Belarusian authorities interested in limited cooperation with Poland
Belarus’ authorities have somewhat intensified diplomatic relations with Poland aspiring to "neutralize" Warsaw’s harsh stance on the Belarus-EU settlement, i.e. without changes in Belarus’ policies. Further development in the Belarusian-Polish relations will be determined by the general state of affairs between Minsk and Brussels, as well as by the political situation ahead of the 2015 presidential campaign.
After a long break, the Belarusian-Polish intergovernmental commission for cross-border cooperation held a meeting in Minsk.
The meeting has not resulted in any progress regarding the implementation of the agreement on small border traffic, however it fits into Belarus’ recent policy aiming to adjust the Belarusian-European relations.
After a meeting in Warsaw on July 10th – the parties discussed Polish minority issues among other things and signed an intergovernmental agreement on cooperation in education – the Polish Foreign Ministry made an optimistic statement about the future of bilateral relations.
Meanwhile, Belarus’ Constitutional Court has ruled that the amendments to the law prohibiting rescuers and military men receiving and using the “Pole’s Card” was in line with the Belarusian Constitution. This decision could be an echo of Russia’s annexation of Crimea and authorities’ fears of power structures becoming less loyal to the authorities. The Belarus’ authorities know very well that many Ukrainian military servicemen sided with the Kremlin during the Crimean crisis this year; in addition, in recent years, Russia actively issued Russian passports to residents of Crimea.
Today the Belarusian authorities not to politicise the small border traffic issue, which was the case during the escalation in the Belarusian-Polish relations in 2011-2012. Deputy Foreign Minister Alexander Guryanov underscored that the agreement was not implemented due to some technical difficulties: “Belarus and Poland have large scale cross-border traffic in goods and passengers. Enabling small cross-border traffic should not create a collapse”.
Meanwhile, the small border traffic agreement has not yet been signed mainly due to economic reasons. The Belarusian authorities are not willing to increase imports of consumer products by the population amid languishing foreign reserves (Belarus managed to replenish the international reserves only in late June - exclusively thanks to a Russian loan).
In addition, due to Belarus’ increased dependence on Russia, the Belarusian authorities cannot move in the wake of the Kremlin’s foreign policy, which negatively affects the Polish-Belarusian bilateral relations. For example, in March this year, Belarusian embassy’s Military Attache was expelled from Poland following accusations of espionage in favour of Russia.
The Belarusian authorities have not changed their domestic policies (the level of repressions against the opposition remains “stable”), however they have suspended pressure on the members of the unregistered Poles’ Union, as well as other actions, which could be perceived in Poland as the repression against the Polish minority.
Belarus is not interested in deteriorating the Polish-Belarusian relations in the near future, given their role in unconditional settlement of the Belarus-EU relations. However, anticipating a breakthrough in bilateral relations would be premature, because the ongoing state of cooperation with Warsaw is the most appropriate for Belarus.
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.