms have not been reformed, neither were farmers endowed with land – only a few received land plots. The major barrier is the lack of legislation that would stipulate the regime of agricultural land use. This being said, the population density is quite low in Belarus by European standards, at the same time there is abandoned land overgrown with forest and scrub. However, even suffering through the consequences of the Chernobyl disaster, the Belarusian agriculture managed to preserve its most reliable capital – the agricultural land.

To solve the problem, it is necessary: 1. to amend the Civil Code and the Land Code of Belarus and other law that provide for rights

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and obligations of land owners; 2. to simplify and reduce costs of state registration of transactions with land, to decrease the time allowed for registration and to minimize the list of grounds by which the registration can be denied; to simplify making changes in the cadastral plans, as well as documenting the title to land; 3. to simplify the mechanisms and to liberalize the rules of land allocation for farmers and farmsteads, as well as for newly created agricultural enterprises; to register land shares and allotment of land plots with local authorities without collecting registration fees; 4. to develop land market infrastructure, including to create a system of qualified intermediaries and specialized land banks or other similar financial institutions (for example, agroleasing companies); 5. to establish mortgage lending practices for agricultural producers; to provide government grants for agricultural producers who temporarily withdraw their land from the crop rotation for rehabilitation and recovery; 6. if necessary, to convert into joint stock companies and sell at auctions shares of the enterprises processing and servicing agricultural production, which are now belong to national and regional authorities. When selling, the priority should be given to domestic agriculture producers.

II. Organization and Optimization of the State Support to Agriculture

In the coming years, Belarusian agriculture and processing enterprises will go through a quite dramatic period related to the forthcoming accession of the country to the WTO. Compared with imported foods, producers of which get subsidies in the European Union, domestic products does not stand competition and are being forced out both from Belarus and from Russia.

Our House believes that during accession of Belarus to the World Trade Organization (presumably 2015 - 2019) and adaptation to the WTO rules, there should be a policy implemented to protect domestic agricultural producers. This is what all the countries - participants of the WTO did at the time. Among the main measures to be taken, there are: 1. Differentiation in volumes and principles for subsidies to agriculture; state support in the amount permitted by the WTO, which is 15% of the expenditure budget of the country and regional budgets. Governmental grants should be issued to competitive products and spent, above all, on modernization and new agricultural technologies, land restoration and energy efficiency. 2. Public funds should also be invested in modernization of processing facilities. In addition, measures to protect domestic agricultural producers related to the purchase and commodity interventions should be developed. Financing of infrastructure and housing in the rural areas is a separate issue to be considered. 3. Given the current disproportion in prices for agricultural products and energy resources consumed by this sector, the cost of fuel, electricity and gas should be subsidized.

III. Creating a Financial System in Agriculture

As of today, there is no proper credit and finance system serving the agriculture in Belarus. This became the main reason for decrease in working capital, chronic defaults and increase in accounts payable of agricultural enterprises. The monopolists in this area, Belagroprombank and Belagropromlizing, deliberately created by the state, have converted

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into highly bureaucratical structures and are unable to meet the needs of the modern agriculture. In fact, Belagroprombank has turned into a mere translator and distributor (on the instructions of the executive committees) of budget funds allocated to subsidize collective farms and state farms.

The analysis shows that all countries with advanced economy possess a specialized agricultural credit system, built taking into account specifics of agricultural production and producers’ interests.

Our House believes that at the national and regional levels a new financial and credit system should be created, which would include commodity exchanges, insurance companies, leasing companies alongside with specialized branches of banks. Such a system should be established taking into consideration characteristics of the regions and interests of agricultural producers. Its objective is to enable farmers to obtain short-term loans to cover seasonal costs and to modernize their business in a comfortably enough way.

Therefore, Our House considers it important: 1. to ensure governmental support of agricultural credit cooperatives and rural mutual insurance companies; 2. to create regional financial structures (guarantee funds, insurance, leasing, etc) on the basis of rural credit cooperatives in the regions.

IV. Development of Horizontal and Vertical Co-operation of Agricultural Producers

Obviously, market relations in the agriculture may not line up properly without co-operation. If agricultural enterprises, farmers and family farms do not co-operate in providing services, processing and marketing products, they will not be able to survive, speaking in terms of economy, under any circumstances.

If share capital influences agricultural reforms, in other words, when the vertical is built from top to bottom (from the store to the producer) but not vice versa (from the field to the store), agricultural producers become completely dependent on the commercial capital, which dictates purchase prices and ultimately disrupts production. Accordingly, agrarian reforms in Belarus should take full account of interests and relations of all participants in the chain.

Co-operation can provide a new resource for the development of small and medium-sized businesses in villages. There is no other more versatile tool in the agricultural sector than co-operatives. The United Nations declared the current decade the co-operatives decade, in particular, in terms of employment. We should extensively use this powerful resource of co-operation while creating new jobs, fighting against unemployment and poverty. Therefore, the system of consumer co-operatives (Belcoopsoyuz) should be radically reformed – it has been preserved in Belarus from the Soviet era and hardly meets current requirements and market conditions.

V. Private Farms as a Flexible and Effective Alternative to Collective Farms and State Farms

First of all, the country needs to re-define such terms as farms, farmsteads and private farms; identify their similarities and differences, possibilities and their place in the country’s agricultural industry. Private business in agriculture should be highly supported by the state, especially at the stage of creating private farms.

At the same time, however, it should be clearly understood that private farms are to be

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created not instead but alongside with collective farms and state farms. The former are more flexible in their work, easier to adapt to the demands of the market and can provide customers with unique products. The latter can secure the large-scale production of the most demanded agricultural products. There is a place for everyone in the market.

The position of Our House is that Belarus should implement a set of measures for the development of peasant farms. For example, those who start farming and those who revive farmsteads should be eligible for special grants. Besides, there should be serious financial support for family farms.

A grant for creating a farm should cover the price of land, animals, machinery and seeds, connecting to utilities, project design documentation for construction or reconstruction of industrial and warehouse premises and, separately, one-time compensation to arrange the household.

Heads of farms, who own at least 10% of the grant amount, but not less than $3,000, will be able to take part in this program. The expenses will be compensated to a farmer only following full registration of his title to land – ownership or life possession.

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Section 5. Construction (Including Housing), Building Industry, Building Materials and Real Estate Market

The Belarusian government has been trying to solve the housing problem since when the first Soviet tank entered the liberated Minsk on July 3, 1944. Since then, the country witnessed a variety of approaches to housing. As a result, today there is a complete “architectural zoo” in our cities – Stalinist architecture, Khrushchevki, buildings erected in Brezhnev’s time, modern high-rise buildings and a private sector built God knows when. At the same time, every few years another government develops a new concept for solving the housing problem, but after some time it turns to be unrealistic again. Today, despite the recent crisis, the prices for construction materials are still high and bank loans are not available for most developers. The government can keep cutting back on profit of the construction companies and imprison the heads of the real estate developers, but by doing this it will not solve the problem. After all, construction materials account for about 60-70% in the cost of a square meter of housing under construction. Due to the general decline in earnings (in dollar equivalent) the demand for new housing is falling, thus burying best endeavors of the Belarusian government. Since 1995, the Belarusian authorities have approved several housing programs and allocated vast resources for concessional lending. In fact, over the past few years a lot of housing has been built. However, stimulation of the construction combined with the lack of reforms in the economy has led to a number of negative consequences: - The construction industry has become perhaps the most corrupt in the country. In mid-2013, the president was forced to acknowledge it publicly, as well as the fact that as a result, the cost of construction per square meter is now two to three times higher than it could be. - The number of people in need of better housing, paradoxically, has not been reduced but increased. This is despite the fact that the population is falling. - The demographic imbalance has worsened – more than 25% of the country's population live in the capital, and the demographic situation in the region is becoming more upsetting. - In spite of the large amount of construction, the job of a builder is still not well-paid. As a result, there is catastrophic drain of professional builders who go to work abroad, first of all, to Russia. - Government funding of construction has led to the situation when companies in the construction industry and Belarusian manufacturers of building materials pay little attention to energy efficiency and energy-efficient technologies, which will make them noncompetitive in the market economy.

New Housing Program Our House believes that Belarus should develop and adopt a new housing program and a building policy concept. Their strategic goal is to make it more profitable to build housing in the suburbs of large cities and in cities with a population of 100-200 thousand people. This approach will, at least to some extent, correct the demographic imbalance that one can observe now, when the Belarusians move from towns to the cities, and from big cities – to Minsk. As a result, every fourth Belarusian lives in the capital now, which greatly affects the situation in the country as a whole. During 2011, the urban population has increased and reached 7,175,000 people while the rural population has decreased to 2,290,000 people. 70% of the urban population is concentrated in

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the major cities of the country with the population of 100 thousand people and more. These are Minsk, all regional centers and Bobruisk, Baranovichi, Borisov, Pinsk, Orsha, Mozyr, Soligorsk and Novopolotsk. For many years, there has been internal migration in the country from the village to the city. Most of those leaving the village are young people who move to the city for further education or employment. They do not come back afterwards, not only because of low incomes in the rural areas, but also because they have no own home. The Belarusian urbanization has its own feature. If in Eastern Europe and Central Asia, there is migration from the rural to urban areas as such, in Belarus people tend to relocate not only from villages and towns, but also from even large regional cities – to the capital. People out-migrate from all regions, except for Minsk, experts say. In these circumstances, the current objective is to develop and adopt a new building policy in Belarus, which would determine the development strategy in all areas of construction – architecture, design, construction, pricing, building materials and engineering activities. A new concept should involve rules that would significantly simplify procedures relating to preparation and implementation of construction projects. There should be standardized definitions of such terms as land plot, building, structure, etc., which under present regulations and executive directives can be interpreted differently. Investors should be exempt from submitting excessive documents to obtain a construction permit or permits by specialized institutions (for example, certificate on exclusion of land, located in the countryside, from the arable land if residential buildings are to be constructed on this land plot.) Formalities related to assignment of land for investment construction should be carried out by the local authorities on the basis of the documents submitted by investors, along with the application for a construction permit. The local authority, by law, will be obliged to issue a construction permit within one month. The concept should provide for the mechanisms and ways of solving housing problems, which can be used not only by those on the waiting list for housing improvements (traditionally, special attention has been paid to this group), but for others as well. Moreover, the concept should specify the categories of those who are eligible for state support in improvement of housing conditions, rules of registration of citizens entitled to the government support and economic instruments to improve living conditions (mortgages, building savings system, etc.) There should be a separate list of measures to support private construction, pricing, lease, operation and tariff policy. The concept should contain detailed mechanism that would allow funds accumulation, mortgage, pledge, housing construction savings, governmental support in allocation of land plots for private construction, etc. The state should observe its duty to help people in all situations: in the form of direct government support, subsidy arrangements and preferential treatment in taxation. Housing construction savings can be a good alternative to mortgages. Everybody should be given an opportunity to accumulate funds for construction. This mechanism will operate in two phases - the accumulation period and, after obtaining the house, the loan repayment. Upon accumulation of 25-50% of the construction cost an individual may apply for a loan for the remaining amount at a lower interest rate.

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New Urban Planning Paradigm Belarus is the last country in Europe that continues to build concrete high-rise residential buildings. The reason for this is outdated construction rules, as well as reluctance of the authorities and developers to change the situation. Modern Belarusian buildings cause an unpleasant déjà vu: They resemble high-rise residential buildings that were erected 40 years ago. During half a century, only a little colour was added and buildings rose from 17 to 24 floors. As for the rest, they are all the same typical high-rise buildings standing in the middle of a huge vacant yard: not a human environment, but a space for survival. However, Western Europe, where this concept came from, abandoned it as early as in the 1970s. A micro-district is a paradigm of the Soviet urban planning since the early 1960s. At that time the idea seemed fresh and trendy: instead of little "capitalist" neighborhoods – huge territorial units, residential micro-districts. They were composed of loosely arranged high-rise residential buildings and social facilities and presented a concept of the future. Architects were fascinated with the change of the scale: Whereas a neighborhood covered an area of one hundred to one hundred meters, a micro-district stretched for a kilometer; whereas in a neighborhood, building were located on the perimeter, along the streets, in a micro-district high-rise buildings were placed randomly, not following any rule – it gave a sense of freedom. The modernist urban planning paradigm of a micro-district came to the Soviet Union from Europe: In the 1950s and 1960s, the cities affected by the war were built up in that way. The concept of a micro-district went well with the idea of prefabricated construction – one had to build a lot and fast. However, by the early 1970s they abandoned the idea of micro-districts in Europe, and even started demolishing them. By that time, disadvantages of a micro-district became quite evident. Such a development is not commensurate with a person. Huge buildings crush, large empty spaces are psychologically difficult to comprehend – they remain foreign. Large public yards can be humanized, but at very high cost, and in practice they just turn to be huge and uncomfortable wastelands. In most cases, multistory buildings are monotonous, which adversely affects mental health. A micro-district sandwiched between two major highways is less efficient in terms of transit than neighborhoods with their system of small streets. The division of the city into mono-functional residential micro-districts and business districts dramatically increases traffic. Finally, no community emerges in a micro-district: People are alienated from each other. All together, this contributes to the delinquency growth in such areas. In the Soviet Union, micro-districts were built in 1970s and 1980s as they perfectly fitted panel construction. Moreover, the mere idea of a “building in the middle of a huge public space” corresponded with the socialism concepts. Then the socialism collapsed, but micro-districts have still remained the dominant scheme for large-scale construction. Their amazing vitality can be explained only by two major reasons – incredible inertia of the construction industry and governmental negligence in urban development in general. Are there alternatives to a micro-district? If talking about high-density construction, there are two alternatives: neighborhoods of 6 - 9 floors buildings and high-density low-rise buildings. The advantages of neighborhoods are quite obvious. This is a classic familiar Western European city with very vibrant and active streets, where cafes, restaurants and shops occupy the first floors of buildings. The size of a neighborhood (in average, one hundred to one hundred meters) and the height of buildings (5 - 9 floors) are comfortable for people. Neighborhoods have a clear division of public (streets, avenues, squares) and private space. Private space is located deep in the neighborhood and is available only to its residents. In

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general, this is a traditional layout of any European city, approved over thousands of years. The proof of its harmony is in the number of tourists coming from all over the world to spend at least some time in this environment. High-density low-rise buildings are less known in our country, and they derive from the Anglo-Saxon system, with the emphasis on the blocked three-storey buildings. A modern example is Borneo Sporenburg district erected in Amsterdam to replace the docks. Originally, they planned to build 10 - 14-storey buildings there, but studies showed that low-rise housing would be cheaper. Then architects offered a solution that allowed for the same amount of square meters in a three-storey building as in a high-rise building. To avoid monotony, they offered several types of buildings: conventional locked houses, townhouses with the access to water, apartments around small courtyards. One of the solutions suggested was to build two lines of townhouses facing each other (while the distance between them still allows putting tables, chairs, flowerpots). With these ingenious solutions the Dutch managed to get more than 100 living cells per a hectare of land. Such a decision may well be embodied in many regions of Belarus. Who could be an agent initiating this transition from micro-districts to alternatives? Developers are unlikely to volunteer. The problem is that developers are not interested in creating a quality environment, as they have a short planning vision coming down to build – sell – leave. A request for a quality living environment should come from a society. However, it has neither influence on urban planning, nor necessary knowledge. In this situation, the work to improve the regulatory framework and introduce new type of housing should be done by the Ministry of Architecture. At first, a dialog between officials involved in construction, local authorities and the community should be initiated so that to avoid conflicts related to inadequate high-density construction that are taking place today. Pilot projects initiated by the state can contribute to changing urban development in Belarus. When implementing such a project, existing construction regulations can be left aside, and there will be a room for experiments. If successful, a project can be used to develop new planning regulations and replicated across the country. One should keep in mind that Belarus already has projects similar to those described. For example, BelNIIP of Urban Development is developing a new model of an urban district for Belarusian cities – the so-called compact multi-functional urban planning module. Its main task is to reduce daily migration. In theory, when everything is within reach, people do not need to cross the city twice a day, thus the burden on public transit is reduced and there are less traffic jams on the roads. Of course, not everybody will be able to work close to home, but urban traffic will still decrease significantly. It is easier to implement the idea of architectural units in the satellite cities. The concept of "compact" undermines construction of apartments of smaller area compared to those which have been offered in the recent years. For the large-panel buildings, architects are revising the section to break them down into smaller, one-and two-bedroom apartments.

One-Storey Belarus The term “one-story America” was born in the 20's and 30's of the twentieth century, at a time when the United States were in the Great Depression and then painfully recovering from it. It was at this time when construction of one- and two-storey detached private houses in the suburbs of American cities boomed. The land in the suburbs was cheap, and the total

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motorization of America allowed solving a transport problem. American banks, in desperate need of both clients and government subsidies, eagerly took up the initiative. Even during the Great Depression many people could afford buying a land plot in suburbs (they were very inexpensive.) The client would immediately, without any problem, get a long-term bank loan (subsidized by the state) for the construction of his own home. The role of the local authorities was minimal: They developed a unified town planning regulations to ensure that new homes did not cause an obvious disparity in the urban architecture. Mass housing construction supported by bank and municipal loans gave rise to an entire industry of small private construction firms. They created new jobs, and money were invested into production of building materials. The outcome of economic measures taken almost a century ago can be witnesses even today: More than 80% of the U.S. residents still live in "one-storey America” – in huge residential areas stretching around a downtown stuffed with skyscrapers. And Americans like it – in California, the wealthiest U.S. state, you can drive miles without seeing a single high-rise building. In Belarus, something similar happened in the 1990s. The green light was given to cottage construction, and the emerging middle class immediately began to build up their own houses in the suburbs of the major cities (the most obvious example is Borovliany near Minsk). This being said, Belarusian mentality made its impact – a cottage in the suburbs was not considered as a house, but rather served as a prestigious supplement to an apartment in the city. Local authorities did not interfere in the process, and as a result everyone built the way he wanted. Since 2000, cottage construction boom in the suburbs of the Belarusian cities naturally ebbed. Those who initially had money and desire finished construction, there were no new wealthy, and the demand for land fell sharply. A “dacha” (a country house) became popular again. A city apartment has kept its value on the real estate market and has remained as such up until now. The concept of "one-story Belarus" – if implemented – will certainly be not a panacea for all problems. However, it will be able to mitigate them. The density of the population in Belarus is very low by European standards. The land, including in suburbs, is available, but usually not suitable for agriculture. In this situation it would be reasonable to allocate this land free of charge (in certain suburbs, of course) to those who need better housing, on the condition to start construction within, for example, a year. Budget funds which now are transferred directly to construction companies (where they can be well stolen or simply wasted) could be spent on infrastructure in "one-storey Belarus" districts – on electricity, gas and water supply, disposal of waste, roads construction and telecommunications networks. In many ways, it is the lack of infrastructure that led to the curtailment of mass cottage construction in the 1990s. The plan of action is simple: the state provides a family in need of better housing with a land plot connected to infrastructure for private construction free of charge. It is obvious that all family savings will be spent on the construction of the house, as well as most of the monthly salary. Any bank will be interested in giving this family a long-term mortgage loan. The state may as well act as a guarantor of the loan and even pay a portion of the interest. This plan allows engaging private savings into economic rotation. Small personal savings of the unregistered entrepreneurs will certainly "come out of the shadows." The banks will have more work and more clients. At the same time, small private construction companies will be more activate on the market. This means not only tax revenue, but also new jobs. Moreover,

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in the new suburban residential areas there will be a need to build domestic infrastructure – shops, cafes, laundries, dry cleaners, service stations, gas stations, etc. And this is a huge field for small businesses, "tidbit" for small investors. When there are a lot of small construction firms on the market, building materials producers will have to be more flexible. And that means, among other things, that they will have to implement energy-saving technologies in order to reduce price for their products and produce "cheap energy" building materials, such as various wood products. Mass distribution of land in the suburbs free of charge is easy to make fully transparent, thereby eliminating the "corruption index" traditionally high in the construction business. Today, when high-rise residential buildings are being constructed, the land in the city is allocated through a long, complex and completely opaque process. Abuses in this area are well-known. On the contrary, it is possible to make transparent mass free of charge distribution of land in the suburbs. If there is no deficit, there is no corruption. Of course, the government will have to work hard to develop and adopt uniform urban development (architectural, etc.) standards for single-storey residential areas, the way it was done once in America. On the upside, the most odious phase in today’s construction – the infamous coordination of the project – will automatically disappear.

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Section 6. Energy, Energy Saving and Energy Efficiency

Our House believes that in order to increase energy security and enhance energy supply in the real sector, Belarus should demonopolize its power industry and open it both for the Belarusian private businesses and foreign investors. As a medium term objective, a full-fledged energy market should emerge in Belarus. Nevertheless, the main purpose of the reforms in the power industry is to enable the transfer from the vertically integrated energy network to the distributed-adaptive one.

Withdrawal from the State Monopoly Belarus will have to give up the state monopoly in so-called “high energy.” And the

first step towards it is to enable private investors, including non-residents, to build and manage energy generating resources operating on local fuels.

Later on, Belarus should develop and adopt an electricity law which would abolish the state monopoly in the energy sector. In particular, it should create conditions for private, including foreign, companies to build and operate large power plants. Nevertheless, the country’s energy security should be a priority. In other words, a reasonable balance between public and private power generating capacities should be found and enforced in the future.

There should be certain restrictions of the principle of market freedom in the interests of the people. In other words, the government will continue to regulate “energy” prices using administrative resources, thus limiting profitability of the energy companies in favor of the rest of the industry. Today, we have already reached a dangerous stage of almost European prices for energy – 13.7 cents per kilowatt-hour.

To develop new generating capacities, huge capital investments are required, that is, major foreign investors should be admitted to the country. Besides, without separated transmission networks and transparent electricity market even the best energy law may turn into the cart put before the horse. Any investor is more interested to buy existing generating assets offered for privatization that already have established infrastructure and personnel, upgrade them and increase their capacity, rather than to build “from scratch” in an open field.

As the second option, an investor can build generating capacities and then exploit them by selling electricity to the state at a fixed price, thus obtaining return on his investment. When profits from electricity sold reach a certain amount during the operation period, an investor will be required to transfer the generating capacity to the state. In this case, there is no need to separate a transmission network or to create electricity market. It will be sufficient just to ensure that the investor sells energy at attractive prices.

Currently, even the government confirms that Belarus has all prerequisites for the private energy industry. And first of all, for the energy obtained from local and alternative fuels. Today, gas is imported at $165.6 per 1 thousand cubic meters, and even at that price it is cost-effective to use local fuels. But the “gas pause” will not last long. Russia will move to equal profit rates, which means that it will raise prices for Belarus.

Today, private energy industry exists in Belarus, so to speak, “on the lower level.” These are small power plants usually operating on biogas, peat, sawmill waste, etc. In most of the cases they provide a specific consumer with the electricity and heat, that is, do not supply energy into the grid of the whole country.

However, they do exist, and namely as the first representatives of a non-state component in the energy balance of the country. And if not to consider large foreign

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investments into the Belarusian energy, then these small local power plants can and should facilitate large scale development of the private energy sector. Smaller power plants operating on alternative or local fuel should be united in regional clusters, holding companies, generating capacities sufficient to be sold into the grid of the country. Facing inevitable rise in prices for Russian gas, this can and should become a full-fledged business in the long run.

Energy Saving and Energy Efficiency In fact, things are not as bad in this area as it is often assumed. In particular, experts of

the Eurasian Development Bank (EDB) emphasize Belarusian progress in reducing energy intensity of the economy.

According to the EDB, energy efficiency of the economies of the Common Economic Space (CES) and Ukraine surpasses by far the world average, which affects their competitiveness. A study conducted by the research department of the EDB found out that over the past few years there have been positive trends in this field. At the same time, the economies of these countries need to be further modernized and energy facilities further upgraded to increase energy efficiency. Belarus, Kazakhstan, Russia and Ukraine announced energy efficiency to be the part of their national development policy. These countries have adopted laws, programs and road maps, but not all of the initiatives in this area are duly implemented.

Belarus has achieved the greatest success among these countries boasting 50% reduction in energy consumption since 2000 reached due to consistently pursued policies in this area. With the adoption of the Law On Energy Saving the country has started to implement energy efficiency policies more systematically and has made energy conservation a priority for the country's economy.

Nevertheless, despite the progress made the problem of energy conservation remains highly relevant. Energy intensity of GDP in Belarus three to four times exceeds the average power consumption in the developed countries. Even the Ministry of Economy acknowledges that to manufacture a standard unit of a product in Belarus, five-six times more energy than in the EU is consumed.

The study of the EDB shows that the laws of the EEA and the Ukraine stipulate general principles of energy conservation. However, this regulatory framework fails to reflect a number of issues. In particular, the law has no control and monitoring mechanisms to implement already approved energy conservation programs, which reduces their effectiveness.

Experts of The Civil Campaign Our House believe that in order to promote energy efficiency in Belarus, it is first necessary to focus on finding the tools to facilitate access to long-term financing of energy efficiency projects by financial institutions. This will increase the demand for energy-efficient technologies.

It is also necessary to identify less time- and money-consuming mechanisms to improve energy efficiency. Priority measures usually include energy loss reduction, including through technical repair of electricity and heat leaks, as well as through administrative measures to administer, save and control energy consumption. Experience has shown that companies can easily reduce their overall power consumption by 5-10% provided cost-free or low-cost energy saving measures are applied, in other words, provided the proper "energy-saving" discipline is ensured.

The governmental policy in this area should clearly identify possible sources of

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funding the measures to improve energy efficiency, resource conservation and use of renewable energy. Energy efficiency measures require stable and predictable funding. International experience shows that energy efficiency projects can be funded from various sources, but the government plays a key role in creating conditions for attracting investments. The forms of financing may vary from direct investments to compensation through financial institutions. The latter is considered the most effective but requires a high degree of coordination between the government, business and community.

The Nuclear Power Plant Problem In this section of the economic program, the authorities' plans to build a nuclear power

plant in Belarus cannot be overlooked. It is obvious that this project is primarily a political one (greater dependence on Russia) rather than just an energy project. Besides, a moral and ethical side of building a nuclear power plant in the country that was the most strongly affected by the Chernobyl catastrophe is very questionable.

“I took the decision to build a nuclear power plant and I bear responsibility for it,” said Alexander Lukashenko addressing the nation in 2011. In other words, there has been no referendum held, nor the opinion of the people has been taken into account. It was not taken into account even when the government took a loan of $10 billion from Russia to build a nuclear power plant. We do not know whether a nuclear power plant turns to be profitable, but we do know that we and our children will have to repay the loan. Moreover, the total cost of building a nuclear power plant amounts to $16 billion.

Experts believe that the same amount invested in modernization of thermal and hydro power plants to increase their efficiency, in energy saving and energy efficiency, in modernization of energy transmission networks, in alternative energy sources may have a much greater impact on the economy compared to building a nuclear power plant. At the same time, a huge risk for the environment and safety of the country, which by its very existence a nuclear power plant creates, would be excluded by default.

Biogas as the Best Investment Target and Small/ Medium Energy Business Dependence of the Belarusian industry and housing sector on gas supplies from Russia

has already become the talk of the town. However, Belarus has its own gas “deposit,” and it is inexhaustible. We can produce at least half of all the gas consumed from bio sources at biogas facilities. Moreover, we might even not need to purchase outer gas if we put more effort.

The problem of renewable energy sources is much more relevant for Belarus than for Russia with its vast hydrocarbon reserves. But Belarus does not have a lot of options. It is difficult to develop wind power in Belarus – we do not have sea coasts with constant and stable high winds. The weather in Belarus with few sunny days per year is too unstable for solar energy, not even mentioning geothermal energy as an option.

Therefore, we are left with bioenergy, which in Belarusian conditions is the most reliable source of renewable energy. Statistics for 2012 show that the renewable energy sources (RES) amounted to 5.1% in the gross consumption of fuel and energy resources and 8.3% of fuel and heating oil. Wood fuel dominates among the RES, due to the country's forest cover and developed infrastructure for processing, preparation for use and use of wood fuel.

Nevertheless, the balance in the RES segment should be changed. Biogas production (methane mixed with hydrogen) is a well-known technology. Almost a full analogue of the natural gas can be produced in the same way as moonshine, from any organics – from manure

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to a wooden stool. This is the advantage of Belarus – we have a great variety of organic material suitable for processing into biogas: agriculture (especially cattle), waste of all food producers and agro-processing enterprises, slaughterhouses, urban sewage, food waste, wood waste, etc.

Average gas output is 300 cubic meters from 1 ton of raw material. Of course, in reality it depends on the type of raw material and solids content. For example, a ton of cattle droppings delivers 50-65 cubic meters of biogas with 60% methane content, different plant species – 150-500 cubic meters of biogas with up to 70% methane content. A maximum amount of biogas – 1,300 cubic meters with methane content up to 87% – can be produced from fat.

Biogas has an important feature – its production is not possible on an industrial scale within one enterprise. In other words, one cannot build a huge biogas plant (a “gas well”) to supply gas to the whole country. More precisely, it is possible but it will be extremely unprofitable and just plain stupid.

The more effective way is to use biogas directly at the place of its production, immediately providing local customers with heat and electricity. This means creating a fundamentally different gas supply system outside the cities. And this is the very transition from a vertically integrated network of energy supply to the distributed-adaptive one, which was mentioned at the beginning of this section of the economic program. A single large pipe from which a number of small tubes extends to small rural consumers will no longer be required. These consumers can provide themselves with heat and electricity, just by having a medium-sized livestock farm in the neighborhood.

Such is the global practice most popular in Germany, the Netherlands and the Scandinavian countries. Over there, small and medium-sized facilities, suitable for installation in individual farms and cattle-breeding complexes, are on demand on the market. Using such facilities, an animal farm can produce heat and electricity not only for its own use, but also for neighboring villages.

Resources for biogas production in Belarus are almost limitless, and most of them just lie on the surface. There are a lot of cattle farms in the country. They remove manure simply by a huge amount of water. Water-manure suspension cannot serve as a fertilizer because it literally burns the soil. As a result, there are vast dead lands around farms and manure swamps in some places. However, the same very manure is an excellent source for biogas production, especially if chopped straw (used animal bedding) or other crop residues (for example, tops) are added.

Thus, a simple mixture of water, manure and other organics rotting in abundance in any collective farm is able to provide this very farm and nearby villages with electricity and heat. At the same time, it solves a serious environmental problem. Another advantage is that these facilities produce a fermented mass (sludge), which is a wonderful fertilizer. Normal manure is not the best fertilizer but the sludge extracted from biogas plants can be immediately taken to the field. Or be packaged in bags and sold to those doing gardening.

Annually, Belarusian agriculture provides for 30 million cubic meters of waste that must be disposed of properly. Belarusian experts on energy-efficient technologies believe that just livestock farms (plus poultry) represent 4 billion cubic meters of biogas potential in Belarus – about 800 MW of electrical power. For comparison, in 2011, Belarus bought 20-21 billion cubic meters of natural gas from Russia.

Poultry farms should be the first ones to open biogas facilities. Chicken manure is not

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suitable for fertilizer – it burns out roots of the plants. But it is perfect for biogas production as it provides for the highest yield of methane. Along the way, another problem of stinking smell killing the neighborhoods around poultry farms will be solved.

Gazprom is a traditional “antilobbist” of the biogas industry in Europe. It is crystal clear why – the Russian gas giant would not like to witness reduction in consumption of natural gas, even if it is caused only by small consumers from the agricultural sector.

But even Gazprom can deduct that gas fields will be exhausted in the future. And this is a problem that biogas production may solve. In October 2011, it was announced that Gazprom would produce biogas. As the raw material, waste from livestock farms, primarily Russian poultry farms, will be used. The first stage investments in the project will amount to $100 million.

To implement the “biogas” project, Gazprom, the Dutch gas infrastructure company Gasunie, the Russian company Biogazenergostroy and ZAO “Eurotechnica” signed an agreement, under which the Europeans convey a right to construct biogas plants to the Russians. The issue here is not of high-tech nature but rather that Europe put a lot of time and effort into biogas technology and this collaboration will allow the Russians to save on engineering.

According to Sergey Chernin, the head of Biogazenergostroy, to implement this technology in Russia, 5-10 stations will be built with the total output amounting to about 50 million cubic meters of “green” gas.

Today, biogas is becoming a real eco-friendly component in the energy balance in many countries. This is an effective way to dispose of renewable biomass using existing developed gas infrastructure, as well as enormous potential for the biogas production available in Belarus. According to some estimates, the widespread introduction of biogas plants supported by a well-thought governmental policy may eventually take away the need for our country to buy gas from Russia.

The most effective way is to use biogas in place of production, directly supplying it to heat and electricity consumers. In fact, it is internationally common now. Therefore, small and medium-sized biogas production facilities suitable for installation on a farm or a cattle-breeding complex are on demand.

If the government adopts a serious approach to developing biogas industry in Belarus, construction of related facilities can be quite a profitable business. Now they are being bought from abroad (mostly, from Germany), Belarus does not produce them.

However, a biogas plant can hardly be called a high-tech machine. And it is easy to start producing such facilities in Belarus. Accordingly, if there is demand, it is quite possible that specialized engineering firms will emerge to manufacture biogas plants for the Belarusian companies.

Of course, an economic and legal mechanism should be created for biogas to be sold in the gas transmission network in Belarus. Local administrations should create investment portfolios, support guaranteed contracts and, perhaps, insure against contract defaults.

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Section 7. Telecommunications and IT

Over the last two or three decades, computer and information technology (IT), modern telecommunications and the Internet have become a full-fledged driving engine in the development of post-industrial economies around the world – from Europe and the United States to India and China. Today, the countries that do not want to or cannot afford development at the expense of natural resources and mineral deposits exploitation count on the “economy of the mind” – IT and telecom.

Belarus has a good basis for such high-tech development. However, the government is not doing enough. One High-Tech Park for the whole country, refusal to privatize Beltelecom and a state monopoly on foreign internet channels – all these hinder IT development in Belarus. The Civil Campaign Our House proposes to change the situation radically by this course of action: - to privatize RUP “Beltelecom” - to implement the program IT Country - to create a network of high-tech parks.

Beltelecom Privatization Today, the Republican Unitary Enterprise “Beltelecom” is the sole provider of fixed

line telephone services in Belarus that enjoys monopoly on the external Internet channel and remains a key part owner of the Belarusian mobile operators. Preserved monopoly of Beltelekom on external communication channels is the main factor that impedes business of the commercial providers. They, like a dozen years ago, live off re-selling web traffic trying to earn on additional services. Only a few manage to set enough money apart to keep their business growing, therefore private companies have to cut costs for everything from rent and salaries to new equipment.

As a result – poor tech support, poor quality of the Internet access, slow data communication, often far from the declared. No wonder that private providers have been asking to eliminate monopoly of Beltelekom on external channels access since 2000. It would radically change the situation: By reducing the cost of the main “raw material” – Internet traffic – the price for services would fall at least by half. This, in turn, would allow internet market players to accumulate funds for modernization and for launching new services.

Along with Belaruskaliy, Naftan, BelAZ and other industry giants, Beltelecom is a “family silver” of the Belarusian economy. On the one hand, its “mines” are never empty. On the other hand, the prime cost of Beltelecom is growing along with the demand for data communication and dependence of mankind on information. Beltelecom is an asset that will be of interest to investors in any situation: In case of the national telecommunications operator, an investor is offered not so much the data infrastructure but access to the subscriber base. And this means the whole population – 9,000,000 subscribers – plus all legal entities.

Many potential investors view Beltelecom as an asset, above all valuable because of its monopoly on the fixed telephony market. Belarus is the only European country with a monopoly on the fixed telephony market, which holds back the development and growth of the market. Beltelecom privatization would allow free development of mobile communication market in Belarus. Today, this is a sufficiently competitive and ready to accept new technologies market. However, the Belarusian mobile operators still do not have sufficient resources to grow in line with current trends. One example of this is their refusal to participate

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in tenders for the frequencies necessary for the deployment of fourth-generation networks (LTE technology).

De-monopolization of the telecommunications industry and Beltelekom privatization are the key factors to bring investments into the Belarusian telecommunications. Moreover, elimination of Beltelekom’s monopoly is one of the main conditions for WTO accession for Belarus. WTO requirements clearly indicate that after joining the organization Belarus should fully open the market of international communication services.

Beltelekom monopoly could be eliminated through converting it into a joint-stock company and then selling its shares to commercial providers and telecom operators. It seems appropriate to sell the concern by parts, under the strict control of the government. In other words, investors should be separately offered a data communication network Belpak, an independent operator of Internet access ByFly, ip-TV ZALA, controlling interest in MTS, data centers, fixed telephony infrastructure and satellite communications.

There are enough potential buyers for the assets listed. Such European companies as TeliaSonera, France Telecom, the Russian Rostelecom, AFK “Sistema”, Rostehnologii, the Polish Polkomtel, the Italian Finmeccanica, the Finnish Nokia and transnational Orange are likely to express their interest.

Nevertheless, whether foreign (including Russian) telecom operators should be admitted to the Belarusian market is a disputable issue. Experts agree that small and medium-sized Belarusian companies will not be able to compete on equal terms with foreigners if the latter are admitted to the Belarusian market. Accordingly, the approach to such problems should be well-thought and careful, with a thorough expert evaluation of each step. Professional community could provide invaluable assistance – for example, the association Belinfokom or the scientific and technological associations of Infopark.

Beltelekom privatization held right now, after a similar process took place in the post-Soviet countries, will allow taking into account the errors committed in the privatization of the national telecom providers in other countries, for example, of Ukrtelecom (the Ukraine) or Lattelekom (Latvia).

The Program IT Country The ambitious project IT Country may place Belarus among the world leaders in IT-

industry and make information technology one of the main branches of the Belarusian economy. The author of the project IT Country is Igor Mamonenko, Director General of the company BelHard. According to Mr. Mamonenko, Belarus will be able to get at least $7 billion annually through offshore software development, while investments will be required only in IT education.

IT Country authors presume that purposeful training of people of other professions (primarily – accountants, economists and engineers who are in oversupply) will bring 300 thousand programmers to the country. And though not everybody will work as a programmer, people will still be involved in the export of IT services. (By the way, there are 2.2 million of such people in India now.) Currently, Belarus can sell services of the Belarusian IT people at $20 per man-hour. And this figure is clearly underestimated because a more expensive rate is applied nowadays, the rate in Europe starts from $25 per man-hour.

Belarus is now quite interesting for western buyers of IT services. However, the whole country in terms of IT development is equivalent, at best, to one Indian IT company from the top twenty. Equivalent in terms of size and cash flow.

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Without doubts, the project IT Country has very ambitious goals: The Belarusian IT industry will have to grow at a rate exceeding 2.5 times the rate at which India developed. In 1998, IT services turnover in India amounted to $2.7 billion. The same year they announced IT development program which assumed a 20 times increase in revenues from this sector – and they completed it.

In 2011, Belarusian IT export made $160 million. To reach $7-10 billion a year, almost 50-times increase is required. And it is achievable primarily through a rational use of human capital.

To implement the project IT Country, a very large number of people will need to be re-trained in a very short time. However, the existing education system is not ready and will not cope with it. During this experiment a new – and experimental as well – system of education will be created. Its main task will be to train those professionals who are guaranteed to find a job in the IT industry. To determine what IT jobs will be on the market tomorrow, it will be required to monitor situation in the world and in Belarus.

Implementation of the project IT Country will be launched by founding a new structure – IT Academy. Its main task will be to develop a strategy for the development of the IT sector, where education is one of its constituent parts. The IT Academy will act as a research center that will engage in scientific research, analysis, etc. – and even in creating new programming languages and new software development methodologies.

For example, in India, not a single IT course lasts for even a year, six months maximum. The fact is that during a year-long training program a person can face the reality that the knowledge he receives outdates. Therefore, the training is broken down into short-term courses.

To re-train 300 million people (or maybe 500 thousand) within five years, the following working scheme may be used. The government provides benefits to the IT education, equivalent to those given to the residents of the High-Tech Park – 1% tax on turnover and no restrictions on the size of the payroll. It would stimulate both investors and future teachers.

Training centers created under the project will compete with each other in terms of duration of training, pricing, programs. The annual market size of IT education in Belarus will reach about $200 million by 2015. To get the final certificate, a newly educated IT specialist will have to pass an exam (perhaps, online) in a test center of IT Academy. The test center work as an independent arbitrator.

There are human resources for the IT industry. In 1991, Belarus had 50 thousand accountants. By 2001, this number reached about 400 thousand. Our country has already had a similar experience – hundreds of thousands of different specialists were re-trained to become accountants. Those were engineers, technologists, economists, cooks, ex-military men, etc. At that time a new profession gave a chance for those who had lost their job or were earning a mere pittance. People saw a future for themselves in this profession.

On the one hand, people were dismissed from various research institutes, on the other hand, private companies needed accountants. And then many courses emerged where people were re-trained to accountants. Now the country needs to undergo a reverse process. Here we are not talking about accountants or engineers. Four million people work currently in Belarus. Out of these 4 million, 2.2 million have higher or specialized secondary education. The government will have to dramatically simplify the current taxation, accounting and statistical reporting to a reasonable level. Then the economy will release at least 350 thousand people.

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Out of these people, future IT specialists will be recruited. Reforms are inevitable. The country will be getting rid of jobs currently consuming its

resources for the benefit of those who have potential for the resources to grow. Now, according to the World Bank, a Belarusian firm spends on average 900 hours annually on accounting. The world’s average is 160 hours, in the United Arab Emirates – 12 hours. Therefore, if to cut the time for bookkeeping at least five times, 80 thousand accountants from 400 thousand we have now will keep their job, and 320 thousand people will be released. Of course, this should not happen simultaneously – the authors of the program thought about a five year term.

Belarusian IT companies involved in the project IT Country will need to show to the customers their ability to implement large projects. Belarusian companies are now able to implement major complex IT projects. However, IT Country will be able to bring them to a whole new level.

In 1998, India announced that by 2008 they will receive $50 billion revenue from exports of IT services. The world was laughing at them because the whole world’s market at that time amounted to $30 billion. Nevertheless, they completed their program and got what they had planned.

Moreover, there is irreducible deficit of IT specialists. Only in India it is estimated at 200 thousand people a year, and around the world this figure exceeds one million. We need to show the world that Belarus is able to partially cover the deficit. Only a clear objective will be able to attract outside attention and mobilize the country for the implementation of this economic idea.

Creating High-Tech Parks Network Established in 2006, the High-Tech Park turned to be a successful and justified project.

However, to a large extent, it is simply a free economic zone for IT companies. And not for all companies but only for those focused on software development and Internet technologies.

Meanwhile, there is a fully justified practice of creating high-tech parks of wider profile in the world, of those special institutions which task is to facilitate growth of high-tech businesses. They create environment for the high-tech business in a particular area, for attracting the best minds to a certain territory.

Such high-tech parks are based on the so-called German model, when there is a problem area which can be put in order by creating a favorable environment for business development there. As a result, funds are invested into the area and people start to revive it and create more jobs there.

A perfect example of how this model can be implemented is a technology park created on the territory of the former Academy of Sciences of GDR, which was not able to compete with the scientists from West Germany and was closed a year after the reunification. The premises where the institution was located became empty, and a big question arose: what to do with it? Then the government of Berlin decided to create a special production area – an industrial park, and today it is one of the largest industrial parks in Europe. These parks emerge not where everything goes well but where there is a problem to be solved. And they are a method of solving problems.

In Belarus, once there was an attempt to organize such an institution – Minsk City Industrial Park. However, this project was of a very modest caliber and has produced no economic effect.

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Our House suggests creating at least a dozen parks in Belarus as described, which main task would be to create favorable conditions for doing business in the high-tech sector and support innovative start-ups.

To become a resident of the industrial park, a company must be engaged into or plan to create innovative products or implement technical research development projects, with up to 100 employees on the payroll.

High-tech park residents pay income tax at the rate of 10%. They also receive preferential conditions for rent payments. Such industrial parks are supposed to facilitate development of industries with high added value – biotechnology, nanotechnology, precision engineering and specialized metal working. Of course, they can also accommodate software and web developers.

Focusing high-tech companies in one venue can have a great synergy affect – they do not just develop but also interact, share experience and help each other. In such industrial parks, so-called “anchor” companies emerge quickly, those who stand firmly on their feet and place orders with small resident who has been just registered.

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Section 8. Private, Small and Medium Business One of the goals of the economic reforms proposed by The Civil Campaign Our

House is to create strong and influential middle class in Belarus comprised of individual entrepreneurs, representatives of small and medium-sized businesses, as well as highly paid employees of private companies.

The economic success of Poland, the Czech Republic, Slovakia, Hungary and other Central European countries in the 90s relied primarily on their citizens’ initiative. At that time, strict regulation of the economy was abandoned, which motivated many active people to accept the risk of engaging into private economic activity.

Unfortunately, it is widely believed in Belarus that historically our nation does not like businessmen. State propaganda, in particular, uses such an approach – just think of the phrase “lousy fleas” used by the president and the fact that Alexander Lukashenko has consistently used the word “businessmen” in conjunction with the phrase “and other scoundrels.” Apparently, in such a way the current government shows its inferiority complex and its fear of self-reliant and financially independent people, what businessmen are by definition.

Meanwhile, in order to dispel negative attitude of the Belarusians towards businessmen, it is enough to recall that more than a millennium ago Belarus was created on the trade route “from the Varangians to the Greeks.” Belarusian merchants were the builders of our country together with the dukes. Many Belarusian cities received Magdeburg rights – they achieved it just to be able to trade freely. In fact, even the word “comrade” (tovarisch) privatized by the Communists originally meant a shopping companion and comes from the word “commodity” (tovar).

On the other hand, if you look at the surveys, the degree of opposition to the profession of a businessman in the country is really high. Apparently, the reason is that we confuse different types of businessmen. Conditionally, three types can be distinguished: criminals, parasites and creators. For historical and ideological reasons, we are accustomed to call a representative of any of the types by the word “businessman.”

The first, criminal type of businessmen has stayed in our memory since the 90s. And this memory does not add appeal to this word. But the majority associates the word “businessmen” with "parasites of the economy" who build their under-the-table business through connections with government officials and security forces, of whom there are unjustifiably and catastrophically plenty in today's Belarus. These businessmen live in the shadow, they are not public figures, but their business is secured with monetary and commodity flows that are created for them by the concerned officials at all levels of the government.

Oftentimes, such businessmen are kin to those officials or have a close relationship with them (for example, they went to college together or served in the military.) These figures exist in any economy, but in Belarus their share is disproportionately high, which causes rejection.

However, for many the term “businessman” is associated with a dull salesperson on the clothing market selling Chinese cloths, who meticulously calculates every penny of profits and in reality lives not better than a factory or a construction worker. It is obviously difficult to attribute such a businessman to the famous “middle class” so beloved by economists.

There is a third type of businessmen in Belarus – people who start their business from scratch, build factories, create new jobs, produce real goods and services that people need. These people should enjoy full respect from the community. Unfortunately, this type of

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business is most likely to be exposed to harassment by the authorities. These are numerous and unnecessary taxes, bureaucratic restrictions and approvals, inflated rates for rent of state property and government services, unjustified licensing and/ or certification requirements, unfair competitive environment where products and services produced by the state enterprises are preferred.

Our House suggests radically changing the attitude of the government to businessmen of the third type turning the situation from upside down back to right way up. We are convinced that a real right-wing ideology can only be born in a third type of businessmen environment, which, oddly enough, fits into a socialist formula “from each according to his ability, to each according to his work.”

Such ideology aims at creating the most comfortable environment for implementation of initiatives and opportunities for businessmen and the rest of the community, reversing the paternalistic, even parasitical attitude of the community, setting the motion vector from distribution of bureaucratic power to production of new goods, services, ideas, and, consequently, to healthy competition, the main success criterion to which is hard work, initiative, ingenuity, rather than being close to the government and to those in power who determine market conduct rules and mechanisms of budget allocation. Our task is to create an environment in which a man with the above qualities stands in the center of the entire state system.

It is generally believed that such an environment must be preceded by the development of political institutions and civil society. Nevertheless, experience shows that when the economy becomes a primary concern, a reversed relation can be observed. While there is no massive business in Belarus, middle class (not office plankton but professionals focused on creative work and personal success) is yet to emerge, these institutions are not likely to appear – they will not be needed.

For a long time it was believed that the very right-wing ideology was not in demand in Belarus. To some extent it was not, and to some extent it was determined by absence of real creative entrepreneurship. But today it is clear not only to businessmen that the right turn – if not in politics, at least in the economy – is vitally important to us. Without it, our country runs the risk of being permanently stuck in a dead end of a “people-oriented” state with a state monopoly on literally everything and the great variety of different restrictions and unnecessary rules.

Not only experts but also high-ranking officials talk about mass production, removing barriers to business development, improving investment climate, that we need a qualitatively different growth of the economy, that the pace of development should be much higher than it is now, and that creative Belarusian business should be the engine of that development. Or, more exactly, talk the ones who understand the need to move towards a free market. And there are plenty of them in power – but for many reasons they cannot express their views openly.

The Civil Campaign Our House believes that Belarusian government, political parties and business associations should jointly develop and adopt a so-called New Industrialization Plan that would facilitate intensive development of small and medium-sized businesses, especially in the real sector and in production of goods and services. The plan should be adopted for and become the core part of the economic block of the government.

Left-wing politicians talk about how to distribute money fairly, and right-wing politicians – how to earn it, because otherwise there will be nothing to distribute. Therefore, the ideas presented in the economic program of Our House are in demand right now – when it

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has become clear that the global economic system is basically unstable, an “airbag” of the industrial heritage of the USSR has already been exhausted, and the Russian aid is not infinite and has its price.

In Belarus, economic activity regulations should be audited in depth to eliminate provisions that slow down growth of entrepreneurship and to develop and implement economy stimulating tools.

Currently, individuals and businessmen are often unable to find out the legal ceiling of their rights and responsibilities, even with the help of experts, and courts and government agencies get too often involved in issues that cannot take place but are allowed through loopholes in the legislation.

Without fair and clear legislation, without giving up control in the areas that require absolutely no legal intervention, our social and economic life will go through a painful experience. Jobs will be massively relocated to countries where business conditions are better than in our country, and young Belarusians will follow them.

Free business environment requires above all property rights protection. However, for almost two last decades the authorities deliberately have been taken actions that undermined those rights bring us back to the feudal tradition of the conjunction “power-property,” which jeopardizes the future of the country. Total denial of privatization, scandalous nationalization (in the spirit of hostile takeovers) of what has been privatized earlier, appeals to the imaginary justice and re-distribution of property in reality – all these undermine confidence of the business in the government and of the community in the business. This campaign should be stopped, legally restricting the statute of limitations in cases of privatization by three years.

Unless property rights are protected, investors will not invest in the economy. Moreover, in the absence of effective property rights protection and inability to enter into solid contracts and enforce them, the level of trust in the economic system will be low.

Property rights protection laws should clearly stipulate who has title of the property and enjoys rights to use it, as well as ensure that any abuses and violations by other business entities or the state and its officials will be prevented.

Leaders of the democratic parties, responsible media and the state authorities should by all means promote the important role of business, protect it from unwarranted attacks. Protection of property rights must be reinforced in judicial practice.

Equality of the rights of taxpayers and tax authorities should become a reality, otherwise it will be impossible to restore confidence of the business in the state. Certainly, it is necessary to strengthen fiscal discipline, but the use of tax optimization schemes permitted by the law in no way can be imputed to the business, and only to officials and the law, which, if necessary, needs to be updated in time. Taking into account characteristics and conditions of the Belarusian business after 1994, tax amnesty seems to be advisable.

We believe that in order to eliminate the existing conflict between the business and the government, both sides should express initiative. This is why The Civil Campaign Our House considers it essential to revive the concept of private-public partnership (PPP) now virtually frozen by the government, to further develop it in accordance with this economic program and, finally, to adopt a law on PPP.

So-called “subsidized privatization” should become one of the manifestations of the public-private partnership in Belarus. Its essence can be explained by an example. The government has some asset to be privatized – a small production, a farm or a shopping center in the province. A contest for investors to take part and, respectively, a Belarusian and a

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foreign investor participate. A foreign company offers $1 million for the asset, a Belarusian company – $1.1 million. The Belarusian company wins. The point is that in reality the Belarusian company had only $700,000. The remaining amount was subsidized by the local authorities on behalf of state. Nevertheless, these authorities do not get a share in the privatized asset. Instead, the Belarusian company receives the asset subject to certain obligations – for example, that it cannot sell it for the next five years, must retain jobs and invest in the development of the asset.

In addition to elimination of some existing rules, which are often unnecessary or even harmful, Our House believes it necessary to create a mechanism to protect the economy from unnecessary restrictions and new regulations. In particular, a mandatory element of any draft law assessment will be a highly standardized assessment of the law implementation costs, i.e. estimated calculation of the costs incurred as the result of the application of the law by public authorities and individuals affected by the law and the economy as a whole.

In turn, business unions and the whole business community should make serious efforts to implant among themselves the highest standards of corporate ethics, transparency and lawfulness of the national business. There should be public arbitration for pre-trial resolution of business disputes.

A separate topic is support of individual entrepreneurs operating without founding a legal entity. In our country, about 230,000 individual entrepreneurs are registered. The economic potential of this group in the labor market is huge, but over the last decade it has been carefully blocked by the state policy. The right to hire employees without limitations, a single tax rate cut three times, annual patents to carry out certain types of activity, reducing rental rates by three times in the premises belonging to the government, reducing the administrative burden at least by half, abolition of unjustified restrictions (technical regulations) of the Customs Union will significantly liberate individual entrepreneurs.

As a result, according to experts within about two years they will create 300,000 new jobs. These jobs will be occupied both by youth and lay off employees from state-owned enterprises. Individual entrepreneurs will create new jobs, mainly in the field of trade and public catering, domestic service, agriculture, transportation, vehicle maintenance, hotel and roadside service.

The government should encourage transition of individual entrepreneurs into the category of small businesses. In Belarus, there are about 85,000 small businesses today. Comprehensive measures to improve business environment, de-monopolize the domestic market, reduce tax burden by at least 40%, reduce administrative burdens, price liberalization and revenues amnesty – all these measures will allow small businesses to grow, quickly ramp up their activity and in three years create about 400,000 new jobs in Belarus. They will be occupied by laid off employees of the local state-owned enterprises, young and migrant workers from other regions and cities. Small business of the country will realize its potential in services, agriculture, agro-processing, light industry, wood industry, software and training infrastructure development, medical treatment and leisure.

Let us conclude this section of the program citing the late Zhanna Grinyuk: “The mentality of the partnership in Belarus is not formed yet. However, this is the basis for sustainable development. We still do not trust each other crossing fingers behind the back. Everyone – the business, the state, the people – pursues its own interests... Therefore, the country needs a new leadership that will integrate us and direct us to solving common problems.”

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