Belarus opens up for foreigners but not for own nationals

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January 16, 2017 11:50

Economic challenges have prompted the Belarusian authorities to open up Belarus to foreign businesses and tourists. The authorities are likely to continue to liberalise the entry for foreigners. However, they are unlikely to simplify the visa regime with the EU for own nationals, primarily due to economic reasons and fears of currency export from Belarus.

Belarus introduced a five-day visa-free regime for nationals of 80 states, including the European Union, Brazil, Indonesia, the US and Japan, as well, she reduced the visa cost.

Earlier, the Belarusian authorities allowed foreign citizens to visit some areas bordering with the EU without a visa – Belovezha Forest and the Augustov Channel. Meanwhile, analysts doubt the substantial influx of foreign tourists in Belarus due to inadequate infrastructure and unattractive image of the country abroad.

Preparations and the introduction of the visa-free regime has caused tension among the state agencies involved – the Foreign Ministry, the Sports and Tourism Ministry, and the Interior Ministry. Apparently, the security forces responsible for migration issues, did not welcome the Foreign Ministry efforts to open up the country for foreigners.

Meanwhile, cooperation between Minsk and European capitals on border control issues has been the most successful. In the past two decades, the European Commission spent a large amount of grant aid on border cooperation projects with the Belarusian authorities.

However, the Belarusian authorities are holding back the introduction of a visa-free regime for residents of the Belarus-EU bordering territories. The delay with the launch of small border traffic with Poland and Lithuania is likely to be due to economic concerns of currency export from the country. According to the Polish authorities, thanks to the cross-border trade, Belarusians spend circa EUR 1 billion per year in Poland.

The visa-free regime and economic recession are likely to prompt the Belarusian authorities to creating a better environment for advancing foreign tourism in Belarus, including implementing initiatives by local and regional authorities.

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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.

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