Belarusian authorities may have to reform KGB
External factors and complications in Russo-Belarusian relations prompt the Belarusian authorities to transform the national security system and special services in the first place. Current and future challenges, which Minsk is likely to face dictate the need to pay close attention to the authorities’ capacity in this regard.
Over the past year, Belarus has repeatedly faced Russia-inspired provocations. The provocations aimed to demonstrate that the Belarusian authorities were unable to control the situation.
For instance, in February 2017, an attempt was made to disrupt a press conference concluding the next round of negotiations on the settlement of the conflict in eastern Ukraine. Four unidentified persons started shouting insults at Ukrainian President Poroshenko, chanting “Donbass is a part of Russia” and disseminated leaflets calling on the Russian leadership to stop negotiations with Ukraine and send troops to Donetsk and Lugansk regions of Ukraine. Later it turned out that the provocateurs represented the National Bolsheviks, a marginal political group in Russia. The incident occurred in the President Hotel opposite Lukashenka's administration. The hotel security service is headed by former Belarusian Interior Minister Valentin Agolets.
In late August, in Gomel, Russian special services kidnapped Ukrainian citizen Pavel Grib. On September 18th, 2017, the National Liberation Movement (NLM), a Russian chauvinist organization, organised a motor convoy passing through Minsk centre. On September 20th, 2017, NLM activists appeared in Gomel, they travelled through half of Belarus without hindrance.
Frank provocations from Russia against Minsk require appropriate response from the Belarusian authorities. Conventionally, special services respond to such provocations and prevent their occurrence in the future. Lukashenka is likely to focus his attention on this segment of the national security in the near future. The KGB, being the largest special service with broad competences, is likely to undergo a serious internal transformation, with the redistribution of internal resources (human and physical) to enhance counterintelligence, OSINT intelligence, and political analysis. An increase in the security component in special services is likely, too. That said, the political intelligence, "customised" to suppress the political opposition and civil society in Belarus (including independent media), is unlikely to change.
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.