Two tracks for a dialogue with West
In relations between the Belarusian authorities and the Western countries there are attempts either to mitigate the conflict and to bring together negotiating positions at the top level, or to increase technical cooperation, i.e. at the level of professionals and experts, if obstacles to a political dialogue are not removed.
On January 21st, President Lukashenko met with a group of American political scientists in Minsk, including two Jamestown Foundation representatives.
President Lukashenko met with American political scientists behind closed doors. One of the meeting participants - Professor H. Joffe from Redford University – spoke to the media about raised issues. According to what he said, Lukashenko said nothing new during the meeting, but listened to the American political scientists’ advice to ‘improve’ image.
Developments of the past 1.5 months allow some experts to talk about rapprochement negotiations between the Belarusian government and its Western partners from the EU and the U.S. The most noticeable were the following factors: 1. Belarusian Foreign Ministry’s increased activity after Makey’s appointment. 2. Lukashenko makes public statements about the necessity and even inevitability of relations’ normalization, while he himself takes an uncompromising stand. 3. Discussions resumed about the restoration of relations between Belarus and the Council of Europe.
On 22nd January, CoE Secretary General Mr. Jagland said that CoE was essentially ready for a constructive dialogue and anticipated Belarus’ moratorium on the death penalty, and the decision about the fate of political prisoners. Undoubtedly his statement was a public response to the visit of the CoE delegation, headed by the CoE Secretary General’s office head Mr. Berge to Minsk on January 14th – 15th, 2013.
It will be noted that on January 24th, former vice president of the European Commission Mr. Verheugen spoke in Minsk. He presented an educational programme for young government officials and community leaders from the Eastern European countries of the Carl Friedrich Goerdeler College, which he leads.
In the broad information space Belarusian authorities adhere to the hard anti-Western stance. In late 2012 the national television showed a documentary about European dialogue on modernisation with Belarusian society, which aimed at experts and government executives. The documentary was highly critical and revealed a conspiracy by the West aiming to ‘conquer’ Belarusian elites via partnership and dialogue programmes.
President Lukashenko perceives such expert-level dialogue with mid-ranking officials extremely negatively – he sees a threat to his own power and regards it as an attempt to solve important issues by-passing him. Odds-on, de facto participation in this dialogue will be furnished with many bureaucratic procedures, hampering the participation of Belarusian participants.
Clearly, the potential resumption of a dialogue and resolution of the political conflict with the West are actually discussed at the highest level, but the principled decision is still pending with the president. A careful probing of the soil for potential gains and losses is ongoing on both sides. In the meanwhile, the state ideology and propaganda media machine operates by inertia, following the previous instructions about Belarus’ tough position in the conflict.
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.