Before early spring Belarusian authorities will renegotiate contract with entrepreneurs in exchange for their political passivity

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April 22, 2016 19:39

Before the parliamentary elections, the Belarusian authorities hope to seize growing discontent among entrepreneurs and their politicization through negotiations with mutual concessions on both sides. Yet the authorities have not offered the full package of concessions – it will be prepared by the spring and will depend on SME protest activity. The opposition has once again failed to take advantage of tension between the authorities and the SMEs in order to build its human and financial capacity before the parliamentary campaign.

According to the estimates of the organisers, the anti-crisis Business Forum has attracted more than 1 500 people. The regular Business Forum serves as a mechanism for coordinating interests within business environment and elaborating mutual concessions acceptable for the state and SMEs. The most recent Forum was also attended by Trade and Economy ministry representatives.

The SME’s main requirements vis-à-vis the state include: enabling selling imported light industry goods without supporting documents, abolishing mandatory payment terminals, introducing a five-year moratorium on inspections and seizures, reducing rent fees, tax and penalty rates amid reductions in welfare and others. According to SME representatives, if the state does not reduce the financial pressure on SMEs, 120,000-140,000 jobs may be lost.

In recent years, tension between entrepreneurs and the state was often on the rise so as the state was tightening operating conditions for SMEs each year. The authorities often seized SME’s protest activity by delaying the introduction of restrictive measures. Nevertheless, the state consistently introduced new mechanisms of raising additional budgetary proceeds from SMEs.

This time, the authorities seem to be taking the SME’s basic requirement quite seriously – to abolish the requirement of supporting documents for the sale of imported light industry goods. President Lukashenka said that the requirement would not be abolished: “their honeymoon years will be over as of January 1st, they will have to work on equal terms and with supporting documents”. That said, last March, when tension between the authorities and the SMEs was high, President Lukashenka visited one of the Minsk markets. Back then, after the meeting with entrepreneurs the president allowed to extend the terms of trade without documents until the end of 2015.

Meanwhile, amid the overall restrictive policy against consumer imports, the authorities may be less sensitive to the needs of SMEs importing light industry goods. According to Trade Ministry specialists, only about 13,000 entrepreneurs have not yet sold the remnants of the goods lacking supporting documents.

It is worth noting that the level of solidarity among entrepreneurs is quite low and their interests differ a lot. The state has learned to use such contradictions quite successfully when implementing its long-term SME strategies and disabling unnecessary politicization of their demands. In recent years, especially since the politicized street protests of entrepreneurs in the winter of 2007-2008, the state has concluded an informal contract with SMEs, according to which the parties committed to dispute resolution through dialogue and without street activity.

In recent years, the opposition parties and leaders have repeatedly attempted to use the SME’s discontent with the authorities’ actions and prompt them to closer cooperation. However, small business is not willing to join efforts with the opposition in order to defend its interests and prefers direct negotiations with the authorities and adapting to the new environment.

By early spring 2016, the authorities are likely to conclude a new short-term contract with SMEs, the terms of which will be developed through negotiations and will exclude political demands. The state, however, is likely to continue to introduce new mechanisms of milking the SMEs.

Image: Vadim Zamirovskiy, TUT.BY

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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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