India shows interest in Belaruskaliy
Besides, Indian Potash Ltd is interested in a long-term agreement on the supply of potassium chloride from Belarus. On August 27, 2011 the Indian Governments and Belarus signed a protocol concerning the examination of the possibility to conclude a long-term contract for buying potassium and India’s equity position in Belaruskaliy (this concerns a minority interest).
In aletter from the Indian Minister, it is stated that “within the implementation of the protocol the IPL takes on long-term responsibilities to buy Belarusian potassium and the IFFCO will be involved in the conduct of due diligence in relation to the possibility of purchasing a share of Belaruskaliy”.
The IPL company that supplies more than 60% of the Indian potassium market is a strategic partner of the BPC (Belarusian Potassium Company), an exclusive Belaruskaliy and Uralkaliy production exporter. India covers its demand in potassium fertilizers fully due to import, purchasing about 5 mln. tons of fertilizers annually. That is why the Ministry urges market players to buy potassium assets and create joint ventures with fertilizer producers abroad.
In our opinion, the probability that Belaruskaliy shares will be sold to residents of India seems low, as a minority interest will not allow them to influence the pricing and merchandising policies of the Belarusian enterprise. However, it should be admitted that the financial capabilities of the Indian Government are now substantial (by April 27, 2012 the Indian gold and foreign currency reserves reached USD295.361 bln.).
For reference. According to Belstat the production of potassium fertilizers in Belarus in the first quarter of 2012 decreased by 12.1% to 1.269 mln. tons compared with the first quarter of 2011. This was caused by the decreased demand for potassium fertilizers on foreign markets.
Thus in January-February 2012, Belarus abridged the export of potassium fertilizers compared with the same period of the previous year twofold to 377.2 thousand tons. In monetary terms in January-February of the current year the export supplies of potassium fertilizers dropped by 40% to USD285.581 mln. the average potassium fertilizers price grew in January-February 2012 compared with January-February 2011 by 22.1% to USD757.1 per one ton.
JSC Belaruskaliy is one of the world’s largest producers of potassium mineral fertilizers. All 100% of shares belong to the Government. The enterprise functions on the basis of the Starobin potassium salts deposit and comprises four mining departments, auxiliary shops and service subdivisions. It employs 18.589 thousand people. The share of the enterprise in world export exceeds 16%. The production is supplied to more than 50 countries. Belarusian Potassium Company deals with all exports.
Belarusian Potassium Company is an exclusive supplier of potassium fertilizers produced by JSC Belaruskaliy (Soligorsk) and JSC Uralkaliy (Perm region, Russia) to foreign markets. The BPC was established in 2005. Shareholders of the company are Belaruskaliy (45%), Belarusian Railway (5%) and Uralkaliy (50%). The BPC is the largest supplier of potassium fertilizers on the world market the company’s share makes up 42% of the world market volume.
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.