Enhancement of the administrative control

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April 22, 2016 18:05

Decree No 114 of February 27, 2012, empowered the local authorities and the Pricing Policy Department of the Ministry of Economy of Belarus to organize ad hoc inspections of enterprises “in order to timely detect and suppress violations of anti-monopoly legislation”.

Moreover, such inspections could be organized regardless of the grounds stipulated in the legislation. The decree envisages severe penalties for violations of antitrust legislation and unfair competition.

The authorities believe such ad hoc inspections will allow them to detect and deter cases of violation of the legislation, including facts of price collusion, violations of prohibitions, and (or) restrictions on the sale of goods (works, services) introduced by the government in some administrative regions of Belarus. The Decree also envisages strengthening of the penalties for violation of the anti-monopoly legislation.

Therefore, any manufacturer could be accused of a monopoly (if share of sales is more than 30%) therefore tightening of the legislation could be interpreted as an attempt to treat high prices and inflation with increased repression.

This is a new/old logic of the authorities: instead of liberalization, privatization and the simplification of the business environment, opening markets to foreign competition, they introduce new restrictions and new (ad hoc) inspections. It contradicts the generally declared intention to liberalize the economy and casts the country two years behind in its attempt to liberalize the pricing policy.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

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.

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