Belarusian Economy in April: GDP Growth, Privatisation and Monetary Policy
This April economic growth in Belarus was nearly at the level of last year's, which still remains significantly below the official forecast.
The financial sector showed certain stability but the situation with attracting foreign capital and the nation's privatisation prospects remain uncertain.
The growth of consumer and commercial deposits in Belarusian rubles provided the banking system with the necessary resources. At the same time a sufficient amount of liquidity in the banking system contributed to stability on the currency market.
The gradual reduction of the refinancing rate was preserved. The National Bank carried out a second round of cuts and decreased the rate to 27%.
It also allowed for reducing interest rates on 1-day loans in Belarusian rubles on the interbank market. The rates fell from 35% in January to 18.5% in March and continued to decline in April.
The supply of foreign currency on the Belarusian Currency and Stock Exchange increased due to a positive trade balance. The National Bank had to buy some foreign currency in order to prevent an excessive appreciation of the Belarusian ruble. This, in turn, had a positive effect on the dynamics of its international reserves, which grew by USD 136.2m and came to a total of USD 8,148.7m.
The economy has kept growing at a gradual and steady pace. In the first quarter of 2013, the GDP grew by 103.5%, which is matches last year's growth. Belarusian authorities forecasted GDP growth in 2013 at the level of 8.5%. However, this prognosis raises doubts as the estimates of international experts remain more pessimistic when compared to the figures proposed by Minsk officials.
According to the International Monetary Fund, the Belarusian economy will grow by just 2.1% in 2013. Predictions of Russia’s Ministry of Economic Development are more optimistic – 3.7%. The World Bank estimations predicts 4%.
Net taxes on goods, retail and wholesale trade were the main contributors to GDP growth in the first quarter of 2013. Industrial production had a negative effect on GDP growth. Even though the volume of industrial production was reduced, inventories of finished goods formed almost 80% of total monthly production by the end of March, while this number was only 46.4% a year ago. The Belarusian government, however, plans to provide the required growth rate primarily due to its emphasis on achieving economic modernization.
Privatisation and Foreign Direct Investment
Attracting foreign investments remains a major concern for the government. The denationalisation of the Kommunarka and Spartak confectionery factories, which occurred back in October, has had negative consequences for the Belarusian economy. The main issue facing the leaders of the confectionery industry is finding proper channels to unload of their stocks. Denationalisation resulted in their losing many of their former distribution channels which remain under control of Marat Novikov, the former owner of the factories.
At the same time the authorities have undertaken efforts to make the privatisation process more smooth and effective. At the end of March the Council of Ministers adopted a decree to introduce changes into the law on the privatisation of state assets. It intends on implementing specific measures in generating the private sector’s support such as the introduction of a ban on revising the terms associated with the results of the privatisation process.
The reasons for making such a decision are rather straightforward. In 2013 Belarus has to sell at least USD 2.5 bn of its state assets in order to fulfil its obligations of its EvrAzES loan. However, events connected with the re-nationalisation of the leading producers in the confectionery industry, together with a gratuitous transfer of 21% of shares of the Luch watch factory to the state, undoubtedly raise serious concerns among investors with regards to the risks associated with property rights protection. These planned changes in the law on privatisation are suppose to signal an improvement of the situation and increase the attractiveness of making investments in the economy.
Nonetheless, the forthcoming passage of the law “On Amendments to the Law on Privatisation of State Property and Transformation of State Enterprises into Joint Stock Companies” will bring innovations in management and the regulation of joint stock companies created through privatisation. This will have a negative impact and decrease the interest of potential investors in those assets, where at least some part still belongs to the state.
At the same time, the introduction of a ban on the revision of privatisation deals does not protect owners from an abrupt transfer of control to the state, something that can be easily accomplished through the issuance of additional.
While an the implementation of a ban is the right step towards creating conditions that will improve the investment climate in Belarus, it will not likely have a serious effect on stimulating the privatisation process in the near future.
Overall, despite a rather robust and stable picture that characterises the situation in economy so far, Belarus continues to struggle to meet the targets set by the authorities.
Maryia Akulava and Anastasia Luzgina, Belarusian Economic Research and Outreach Center (BEROC)
This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)
Belarus Fights Photo Extremism
On 18 April district court of Ašmiany concluded a trial of Belarus Press Photo – 2011 album. The KGB, which initiated the case, argued that the album contains extremist elements and the court agreed with it.
Belarus enacted the Law on Counteraction against Extremism 2007. Security services elaborated it in order to prevent potential colour revolution in Belarus, but subsequently they rarely applied it. On a few occasions over the last five years they deployed this law. But the judiciary did not always take the side of the KGB. In some cases it declined KGB demands to declare extremism.
The Law against Colour Revolution
The Belarusian KGB prepared The Law on Counteraction against Extremism in 2006. It aimed to prevent mass protests and another colour revolution in the post-Soviet space. Civil society perceived the law as political instrument which gave additional grounds for political repression.
Apart from usual concepts of terror, violent seizure of power, paramilitary formations, fomenting racial, religious and other kinds of antagonisms, it counteracts “mass unrest on the grounds of political and ideological antagonism”.
What is more important, it qualifies the act of “humiliation of national honour and dignity” as extremist activity. The law also provides a definition of “extremist materials” – informational product which promotes extremist action.
So, the judiciary can qualify practically every political action directed against the regime as extremist. Equally, it can qualify media and information products as extremist if they involve political elements. Practical sense of the law in legal terms looks unclear, since all main extremist concepts already exist in criminal code of Belarus.
However, the application of the law did not appear as cruel as many expected. Improvement of relations with the West in 2007-2010 prevented it from being fully deployed. Yet the KGB tried to use the law occasionally to deal with certain undesirable publications such as books, CDs, bulletins and newspapers. The recent case of Belarus Press Photo – 2011 gives a good illustration of such selective application.
Belarus Press Photo – the Extremist Album
Belarus Press Photo is an annual contest of photos taken for mass media. The album of 2011 (available online here) contest contains numerous photos of protest after elections in 2010 as well as “silent protests” of 2011. However, most of the photos in the album cover national traditions, army, sport, art and other issues far from politics.
In November 2012, Belarusian customs office confiscated 41 photo albums, which Belarusian journalists carried with them after a European tour. Ironically, the publishers printed the albums abroad and imported them to Belarus a year ago. They conducted all formal procedures, paid customs duties, and faced no problems at that time.
This time the customs took a different view on the album and decided to destroy it. But, somewhat unexpectedly, they changed their mind and passed the case to the KGB.
The KGB established an expert commission in order to evaluate the album. The commission included a representative of ideology department of the local executive authority, a criminology professor, a linguistics professor and an art lecturer, all from Hrodna university.
After examining the album, the commission rendered the following verdict:
The album Belarus Press Photo – 2011 contains deliberately distorted images of Belarusian politics, economy and social life, which humiliates national honour and dignity of citizens of the Republic of Belarus. It belittles the authority of Belarusian state and undermines the trust of foreign states and international organisations in Belarusian government.
Hence, according to the Law on Counteraction against Extremism, humiliation of national honour and dignity forms an act of extremism.
The court summoned to the trial the organisers of Belarus Press Photo contest Julija Daraškevič, Vadzim Zamiroŭski and Aliaksandar Vasiukovič. The court took the side of KGB and on 18 April declared the album to be extremist. It ordered to destroy 41 copies of the album.
The Dissent of Belarusian Judiciary
Over the last few years, the courts had a few opportunities to apply the Law on Counteraction against Extremism. Most of them had a similar plot: customs officers checked materials which people carried through the border, and then passed them to the KGB for evaluation. The KGB would then initiate court proceedings. Yet the outcomes of those trials break the myth of the total politicisation of Belarusian judiciary and its inferiority to security services.
On several occasions, only one court ruled that the submitted materials were of extremist nature. The case involved compact discs with films “Lesson of Belarusian language”, the concert “Solidarity with Belarus” in Warsaw, and photos of 2010 protests in Minsk. In all other cases in the past, the courts dared to disappoint KGB.
For instance, in 2008, the KGB did not like the article “War in Georgia” published in Svaboda newspaper. They argued that the article discredited domestic and foreign policies of Belarus and promoted extremism and genocide of Ossetian people. The court of Iŭje district recognised it as extremists and ordered to destroy 5,000 copies of the issue. However, on appeal the lower court decision was set aside.
The trial of Arche journal, publication of Belarusian intellectuals, presents a more complicated case. Customs confiscated it in 2008 on Belarusian-Polish border and as usual, KGB filed an action. According to them, the journal contained a number of publications with extremist content. Three of them presented analysis of Belarusian politics, and the fourth, a review of Andrzej Wajda's Katyn film on the massacar of Polish officers by the Soviets in 1940.
The KGB argued that “the analysis of the materials showed that the journal materials damage the image of government, increase social and political antagonism in society, encourage mass unrest and thus threaten national security of Belarus”.
At first, the court of Brest recognised the journal as extremist and ordered to destroy it, but higher court subsequently returned the case for review. The KGB demanded another trial, but after expert evaluation of the materials the proceedings were terminated.
These facts reveal interesting processes inside the Belarusian security and judiciary systems. KGB continues to hunt for witches occasionally, but it does not implement any comprehensive programs to combat dissent. The cases rather depend on initiative of particular department and district.
Second, the courts do not always follow the political needs of the regime and may do their job fairly. Of course, this does not concern largest and most notorious trials, which Lukashenka controls personally. But local and minor issues can be resolved in favour of citizens, not the authorities.