Nurtured by the government in greenhouse-like conditions for more than 10 years, Horizont and Vitsyaz face a tough competition from TV makers in the neighboring countries. The new Value-Added Tax (VAT) payment mechanism introduced last year disrupted the companies' traditional distribution arrangements in trade with Russia. Vitsyaz was placed 42nd among the country's top taxpayers in 2004 accounting for 0.2 percent of the total budget revenues. It went down to 50th spot in 2006 with 0.12 percent. Horizont plunged from the 41st spot (0.22 percent) to 122nd (0.03 percent).

It is common knowledge that Belarus' economy is strongly dependant on trade with Russia. Although Russia's share shrunk in the first six months from 48.1 to 47.7 percent, the dependency is unlikely to reduce in the foreseeable future. The government has failed in its declared bid to diversify external markets.

The widening trade gap may be a sign of crisis in the real sector and on the internal market. The government's import substitution programs are ineffective. The Belarusians still prefer to buy imported goods. All short-term benefits have been derived from the new Value-Added Tax (VAT) payment mechanism in trade with Russia. There are shortages of competitive Belarusian goods on regional markets. Programs to support large industrial and agricultural exporters have not produced the desired effect as the ratio of processed goods on exports has been shrinking.

The Ministry of Trade uses funds accumulating in its innovation fund to meet unrelated expenses. The example is indicative of how government agencies manage their finances. Money from targeted funds is often channeled to companies with links to officials.

The Belarusian authorities introduce identification marks for footwear and some other goods in an effort to protect market from cheap poor-quality imports. The introduction of identification marks on December 7 can result in the disappearance of cheap goods of good quality from shopping centers and outdoor markets. The number of "individual entrepreneurs" can decrease because the sale of goods without identification marks is punishable by a fine of 20 times the Base Rate (31,000 rubels at present) and the confiscation of goods and proceeds from their sale.

Alyaksandr Lukashenka directed that scientists, economists and bureaucrats look into the possibility of reducing Belarus' dependence on energy imports from Russia. The National Academy of Sciences, Energy Ministry and Energy Efficiency Office have submitted two papers entitled the Concept to Ensure Energy Security and Reduce Economic Dependence of the Republic of Belarus and the Comprehensive State Program for the Modernization of Belarusian Energy System Facilities, Energy Efficiency and an Increase in the Consumption of Domestic Fuels and Energy Resources for the Period from 2006 to 2010. The Belarusian leader issued Edict N399 on August 25, 2005 to approve both papers.

Being aware of the impeding gas price hike, the Council of Ministers on June 7 adopted a program of the development of the country's housing and utilities sector for the period between 2006 and 2010. For some reasons, the government decided not to publish the text of the program. Let us state what the authorities wanted to conceal from the public in the so important economic matter.

Now that it is increasingly hard to trust official statistics, analyzing absolute indicators is a thankless job. Nonetheless, we should take note of four economic indicators of the first six months of the year. They reveal not only the poor quality of short-term planning but also the government's economic priorities.

Gas price talks between Belarus and Russia overshadowed the uncertainty over oil delivery and transit conditions in 2007. Striking an oil deal with Russia may also be difficult.

Russian experts have persistently advised their government against providing unconditional support for the regime in Minsk. The Belarusian leadership, however, has managed to secure lucrative oil, arms and other deals with the help of lobbyists and partners in Moscow.