Belarus counts on Austria and the OSCE
On 26 August the president appointed Valery Voronetsky as Extraordinary and Plenipotentiary Ambassador of Belarus to the Republic of Austria, Permanent Representative of Belarus to International Organizations in Vienna
and Extraordinary and Plenipotentiary Ambassador of Belarus to the Republic of Croatia in combination.
President Lukashenko seeks to restore and strengthen old ties with Austrians, who could provide a new platform for restoration of a dialogue with the EU. He also removes the closest subordinates of the Foreign Minister Martynov, who have lost confidence by the head of state after the presidential campaign of 2010. Resignation of Martynov himself is also possible in the medium term.
Following the scandal concerning the provision of financial information about human rights activist A. Bialiatski to Belarus and arrest of the latter, the restoration of a political dialogue between Belarus and the EU, solicited by the authorities of Lithuania and Poland, is questionable in the short term. Belarusian authorities are forced to seek for the new platforms to resume a dialogue, or at least to maintain the current level of cooperation with the EU.
Appointment of an experienced and respected Foreign Ministry official Valery Voronetsky, who had previously served as Ambassador to Belgium (1997-2000) and to the Slovak Republic (2002 - 2006), as Ambassador to Austria implies that Minsk hopes to strengthen cooperation with Austrian businesses (primarily in the banking and telecommunications fields), and to improve cooperation with other EU countries, in particular, with the business community of Germany, who often expressed interest in the Belarusian market.
Moreover, Vienna hosts the OSCE Secretariat and Belarus is interested in maintaining relations with this international organization. Earlier this year the Belarusian Foreign Ministry said that regardless of the closure of the OSCE Office in Minsk in March 2011, Belarus intended to continue cooperation with this organization without “mediators”, directly with the Secretariat in Vienna.
Transfer of Valery Voronetsky from the position of Deputy Minister of Foreign Affairs to the Embassy service implies weakening of the position of Foreign Minister Sergei Martynov. The latter was one of the organizers of talks between President Lukashenko and the foreign ministers of Poland and Germany on the eve of the presidential elections in Belarus in 2010, however, elections were held according to a different scenario, and the efforts of Minister Martynov were in vain, resulting in the increased distrust of him by the president.
Finally, recently Martynov’s name appeared in connection with a scandal about the likely involvement of Belarus in the arms trade schemes with Pakistani terrorists: a fragment of correspondence between the Minister and his Syrian counterparts has been published by the hacker group Anonymous. Even if these documents are proved to be fakes, the reputation of the Belarusian Foreign Ministry has already been damaged and needs to be improved. The best way to do it is to make new appointments.
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.