Staff reform of the Interior Ministry
Appointment of an ex-KGB official as Deputy Interior Minister should be regarded as strengthening of the power elites close to Viktor Lukashenko, the eldest son of Belarusian President. It is anticipated that Mr. Shunevich will take over the office of Interior Minister Kuleshov shortly.
On 17 January the President appointed the former Head of the Anti-Corruption and Organized Crime Department of the KGB Mr. Shunevich as First Deputy Minister of Internal Affairs - Chief of the Criminal Police.
The statement of Lukashenko, which he made while appointing the new Deputy Minister of Interior and the situation inside the Ministry itself, implies there is a high degree of probability of the imminent resignation of the current Minister Kuleshov. According to Alexander Lukashenko, Deputy Shunevich should focus more on “serious work”. During the appointment of Mr. Shunevich, Minister Kuleshov was on a business trip to France.
Kuleshov’s disengagement from the fight for the fate of his closest subordinates implies that his positions in the Ministry are extremely weak. On 16 January in France, the Minister Kuleshov learned about the controversial resignation of his Deputy Oleg Pekarsky, who was fired from the internal affairs for discredit of the rank. In December 2011 another Deputy Minister Mr. Poluden was arrested on corruption charges. At that time Minister Kuleshov was in a hospital and since then he made no comments about the situation in his Ministry.
Appointment of an ex-KGB official as Deputy Interior Minister with a view to become the Minister should be considered as strengthening of the power elites close to Viktor Lukashenko, the eldest son of Belarusian President. Until 2007 Shunevich worked for the MIA however soon after his transfer to the KGB he made a career. Loyalty of Shunevich to the KGB Chairman Zaitsev, who, in turn, is close to Viktor Lukashenko, implies that the Interior Ministry may soon fall under the control of Viktor Lukashenko.
After the reform of the Belarusian law enforcement bodies and the launch of the Investigation Committee, the control over the MIA implies, above all, the opportunity to control the actions of military police units. In political terms, it means that potential street protest actions would be suppressed harshly, but nothing more.
The new balance of powers in Belarus implies the strengthening of the role of Viktor Lukashenko and his environment. However, unlike some media assessed, there are no reasons to talk about the “reign of Viktor”. In today’s Belarus the most “valuable” source of power lies within the Investigation Committee, which has monopolized the right to investigate corruption cases and is controlled by President Lukashenko.
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.