Minsk is not interested in complicating political relations with Kyiv

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April 22, 2016 19:37

Official Minsk is not interested in complicating political relations with Kyiv because of the growing tension in the Belarusian-Ukrainian trade and economic relations. The introduction of food embargo on Ukrainian products by the Kremlin has created additional opportunities for Belarus as an access point to the Eurasian markets for Ukrainian goods. Trade incidents between Minsk and Kyiv will reach a compromise without any effect on political cooperation between the two countries. 

Ukrainian experts say a new mechanism to block access of competitive products to the Belarusian market has been introduced. By introducing special sanitary certificates for importers, Minsk has actually blocked the supply of Ukrainian food products to Belarus. For instance, the president of Ukrkondprom association Alexander Baldynyuk has accused the Belarusian authorities of violating the agreement on free trade zone within the CIS countries, to which Belarus and Ukraine are parties. 

In response, the Belarusian Foreign Ministry has denied the fact of discrimination against Ukrainian goods and said there was no need to withdraw sanitary examination of Ukrainian goods. Belarusian Foreign Ministry Spokesperson Mironchik has referred to the need to protect the Eurasian market and show potential benefits of the Eurasian integration to Ukraine: "This regulation applies to producers from all countries, which are not members of the Eurasian Economic Union. Imported products are under control due to the objective need to protect the health of our citizens”. 

According to experts, Belarus may lose tens of millions of dollars after Ukraine introduces special duties on some Belarusian goods. If introduced, the special duty’s size (39.2%) will make Belarusian goods non-competitive on the Ukrainian market. 

Yet in 2014, the Belarusian authorities introduced licensing for importers of beer and confectionery from outside the Customs Union, including Ukraine and obliged them to coordinate prices for these products on the Belarusian market. However, after the reciprocal restrictions on some Belarusian goods by Kyiv, Minsk had revoked its decision. This time, the Ukrainian authorities are also planning to introduce export duties on sensitive exports from Belarus in response to the new rules for importers to Belarus (Regulation No 666 of August 2015). Now each batch of imported products requires mandatory sanitary and hygienic registration, which has led to an increase in delivery terms and additional costs for the examination. As a result, the supply of confectionery and beer from Ukraine to Belarus has encountered difficulties. 

Ukraine has announced that it will introduce special duties in two months in order to prompt Belarus to conduct negotiations and reach a reasonable compromise on restrictions. Some sensitive Belarusian produces are listed among goods to be subjected to the special duty. If Belarus insists on restrictions against Ukrainian goods, she may reduce the supply of tyres and tractors to Ukraine after January 20th, 2016 or stop them at all. Overall, restrictions are likely to be mutually abolished before 2016. 

Amid increased tension in the trade and economic relations between Minsk and Kyiv, the Belarusian special services have enhanced a campaign against Belarusian citizens fighting in Ukraine. Last week, Interior Minister Ivan Shunevich said a criminal investigation could be launched against Belarusian nationals-combatants in the south-east of Ukraine. Shortly after, the Investigative Committee reported the detention of a Belarusian citizen at the Minsk railway station, who allegedly was taking part in the anti-terrorist operation in eastern Ukraine. 

Meanwhile, Ukrainian Deputy Information Policy Minister Bidenko emphasised the lack of disputes concerning the launch of Ukrainian TV channel in Belarus and promised that after testing UATV the negotiations with the Belarusian authorities on the broadcast would resume. 

The Belarusian authorities may continue introducing import restrictions on competitive products from Ukraine. However, these measures are likely to be only temporary to avoid Belarusian-Ukrainian trade wars and complications in political relations. In addition, Minsk may be interested in improving the Belarusian-Ukrainian trade and economic relations in the view of the food embargo on Ukraine to be introduced by the Kremlin as of January 1st, 2016. As Moscow bans Ukrainian and European products, Belarus receives the opportunity to increase supplies of Belarusian produces and re-export Ukrainian products to Russia via Belarusian intermediaries.

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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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