Bitter Results of Belarusian ‘Authoritarian Modernization’

Last year, the total foreign debt of Belarus increased by $6,452 mln or 29,2%. By January 1, it amounted to $28,512 mln, or 52,2% of the national GDP. According to the Belapan news agency, the foreign indebtedness per capita in Belarus is currently $3,007, although at the beginning of 2009 it was just $1,596.

According to the IMF, Belarusian foreign debt will keep growing. Thus, by the end of 2011 it can reach 57,3% of the GDP, by the end of 2012 – 61,9%, and by 2016, the debt can amount to 74,5% of GDP. Will the government find courage and resources to change the course which has led the nation into the debt?

Oddly enough, the Belarusian government today does pay attention to the opinions of the IMF and the international community. Recently, it has decided to correct loan interest rates according to the IMF recommendations. But, of course, the most important recommendation is to privatize state-owned firms, which entails a fundamental overhaul of the entire Belarusian society and its values. Unfortunately, in the absence of transparency the only realistic privatization in today’s Belarus could only be a result of manipulations by the regime’s insiders.

The main problem with the indebtedness is not about the amount as such. After all, many developed countries have much higher debts. Yet their economies are working, and they can repay them over a reasonable time span. Is this the case for Belarus?

The rising negative balance in Belarusian foreign trade is a reason to doubt it. Furthermore, since Belarus regained independence, no new major production facilities have been built in the country.

Almost all major foreign investment projects underway concern some low-end technology production (like sewing), mining and construction materials production (like production of concrete) or “dirty” production (like processing hazardous chemicals). Meanwhile, recently propagated projects (such as a car plant built with Iranian investors) seem to be limited to assembly lines only and using only imported parts. But even the Belarusian-Iranian endeavor is not particularly stable. Last month, the Belarusian government declared its intent to renounce its cooperation with the Iranian investors and to give the plant to Chinese investors. As a result, the Iranian project ended up assembling only a few hundred cars.

There have been some successful modernization undertakings in Belarus, including the projects involving oil refining facilities in Mazyr and Navapolack. Such examples are atypical, however. Pro-regime analysts like to articulate the idea of ‘authoritarian modernization’ under Lukashenka. While the ‘authoritarian’ trends are clearly present, there is little actual modernization going on to make their claim stand.

Cheap Russian oil traded for Belarusian geopolitical loyalty to Moscow allowed Lukashenka to downplay the necessity for reforms. But now, with the new Russian policy toward Belarus and the revision of the old business of reselling Russian crude oil to Western Europe, the Belarusian government had little to do but borrow. After all, the oil products, potash and some chemicals provide a bulk of Belarusian exports.

The need to borrow has been great, and over the last two years the foreign debt has almost doubled. That is another reason for Belarusians to be seriously concerned about their economy. And not just the economy, but also the future of the welfare state in Belarus and real independence of the country, especially from Russia.

It does not matter whether the current Belarusian regime becomes more nationalistic in its rhetoric or whether Lukashenka finally starts speaking Belarusian, as some nationalists predict. The actual results of this regime’s activities are already clear: the increased vulnerability of the nation and the absence of modernization – whether authoritarian or not.

SB

Siarhei Bohdan is an associate analyst at the Ostrogorski Centre.

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