President Lukashenko is after nomenclature’s support
President Lukashenko will use the local elections to strengthen the nomenclature’s loyalty by giving them hope for greater influence in politics. The issue of creating the ‘Party of Power’ in Belarus has been raised from time to time, most often ahead of the national election campaigns. However, having such a party would be at odds with the current cult-of-personality system, which could only be transformed following a serious systemic crisis.
President Alexander Lukashenko, when appointing local executives, said that he was not against if a leading pro-governmental political party emerged in Belarus.
For a while now, President Lukashenko has been mulling over setting up the ‘Party of Power’, which would allow him to ensure loyalty of mid- and low-ranking officials. It is worth noting that in recent years, mid- and low level executive bodies have suffered from staff shortages and poor management, which, for example, resulted in derailed economic modernization plans.
Leaders of the ‘Belaya Rus’ quango do not hide their ambitions to transform the organization into a political party. As a rule, Lukashenko’s statements about the need to institutionalize the nomenclature’s interests coincide with national political campaigns or with the deepening socio-economic crisis.
President Lukashenko authorized the establishment of ‘Belaya Rus’ in 2004. The aim of its existence was to support him during the referendum to remove quantitative restrictions on presidential terms. Belaya Rus’ first HQs were in the Grodno region, considered as one of the most rebellious regions.
De facto, the issue of ‘Belaya Rus’’ transformation into a political party appears on the agenda each time before election campaigns start. However, as soon as the political cycle completes its round, the President gradually loses his interest in the ‘Party of Power’. In addition, the ‘Belaya Rus’ issue often coincides with Belarus resuming her Western policy.
Nevertheless, despite some signs of crisis in the governance, the ruling elite have full control over the situation in Belarus. President Lukashenko remains the most influential politician and his electoral rating remains at 34.8%.
Meanwhile, ‘Belaya Rus’ is not an institution which has a significant impact on people’s moods. According to IISEPS’ December poll, only 6.6% of the population would vote for Belaya Rus candidates, even fewer than for the ‘Tell the Truth!’ or ‘For Freedom’ movement candidates.
President Lukashenko will continue to delay the creation of the ‘Party of Power’ in Belarus, being careful not to delegate any authority to nomenclature or create any alternative sources of power. In times of crisis, President Lukashenko will rely on the use of force. However, ahead of the presidential campaign, the President will use various means to enhance the nomenclature’s loyalty, including populist rhetoric about the creation of the ‘Party of Power’.
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.