Harsh personnel policies will not result in nomenclature coup

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April 22, 2016 18:25

On February 8th, new President Property Management Department Head Vladimir Sheyman reported to President Lukashenko that the Investigation Committee was examining three criminal cases against Departments’ officials suspected of public funds embezzlement. 

Recently launched Belarus’ state apparatus reform is inevitably accompanied with restructuring in top managerial elite. High-profile cases against officials close to President Lukashenko remain a conventional, effective and yet safe personnel policy tool for the ruling group.

Anti-corruption purging is the most effective personnel policy tool in Belarus. In his report, V. Sheyman, appointed to lead President’s Property Management Department on January 21st, listed numerous violations in the Department and said that he would re-staff the Department with younger and better competent workers. Unofficial reports say that former Head Nikolai Korbut was placed under house arrest, and one of his Deputies had attempted suicide right at his workplace.

These developments, especially if suicide attempt reports are true, confirm assessments that Belarusian officials cannot counter the country’s leadership effectively and protect their interests collectively. Mutual trust among public officials is very low, therefore persons involved in corruption cases either compensate damages to the state, or accept their fate with humble.

In political terms, this state of affairs implies that the probability of ‘nomenclature revolution’ in Belarus in low. Firstly, the ruling group has sufficient array of compromising information about their subordinate officials: this personnel management style was founded in the days of the Parliamentary Anti-corruption Commission operations, headed by then Supreme Council Deputy Alexander Lukashenko in 1993-1994. Secondly, Belarus’ harsh personnel policy effectively breaks the longstanding relationships between officials and businesses and prevents from political lobbying which could endanger the Lukahsenko’s regime stability.

President Property Management Department is the largest lessor of non-residential property in Belarus, it manages a number of hotels and restaurants in Minsk, 4 national parks, a company which imports alcohol and tobacco, an enterprise which organizes national lotteries, manages construction for the Olympic Games in Sochi in 2014 and others. In fact, President Property Management Department is a state-owned business empire with non-transparent financial management, which creates a favorable environment for corruption.

Regardless of this impressive economic impact, the President Property Management Department has no political influence. In 2004 its former head Zhuravkova, her subordinates and family members were convicted of embezzlement of more than USD 3.5 million from international trade operations (eventually Zhuravkova indemnified damages and was pardoned by the President). This high profile case had no political impact on the regime therefore the new trail against former President Property Management Department managers will have similar effects, not threatening the ruling group.

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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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