Belarusian authorities aim to tighten control over IT and boost its role in economy
The president has demonstrated a loyal attitude to the IT sector, and simultaneously stepped up control over the industry. By appointing a compromise candidate, Vsevolod Yanchevsky, to lead the High Tech Park, the Belarusian authorities aspire to relax tension between the IT sector and the state, which occurred following Tsepkalo’s dismissal. Apparently, the Belarusian leadership envisages applying private business practices in traditional industries to the IT sector, i.e. allowing large businesses to develop in exchange for the loyalty to the current authorities and their financial needs.
The president has appointed his aide, Chair of the Supervisory Board of the HTP and long time supervisor of the IT industry, Vsevolod Yanchevsky, as he Head of the HTP Administration.
Amid distress in traditional industries, the state has stepped up its interest in the IT development in an attempt to boost economic growth. The president counts on prompt economic effects thanks to large investment in the economy. For instance, last week he visited Belarusian IT companies together with Russian billionaire and IT investor Mikhail Gutseriev. Meanwhile, apparently not all senior officials from the president’s inner circle share his views, so they speak about the long-term IT development in order to prevent criticism in his regard in the future.
IT sector leaders have reacted positively to the appointment of former chief ideologist from the presidential administration Yanchevsky to lead the HTP. Yanchevsky is probably the only official in the top echelon of the state administration, who is closely familiar with the IT and communication technologies, and suits both, the authorities and IT entrepreneurs.
It is worth noting that, along with his appointment as the HTP Head, Yanchevsky is attempting to strengthen his lobbying potential by creating an additional bureaucratic structure - the Public Council for IT Development, which would include officials and business representatives.
The Belarusian leadership seems ready for gradual structural transformations in the economy in Belarus and takes measures to ensure it retains control over new promising sectors.
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.