Belarus tries to raise restive Orsha from the ashes
On 19 August, Aliaksandr Lukashenka visited Orsha District, a new Mecca for Belarusian officials. Over the past six months, almost all the country’s top bureaucrats have visited the town.
Orsha is getting a great deal of attention from the authorities due not only to its economic depression, but also its outsized protests against the government’s policies. This March, a thousand people protested against the social parasite tax, an impressive figure given the town’s size. To minimise dissent, the authorities are looking to boost the region’s economy with their signature mix of socialist and capitalist ideas.
In practice, however, their efforts amount to patching holes in a sinking ship. The government’s new policies might help in the short term, but are unlikely to have much effect further down the road.
Orsha in ashes
To many Belarusians, Orsha is known as ‘the city with three prisons and no university’. In reality, there are only two prisons now, but the town retains its criminal reputation. Orsha is also famous as a designated transport hub and as the place where the Grand Duchy of Lithuania defeated the Muscovite army in an epic battle near the Dnieper river in 1514.
The modern history of Orsha, however, is less glorious. On 21 April, Lukashenka stated that Orsha ‘must be raised from the ruins and ashes.’
Orsha remains one of the most economically troubled towns in the east of Belarus. Moreover, residents of Orsha do not seem to fear articulating their problems: this spring, Orsha saw the largest per capita protest in Belarus. A thousand people protested against the social parasite tax in a town of only 115,000 inhabitants.
Orsha’s problems are long term. Over the past 20 years, the region has lost 30,000 inhabitants, or more than 15% of the population. Over a quarter of the region’s enterprises remain unprofitable, according to the Belarusian Statistical Committee, and many businesses have overstuffed warehouses.
According to local media reports, a salary of just $250 a month in Orsha is considered high, and in some companies people work part-time, earning as little as $70. Nevertheless, people are reluctant to quit their jobs, as the unemployment rate may be as high as 15%, according to unofficial data.
The high level of unemployment leads many people leave for Russia or search for temporary work. Every morning, several dozen people gather near the local employment centre, where ’employers’ arrive to order a one-off service, such as unloading goods. In Orsha, these groups of unemployed men even have a nickname: ‘the mafia’.
A Belarusian mix of ideas
Over the last six months, Orsha Region has become a Mecca for Belarusian officials. It has hosted visits from the Prime Minister, Deputy Prime Minister, head of the Presidential Administration, and the Minister of Economy. To demonstrate the seriousness of his intentions, Lukashenka has appointed his assistant, Alexander Pazniak, as head of the Orsha District Executive Committee. Despite the impressive number of bureaucrats involved, however, their ideas on how to fix the region remain uninspiring.
Lukashenka has proposed modernising local enterprises, providing them with financial support, and purchasing new equipment. In July, Prime Minister Andrej Kabiakou stated that the authorities had started the process of cleaning the financial accounts of the Orsha Tool Plant, the most moribund company in the region, and repairing its roof. Later, the enterprise would start buying new equipment.
Unfortunately, this modernisation effort is most likely doomed, just like previous efforts to massively modernise wood and cement plants. For example, in 2016, the profitability of the wood-processing industry was as low as 1% and boasted a $2.7bn debt. It remains unclear whether these plants will ever be able to pay off their debts. To put it more bluntly, Belarus is just wasting money on the modernisation of Belarusian state-owned enterprises.
The government would also like to create the best conditions for doing business. This is undoubtedly a noble pursuit. However, the extent to which this will benefit the region remains dubious, given that the local population lives in poverty, providing businesspeople little incentive to invest there.
In addition, the Minister of Economy is proposing to lease unused parts of state enterprises to new businesses. However, these premises are often so old that last year one company discovered nearly 2,000 unexploded ordnances left from World War II.
The authorities also intend to develop specialisation plans for the regions. In Orsha, the authorities want to expand business in two areas. Firstly, they aim to increase the importance of Orsha as a logistics hub. Secondly, the authorities are fantasising about IT sector development in the region. They do not seem to heed the fact that there is nothing close to an existing IT sector and the quality of life is far from what Belarusian IT employees have come to expect in Minsk.
Closing the gap
It is unlikely that the Belarusian authorities can really help Orsha’s economy through this sort of wishful thinking. One can, of course, expect short-term improvements: for example, investments in fixed assets in 2017 rose almost twofold, according to official figures. But the authorities have simply pushed money into a hole in a sinking ship.
What’s more, the number of such holes keeps growing. In June, Prime Minister Andrej Kabiakou announced that the Belarusian authorities will help the Barysau, Baranavichy, and Babruisk Regions the same way they are assisting the Orsha Region now: the town is a pilot project for Belarusian regional development.
At the end of the day, it remains difficult to understand how this new approach is different from previous policies. It still boils down to investment in state enterprises with some elements of liberalisation caused by lack of money. However, this time around the scale is completely different. If previously the authorities sought to spread out public investments across all regions evenly, now only a few will obtain priority status.
A better method could be for the authorities to give more power to local councils and democratise them, thus helping them to create new development strategies and increase the efficacy of budget management. However, this will fail to have much impact until the authorities answer one key question: what is to be done with failing Soviet enterprises which demand more and more money just to stay afloat?
Lukashenka wants to double Belarus population: will that work?
On 3 August 2017, Belarusian president Lukashenka announced that Belarus could easily sustain a population of 20 million people, noting that human capital was the key to the economic security of the country.
Yet the numbers tell a different story – since 1994, when Lukashenka became president, Belarus has lost over 700.000 people. In the recent years, the population stabilised at 9.5 million, while working age population continued to decrease.
The state offers a number of financial benefits and incentives to families raising children, yet overall it fails to guarantee adequate quality of life for all Belarusians. A recent witchhunt against so-called social parasites revealed that Belarusian economy faces major challenges of providing social protection, ensuring sustainable development, and overcoming poverty.
The big picture
Since the end of the Second World War in 1945, Belarusian population has been growing, peaking in 1993 with 10.2 million people. The trend reversed in 1994, as the economic situation deteriorated and Belarus faced the problems of depopulation and rapid ageing, similarly to other European countries. Only by 2010, the population stabilised at 9.5 million people.
However, the birth rates in Belarus still lie below the death rates, with 13 deaths and 9 births for every 1000 persons. In the past year, the highest birth rates, according to Belstat, were registered only among younger women from rural areas: 256 children per 1000 women.
According to BEROC experts, childcare benefits often inhibit the economic activity of the rural population. Allowance for one child exceeds the living wage, discouraging people from seeking employment. Younger women prefer giving more births for the sake of benefit payments, neglecting their own education and professional development.
What remains in the background, is the quality of life of children from the low-income families, who have limited opportunities to receive education and compete for better jobs. These children are more likely to fall in the same poverty trap as their parents. Thus, rural regions remain marginalised and less developed.
Belstat data also shows that 75 per cent of the Belarusian population live in cities. In 2016, birth rates for the urban areas were considerably lower than those in the countryside, making up only 68 children per 1000 women.
Which numbers are really important?
The issue of falling population numbers has been bothering Belarusian president for a number of years now. In his recent statement on demography, he repeated a thesis of 20 million Belarusians, demanding from the officials on all levels to prioritise raising birth rates and create more employment opportunities. However, population numbers alone do not guarantee economic prosperity of the country.
The UN Human Development Index (HDI), based on the quality of life, education, and decent standards of living criteria, ranks Belarus at 52nd place. Countries with comparable population numbers, such as Switzerland, Sweden or Austria rank as 2nd, 14th and 24th respectively.
To predict possible demographic developments and their economic effect, one has to look at the number of the working age population. According to Belstat, even though the total population remained stable at around 9.5 million since 2010, the number of working age persons has been steadily decreasing: from 5.8 million to 5.4 million. At the start of 2017, for every 1000 persons, 443 were older than the working age limits.
The ageing of the population concerns the government as it has to keep social system afloat. So far, Belarus has initiated the pension reform and launched a demographic safety program, supporting families with children. In the long term, the plan to double the population numbers aims to sustain current social model.
However, the recent controversy over the “social parasites” law showed that for this end the government is also willing to establish stricter control over the activities of all working age Belarusians. The new version of the suspended “social parasites” law is due by October 2017. Recently, the Ministry of Labour and Social Protection has also announced replacement of the current social security number by a new ID card.
This ID card would be connected to the centralised information system, able to track the work activities of every citizen. Thus, the government hopes to force all working Belarusians to pay for the social services, especially if they work unofficially and evade paying taxes.
However, from another point of view, as political analyst Valer Karbalevich noted, these straightforward measures seem as the attempt of the state to “enserf” all working age population. They are not likely to have a positive impact on the desire of people to have more children and are useless against the out-migration trends.
Younger educated groups of Belarusians go abroad in search of education and work opportunities. Others prepare possible options for the future: recently Belarusian media reported that about 50 per cent of all issued Pole’s Cards – over 100.000 – belong to Belarusian citizens.
Should Lukashenka’s scenario of 20 million Belarusians come true, Belarus might face different challenges. Independent economic expert Mihail Zaleski advises against rapid increase of population numbers, warning that current social system capacities would allow to provide for 6 million at best.
Moreover, population growth would place Belarusian ecology and agriculture under more strain. Experts point out the dangers of existing consumerist approaches to the nature. According to Lana Semenas, who coordinates the organic farming initiative Ahrakultura, Belarus would have enough potential to produce enough food for 20 million people only if it switches to sustainable farming methods. In particular, this applies to the large-scale enterprises in the livestock farming sector.
Belarusian demographic problems have a lot in common with other European states, which struggle with the aging of the population and low birth rates. However, Belarusian approach to these issues appears superficial, as the government tends to evaluate the human capital in a quantitative way, luring countryside dwellers into the poverty trap and neglecting brain drain and migration trends.
In order to stabilise the demographic situation, Belarusian government needs to abandon repressive methods, liberalise business activities, aim to breach the rift between the cities and the countryside, and invest in education initiatives to ensure the quality of the human capital.