LDPB connections in Russia have no impact at home
Among Belarusian parties, the Liberal Democratic Party maintains the closest contacts with Russia about policy-relevant issues. However, the party’s influence in Belarus is minimal: vertical control system, established by Lukashenko, effectively neutralizes all party’s attempts to benefit from its external policy assets.
On November 5th, Liberal Democratic Party delegation, headed by Deputy Chairman Oleg Gaidukevich, took part in the VII Congress of the People’s Party of South Ossetia in Tskhinvali.
The LDPB traditionally maintained a close working relationship with the Liberal Democratic Party of Russia and - at least at the rhetoric level – is in favor of closer cooperation between Belarus and Russia. In particular, LDPB Chairman Gaidukevich previously advocated for the need to recognize the independence of South Ossetia and Abkhazia, as well as for the introduction of the Russian ruble in Belarus. In South Ossetia LDPB concluded a cooperation agreement with the People’s Party of South Ossetia, as well as the Russian Liberal Democratic Party.
However, the level of bilateral cooperation between the LDPR and LDPB is not high. For example, according to the Party press service, during the visit on October 29 to Moscow, LDPB Chairman Sergey Gaidukevich and his Deputy Oleg Gaidukevich met only with Deputy Chairman of the LDPR Ovsyannikov, not with the Party’s Chairman Vladimir Zhirinovsky or other Russian politicians.
In turn, inside Belarus LDPB statements about the single currency, recognition of the Caucasian republics, and plans for the 2015 presidential election do not have any political effect. For example, the party was de facto barred from the last two election campaigns (parliamentary in 2008 and presidential in 2010), and in the 2012 parliamentary elections, LDPB candidate Mel’nikov had lost the race in the Navabelitski District of Gomel, even though there were no other candidates (according to official data, the majority voted against the only candidate, which was nonsense for the Belarusian elections).
In turn, the LDPB cannot counteract such arbitrariness of the Belarusian authorities. Moreover, the party’s influence is decreasing. In particular, in August Oleg Gaidukevich (son of party’s Chairman Sergei Gaidukevich) left his job as Chief of the Frunze district police department of Minsk and was appointed Deputy Chairman of LDPB. In March 2012, Gaidukevich’s Deputy Chairman Kotsarenko was arrested on corruption charges. Back then he chaired “Tekhnobank’s” Supervisory Board. He is under investigation until today. All these facts point to the weakening of the Gaidukevich’s family in the Belarusian elite.
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.