Violation of Belarusian airspace strengthens suspicions against the authorities

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April 22, 2016 18:15

The way the Belarusian authorities chose to respond to the incident with violation Belarusian airspace only reinforces suspicions against them. Explanations given by the authorities, in the worst case scenario, allow for assumptions there are shadow cargo transportation schemes at the Belarusian border.

On July 26th, at a meeting with representatives of the State Border Committee and the Ministry of Defense, President Lukashenko admitted that on July 4th the Belarusian airspace has been violated by a light-plane and demanded to punish the perpetrators.

President’s reference to the incident after three weeks implies its high importance. Despite the careful concealment by the government agencies, the incident couldn’t longer be ignored. It is likely that this issue was raised in one way or another during the Minsk visit of a Russian delegation headed by Prime Minister Dmitry Medvedev on July 18th.

Statements made by President imply that in certain cases, a foreign aircraft can cross the Belarusian border without being detected by the air defense system, but by other means (eg, visually). Therefore the absence of the official response regarding the incident during 3 weeks could be attributed to the reluctance to recognize this fact, and not to the air defense system vulnerability.

In particular, on July 11th, Air Force and Air Defense Commander Mr. Pahmelkin said that the Belarusian air defense system has not confirmed a violation of the airspace by an unidentified aircraft. In turn, on July 26th, President Lukashenko said that the plane was timely detected, but those responsible have not stopped it.

Thus, putting two and two together, one may assume that sometimes there are ‘ad hoc’ or ‘manual’ border crossings, without the involvement of the air defense system, which is formally part of the joint Russo-Belarusian air defense system. Consequently, this conclusion leads to other, more serious questions: how often this ‘mode’ is used and what for? 

Despite the lack of evidence of Belarusian authorities’ participation in shadow turnover schemes, the way they chose to respond to July 4th provocation only strengthens such suspicions. Moreover, the likely involvement of Belarus in gray re-exports of Russian oil masked as solvents in order to avoid customs duties make the situation even more complicated and damages authorities’ image.

For instance, on July 26th, an anonymous source in the Russian Energy said that Russia may introduce duties on solvents exports outside the Customs Union, or even restrict oil deliveries to Belarus. This could be a hoax, but the absence of a coherent response by Belarus to the smuggling accusations is an indirect indication of their validity.

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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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