Belarusian-Vietnamese relations as example of Minsk's foreign policy strategy

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July 04, 2017 11:04

In relations with other states, the Belarusian authorities are primarily after own benefit. Loyalty to foreign policy partners is viewed primarily as a ritual, not a foreign policy imperative. The absence of a value-based foreign policy strategy creates good prerequisites for the growth in exports, including military and dual-use, but precludes the formation of allied relations.

During the visit of Vietnamese President Chiang Dai Kuang to Belarus, among other issues, the parties have discussed bilateral cooperation on security and defence. Belarus has expressed interest and readiness to deepen relations in this field. That said, Minsk has not been confused by the fact that Hanoi is a regional rival of Beijing. Moreover, China and Vietnam have territorial disputes, periodically threatening to develop into armed confrontation.

Since the times of the Soviet Union, Vietnam has been a traditional partner for the post-Soviet space. Hanoi has become one of the largest customers of the Belarusian military-industrial complex, primarily in the air defence field. Minsk hopes that Vietnam would lobby Belarus’ interests in South-East Asia. This is probably why Belarus is ready to cooperate with Vietnam on almost any sensitive issue, including the transfer of military technology and the creation of joint ventures.

Minsk appears to ignore the specifics of Sino-Vietnamese relations. Beijing (which is otherwise known as a strategic ally in Minsk) and Hanoi remain many tough antagonists, including because of territorial disputes in the South China Sea, which Vietnam calls the East-Vietnamese Sea. Apparently, the Belarusian leadership is firmly confident of its ability to become a strategic partner for both sides in the confrontation, simultaneously.

Conventionally, Belarus’ foreign policy is an extremely pragmatic one. Minsk in most cases ignores the contradictions between its partners, seeking to withdraw them from the bilateral agenda as far as possible. The lack of value component in relations with other states and Belarus’ readiness for broad cooperation in the security field, including the technology transfer, is a competitive advantage of the domestic military-industrial complex. It creates good prerequisites for the growth in exports of military and dual-use produces. However, winning in one, Belarus loses in another: pragmatism on the verge of unscrupulousness prevents Minsk from forming truly allied relations with its partners.

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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.