Construction of a nuclear power plant: more questions than answers
Russia and Belarus signed an agreement on the construction of the first nuclear power plant in Belarus. So far the agreement is only a declaration of intent and the fate of the Belarusian NPP has not yet been defined. Russia wants to be the co-owner of the Belarusian NPP, which is unacceptable for Belarus.
The “Atomstroiexport” and the “Management of a Nuclear Power Plant” (Belarus) signed an agreement on the construction of the first nuclear power plant in Belarus. Contractual arrangements define the basic provisions of the principal contract for the construction of two nuclear power units with a total generating capacity of it sB-941 reactors of up to 2400 megawatts in total. Atomstroiexport, a subsidiary company of Russia`s Nuclear Energy State Corporation (Rosatom), is to bear full responsibility for the project. The AES-2006 design has been selected for the plant.
Belarus expects to receive a USD 9 billion preferential loan from the Russian government for the construction of the NPP and infrastructure. Belarus would like to receive the loan for 25 years with deferred payment until the completion of the construction of the plant.
However, regardless of the signed agreement, the final cost of the project is still unknown. Also, neither party took the responsibility to voice the approximate dates of signing of the loan agreement. Terms and conditions of financing of the project have not been agreed either. Neither the schedule of expenses, nor the ditch has been prepared to the moment (though promised by summer).
Belarus expects to receive a USD 9 billion preferential loan from the Russian government for the construction of the NPP and infrastructure.
Sources in the Ministry of Energy say that there will be no final project cost, that Russia will open a credit line for Belarus in this regard of up to USD 10 billion. Russia wants to become the owner of the Belarusian nuclear power plant within the provided funding however, it is unacceptable for Belarus. The delay in signing of the loan agreement will affect the signing of all other contracts associated with the construction (e.g., concerning the equipment with a long production cycle (36 months or more)), which could significantly change the schedule of entry of the NPP in operation.
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.