The power elite elaborate defense mechanisms

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April 22, 2016 18:13

New type elite are formed in Belarus from security forces: from representatives of the Investigative Committee and the KGB in particular. This small elite group is concentrated around President Lukashenko.

On June 28th, police offices, which will work for the Investigation Committee, have graduated from the Police Academy. The alumni were welcomed by the IC Chairman Mr. Vakulchik personally. However, the Academy is not planning to open admission for new students to study “investigative activity”.

Exclusion of the Police Academy from the number of schools providing training for future staff of investigative bodies confirms the previously marked trend: the formation of an elite group from Belarusian law enforcers around President Lukashenko’s family. To date, the security forces the most influential and close to the President are the newly created Investigative Committee and the KGB.

Training of investigators will be carried out by the ‘elite’ Management Academy under the auspices of the President, not by the Police Academy. This educational institution will train future staff of the Investigation Committee, Mr. Vakulchik said earlier. Following the reform of law enforcement agencies in 2011, the IC, and partly the KGB have the exclusive right to investigate corruption cases, which has dramatically increased these agencies’ importance and upgraded the status of its employees.

Finally, an attempt to narrow the power elite circle is observed in the judiciary. Earlier, Belarus’ Supreme Court Deputy Chairman Mr. Kondrat’ev proposed to transfer cases against security forces staff under the military courts’ jurisdiction. If successful, this initiative will make Belarusian power elite even less transparent and “safer” from the security forces’ perspective.

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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.