New Lukashenko appointments: change in personnel, no change in direction
Last week, President Lukashenko appointed several people who have made their careers under his rule, suggesting that the authorities will continue with their authoritarian rule, but gradually stop relying on their Soviet past. The new appointments have confirmed the overall trend in how the power is distributed within the ruling Belarusian elite. The state’s relations with the opposition and the civil society will remain hostile.
Last week, Alexander Lukashenko made several appointments in his top brace. Yuri Senko was appointed State Customs Committee Chairman (replacing Aleksander Shpilevsky, who headed the SCC for years). Andrei Shorets is to replace Nikolay Ladutsko as the Minsk City Executive Committee Chairman. Ivan Golovaty was appointed as Belaruskalij CEO (replacing Kiriyenko). In addition, Vladimir Amarin became the new Finance Minister (Anrei Kharkovets resigned in July 2014).
All the appointees have made their careers during Lukashenko’s rule. Recently, for natural reasons, the number of top managers who made their careers after the Soviet Union collapse has increased. Despite the stylistic and structural similarity of administrative practices in Belarus after 1992 and in the Byelorussian SSR, the "new" managers are mostly indifferent to the communist ideology and have a different set of values. Nevertheless, that does not mean they value a less authoritarian governance model.
Those appointed last week will be responsible for managing financial flows. Most often, such appointments in Belarus are the result of the backstage fights among influence groups. The new appointees do not belong to long-established influential groups, which may indicate a compromise or redistribution of power in influence groups.
All the newly appointed officials come from within the system, thus they would be interested in maintaining its basic parameters, including the authoritarian rule and domination of the state in all spheres of life. No changes should be anticipated in this regard.
In addition, the authorities’ actions against civil society representatives mean that the state will continue to exclude civil society and the opposition from public life. The deportation of human rights activist Yelena Tonkacheva and the arrest of a "National Referendum" activist, Vladislav Koshelev, confirm this trend.
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.