Lukashenko attempts to anchor Minsk as international negotiation platform

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April 22, 2016 18:55

The Belarusian government seeks to solidify Minsk as a regional negotiation platform in order to formally break through their international isolation without making concessions to Western capitals. Belarusian society is supportive of President Lukashenko’s ‘peacemaker’ efforts in resolving the conflict in south-eastern Ukraine. However, the Belarusian leadership is unlikely to propose solutions to the conflict which would be acceptable to all parties. Therefore, they concentrate on improving their domestic and international positions by holding international meetings in Minsk, hoping that would be enough.

While visiting the Bereza Power Plant, President Lukashenko said that the heads of Belarus, Kazakhstan and Russia were ready to hold a meeting with Ukraine’s President Poroshenko in Minsk to discuss topical issues.

Last week, President Lukashenko spoke more about a possible meeting between the three heads of the Customs Union and the President of Ukraine. Presidents Vladimir Putin and Nursultan Nazarbayev supported Lukashenko’s initiative to hold talks in Minsk. According to the Kazakh president’s press service, the meeting may take place in the third week of August 2014, “following a proposal by Belarus’ President Lukashenko”.

Yet neither the meeting’s agenda, nor the participation of President Poroshenko in the meeting, have been confirmed. Yury Lutsenko, an advisor to the Ukrainian president, said that Ukraine had interest in the meeting in Minsk, however the final decision had not been made – “we have not been advised about the discussion topics for the heads of state. Although good talks are better than war, we should still understand what would come out of the Minsk meeting. Currently we are clarifying the discussion topics and, I believe, that is absolutely crucial for a meaningful state visit”.

President Lukashenko is proposing to discuss the implications of the Association Agreement with the European Union signed by Ukraine and to reduce tensions between the Kremlin and Kiev, above all in economic relations: "They are crucial for Ukraine, because Russia is gradually cutting exports from Ukraine. Previously this concerned meat and dairy products, now they are talking about alcohol”. Meanwhile, the EU Observer reported that these discussion topics were selected for joint consultations between the Russian and Ukrainian presidents and European Commission President Jose Manuel Barroso.

Interestingly, the Belarusian authorities do not object to including EU and USA representatives in the talks in Minsk, or to adding the issue of normalisation in south-eastern Ukraine to the agenda. “We have even supported the idea that some other party, let’s say the European Union and the United States – if they are interested in normalising the situation in economy, military and politics - could join the talks in Minsk”.

The Belarusian authorities are interested in holding the international meeting in Minsk regardless of their status or their role in it. Lukashenko’s ‘peacemaking’ role in the armed conflict in eastern Ukraine and his proposals to hold negotiations between the heads of post-Soviet states are perceived positively in Belarusian society, including by some opposition-minded citizens.

State-run media have interpreted official Minsk’s activities and efforts in the international arena as recognition of Lukashenko’s international importance. This demonstration of recognition ought to facilitate Lukashenko’s task during the 2015 presidential campaign and will limit room for manoeuvre for the opposition, which questions the president’s legitimacy vis-a-vis the international community.

All in all, the Belarusian leadership is counting on the media success of President Lukashenko’s initiatives in resolving the conflict in eastern Ukraine as strengthening Minsk’s international positions and raising the president’s approval rating ahead of the 2015 presidential election.

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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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