Foreign Ministry risks being trapped in own initiative

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April 22, 2016 18:24

On January 18, Belarus’ Foreign Minister Vladimir Makey met with the heads of the EU diplomatic missions, the Vatican, the U.S. and Switzerland.

Frequent meetings of the Belarusian Foreign Ministry leadership with diplomatic representatives of Western countries should be considered within the rigid and unchanging frameworks set by Alexander Lukashenko. The latter is still not ready to fulfill the main requirement - the release and rehabilitation of political prisoners. 

Following the appointment of Vladimir Makey as Foreign Minister in August 2012, the Ministry has significantly increased its publicity, especially where it concerns Western policies of Belarus. Numerous press releases of the Foreign Ministry can really create the impression of a careful preparation for a diplomatic breakthrough in the relations between Belarus and the European Union and the United States. 

In particular, over the last 4 months the Belarusian Foreign Ministry leadership met with the US Charge d’Affaires in Belarus Mr. Goldrich at least three times. A month ago, Mr. Mackay met with Director of the department for Russia, Eastern Partnership, Central Asia, regional cooperation and the OSCE of the European Union External Action Service Mr. Wiegand in Minsk. On January 18, Deputy Foreign Minister Mr. Kupchina held ministerial consultations with the Lithuanian delegation, during which the preparations for the Eastern Partnership Summit to be held in Vilnius in November 2013 were discussed.

However, this active and impressive PR-campaign by Belarusian MFA should be regarded within the existing rigid political framework defined by President Lukashenko. In particular, the Foreign Ministry and personally Minister Makey are incapable of solving the main political conflict between Belarus and the West over the release and rehabilitation of political prisoners. In turn, a number of policy statements made by Western diplomatic representatives in December 2012 (Czech Foreign Minister Schwarzenberg, US Charge d’Affaires Goldrich) demonstrated that Minister Makey failed to soften the EU and US positions in this conflict.

Thus, the Belarusian Foreign Ministry, in a sense, is in a deadlock situation: the appointment of Makey as Foreign Minister simply increased Ministry’s international and public activity and visibility, but on principle incapable to achieve the desired political effect - as the issue of the release of political prisoners is not within the MFA competence

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

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.