Construction industry reform creates opportunities for civic leaders
During the week, residents in different districts of Minsk held protest actions against developers and city officials.
Belarus’ construction industry problems and increased attention to them by the authorities create opportunities for greater civic activity in Minsk. Belarusian opposition has not yet embraced this opportunity.
Currently the situation is favourable for greater legitimate civic activity in residential and business construction spheres. On the one hand, the government has organized an open campaign to reform the construction industry (working group meetings, chaired by Presidential Administration Head Kobyakov, held three times a week with the participation of the KGB and State Control Committee leaders).
The working group meetings broadcasted by state TV and print media, a ‘hot’ line is organized in the Presidential Administration. In addition, field sessions are planned for the working group. Preliminary results of the working group’s efforts to reform the construction industry will be announced in September-October 2013.
On the other hand, citizens’ activity is increasing, especially in Minsk, where residents protest against so-called ‘construction consolidation’ in urban areas, as well as against the violation of housing commissioning deadlines. The protests are mainly pickets and rallies in residential yards. In addition, tenants and shareholders are making a video clip and prepare written petitions to the city government and Presidential Administration. Residents in different Minsk districts consolidate their efforts and support one another.
The state and the Police in particular, react neutrally to such protest actions by residents and shareholders, which implies common interests of the ruling group and the population regarding construction industry reform, even though they have different priorities: the redistribution of influence in the construction market on the one hand, and solving problems of concrete households on the other. Such temporary coinciding interests objectively create preconditions for greater legitimate civic activity and for meeting some citizen’s demands related to the construction industry reform.
Belarusian opposition is not yet engaged in this process. The ruling group is not interested in protests’ politization and citizens understand that if their demands are shifted to the political level before the elections, repressions might follow.
Therefore, the construction industry reform will have greater civic effect, than political. Emerging civic solidarity structures and leaders will build up and strengthen their influence through urban protest activity.
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.