Updated 2009 solution to 2013 growing stocks problem
On May 24th the country’s leadership ordered to sell stocks of agricultural machinery at a significant discount.
The problem with growing stocks is due to wrong managerial decisions in the deteriorated international market situation. Recent governmental decision has enabled the state enterprises heads to use market mechanisms to sell illiquid products. It can be noted that the government failed to learn its lesson from the analogous situation in 2009.
In January – April 2013 stocks’ growth was BYR 11.2 trillion and on May 1st, 2013 the total volume of unsold products at industrial enterprises was BYR 33.3 trillion, equivalent to USD 3 860 million. The stocks’ growth was due to government demands to meet the set performance targets in industrial production, regardless of the changes in the international market situation. The sharp drop in demand for Belarus’ products against the preservation of production volumes resulted in stocks’ growth, working capital outflow and companies’ financial situation deterioration.
Private enterprises have the flexibility to respond to sales crisis by reducing the staff, reorienting the production or temporary suspending the production. Sometimes they cut prices to sell the accumulated products. State enterprises are limited in their means because of possible charges by the inspection bodies: for instance, sales discounts might be regarded as damaging the state on a large scale and may result in criminal charges against an enterprise’s head. Recent regulation gives certain freedom to state enterprises’ managers to use market mechanisms to respond to market situations, but also sets certain limits on the discounts’ size and by product.
Government’s measures in 2013 implemented to address the growing stocks issue, exactly reproduce the post-crisis situation in 2009, when in order to preserve the production rate growth (against the background of international decline in industrial production) export credits were broadly issued, interest rates were offset to foreign buyers of domestic products, housing construction volumes were increasing and government programmes were adopted to stimulate demand for domestic equipment by supplying it to agricultural enterprises on credit. Four years later, Belarus’ leadership uses exactly the same means to solve the existing problems, instead of trying to eliminate the causes, namely, the limited powers of state enterprises managers to respond to the crisis in foreign markets.
Thus, on the governmental level, there was no in-depth analysis of the 2009 events. Belarusian economy repeated all its mistakes from 2009 and drew no conclusions, which, in turn, resulted in similar problems and consequences. Alternatively, the government can devalue the national currency, but as practice shows, this measure is temporary and only fixes problems in the short-term, without affecting the state management system, where the problems are rooted.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.