The Foreign Ministry of Belarus increased its activity in the West
Last week, officials from the Ministry of Foreign Affairs held a number of public events in Belarus and the EU, namely, in Germany, Austria, the Netherlands, Serbia and Latvia.
Minsk is actively attempting to resume dialogue with the West. The character of Belarusian statements and suggestions is becoming more constructive; however, nothing is said about the fulfillment of two major conditions: the release and rehabilitation of political prisoners.
The rise in diplomatic activity in the West is most likely explained by the fact that IMF mission started work in Belarus on October, 18. Belarus is highly interested in resuming cooperation with the Fund (at least on the issue of debt restructuring), which is a ground for diplomatic activities, although mostly of economic character.
Therefore, it is predictable that activities of officials from the Foreign Ministry are limited to economic cooperation. In the period from October 15-19, a representative from Belarus, Mr. Voronetsky, took part in a conference of member states of United Nations Convention against Transnational Organized Crime. He also participated in the annual meeting to review the fulfillment of economic and environmental commitments of the OSCE member states in Vienna on 16-17 October. On October 18 – 20, 2012 Deputy Minister of Foreign Affairs of the Republic of Belarus, Elena Kupchina, went on a working trip to Germany. On October 17, a Belarusian Economy Day was held in the German city of Friedrichshafen. On October 18, in the Dutch city of Tilburg the ambassador of Belarus, Mrs. Elena Gritsenko, had a meeting with law students of Tilburg University. Finally, on October 15-19, the Latvian town of Jelgava played host to a Week of Belarusian culture.
These events should be viewed as domestic activities of the Belarusian Interior Ministry. In particular, on October 15, Press Secretary of the MFA demonstrated a mild reaction to the decision of the EU Foreign Affairs Council to extend sanctions against Belarusian authorities and business. He summoned the EU “to abandon its sanctions-based mentality and make an effort, in turn, to restore the atmosphere of mutual trust”.
On October 19 in Minsk, Deputy Foreign Minister, Alexander Guryanov, and Director of the National Agency of Investment and Privatization, Dmitry Klevzhits, had a meeting with directors and representatives of trade and commercial departments of twenty foreign embassies accredited in Belarus. However, as anticipated, officials from the Belarusian Foreign Ministry ignored political questions, which is the main claim of the EU and USA against official Minsk. Thus, at a press conference on October 19, MFA Press Secretary Andrei Savinykh reproached the West for having a policy of double standards in regard to Belarus and insisted that Belarus should have the right to transition to democracy gradually and independently. In other words, this implies that President Lukashenko is still not ready to make the main concession, namely to release (and rehabilitate) political prisoners.
It should be expected that Belarusian diplomatic service will continue its activity to establish economic relations with the West. Meanwhile, the solution of the main political issue is under the authority of Presidential Administration and Alexander Lukashenko personally.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.