Official Minsk gains regional importance as state-peacemaker

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April 22, 2016 18:54

While Belarus did not mediate the Trilateral Group’s negotiations (Ukraine-OSCE-Russia), her role in regional and European security increased – not only because she provided the meeting place, but also due to her constructive position regarding the Russo-Ukrainian conflict. President Lukashenko is making careful attempts to use the ‘peace-maker’ image in the Russo-Ukrainian settlement in order to secure Minsk’s role as one of the region’s leaders. Belarus aspires to unlock relations with the EU and the U.S. and to reduce pressure from the Kremlin by participating in the process of de-escalating the Russo-Ukrainian conflict.

On July 31st, Minsk hosted a face-to-face meeting of the Trilateral Contact Group (Ukraine-Russia-OSCE) on the situation in south eastern Ukraine. Representatives of the self-proclaimed People’s Republic of Donetsk were also present.

On July 29th, Lukashenko’s press service reported on a telephone conversation between Presidents Lukashenko and Poroshenko, “upon Ukraine’s initiative”, during which the Ukrainian President requested Belarus to become a platform for discussions with all stakeholders to resolve the Ukrainian crisis. A few hours later, President Lukashenko agreed to this request.

The Kremlin is pleased that Belarus – Russia’s main military and political ally – was chosen to host the Trilateral Contact Group’s meeting, as it allows the Russian leadership to save face amid tensions in Russo-Ukrainian relations. Russian Foreign Minister Sergei Lavrov thanked Minsk for its willingness to become a platform for negotiations, and Russian Ambassador to Belarus Alexander Surikov proposed to continue using Belarus as a platform for negotiations: “If negotiations continue, it probably makes sense to use this platform. It is neutral”.

Despite the fact that President Lukashenko did not act as a mediator in the trilateral negotiations, he met with former President of Ukraine Leonid Kuchma and promised to assist in resolving the conflict in southeast Ukraine: “We will work with you to do everything necessary for our Ukraine to somehow reduce the intensity of the confrontation in eastern Ukraine. This is in our interest”. In addition, President Lukashenko had a telephone conversation with Serbia’s President Tomislav Nikolic. The presidents “exchanged views on the situation in Ukraine”.

In recent months, Belarus has stepped up her contacts with EU and USA representatives. The authorities aspire to ‘normalise’ Belarusian-European relations by participating in the process of de-escalating the Russo-Ukrainian conflict. President Lukashenko said that “creating additional tension with the European Union” was unnecessary.

Minsk managed to impose its own agenda on Brussels and resume negotiations on non-political issues, such as visa liberalisation and socio-economic modernisation. Official Minsk seeks to continue the Belarus-EU dialogue, without fulfilling the main condition (the release of political prisoners). Belarus’ Foreign Minister Makei underscored that “the topic of political prisoners has already made our mouth sore”.

If Belarus continues to act as a negotiation platform, the Belarusian authorities will strengthen their position on the regional and international arena. This will help revitalise Belarus-EU relations without fulfilling the main condition. Moreover, the Kremlin will stop pressuring Minsk to take Russia’s side in Russo-Ukrainian conflict.

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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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