Outcomes of the year: performance targets not met
On 27 December 2011 a Council of Ministers meeting was held to discuss the preliminary results of the socio-economic development in 2011, and implementation of 2012 tasks. All in all, outcomes are disappointing, while the major “growth factors” in 2012 would be the most failing ones in 2011: FDI, export growth and import substitution.
In the end of 2011 the Eurasian Development Bank (EDB) made a second transfer of $ 440 million to Belarus within the agreement with the EurAsEC Anti-Crisis Fund. This was possible following the fulfillment by Belarus of the main preconditions: the President of Belarus signed a Decree on the transfer of non-core assets of the National Bank of Belarus and on the increase in December 2011 of the National Bank rates on instruments to provide liquidity in the interbank market by 5 %. The third tranche ($ 440 million) the Belarusian side expects in the end of February 2012.
The plan on FDI in 2011 on a net basis was a failure: out of planned USD 6.4-6.5 billion on a net basis, de facto Belarus received only $ 1.3 billion, excluding the sale of shares of Beltransgaz. The negative trade balance in January-November 2011 declined to USD 376 million dollars (minus USD 4792 million). Therefore the main problem of the Belarusian economy, i.e. the imbalance between the inflow and outflow of the currency in the country was not resolved. The funding gap was closed by Russian loans and the sale of 50% stake of Beltrangaz.
However, regardless of the failure, the government intends to continue its efforts regarding administrative regulation and control of imports. The State Control Committee has already prepared a draft presidential decree, which envisages tightening of the rules of purchase of imports. The State Standardization Committee has been tasked to prepare a draft regulation to restrict the consumption of imported materials; Ministry of Construction and Architecture was tasked to elaborate the standard costs of construction. Also it is envisaged that import substitution should improve, although there were no improvements in this regard in the course of previous years.
In order to combat the high inflation, the authorities will strengthen control over consumer prices in the country. Therefore as of 1st January 2012 Belarus set the maximum retail selling prices for broiler chicken meat and eggs.
Therefore 2012 will be marked by increasing interference of the central and local authorities in business activities, resulting in increased costs and stimulation of the prices growth. Authorities will spend the budget money on artificial support to state-owned enterprises (projects), which will result in reduced efficiency and competitiveness of the economy as a whole.
The liquidity crisis will be “put out” by new borrowings. However, the third tranche envisages fulfillment of 11 different additional preconditions (monetary, fiscal and other measures based on the results of 2011) and there are reasons to believe it will be delayed.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.