Need For External Financing and Ambiguous Business Perspectives – November Digest of Belarus Economy
This November showed the need for foreign capital in the Belarusian economy is becoming more and more acute.
By the end of October the international reserves of Belarus decreased by $575m and amounted to $6.813bn. This number is much lower than the $8,500 predicted by the authorities in the beginning of 2013 and makes the problem of attracting capital all the more severe.
At the same time likely changes in the regulation of individual entrepreneurship will create additional pressure on the sector and may negatively impact the business environment of the country. Finally, opposed evaluations of the economic situation exist within the country.
While authorities officially tend to have an optimistic assessment of the situation, the banking and real sector show a rather uncertain attitude.
Reluctant attempt to activate privatisation process
The unsatisfactory results with the volume of international reserves fostered activities of authorities in terms of the privatisation of state assets. At present, it can be stated that Belarus missed out on the privatisation process in 2012, with just a few sales of state assets occurring last year.
Belarus is peculiar in its ability to attract foreign capital at a rather steady level throughout the years (Graph 1). However, this capital mostly comes in the form of reinvested earnings and not sources obtained because of privatisation.
Therefore, the State Property Committee created a list of 80 open joint-stock companies, the selling of which will bring around USD 4.5bn into the state budget. For their part, the EurAzEC Anti-Crisis Fund is evaluating the readiness of the Belarusian economy for massive privatisation. This evaluation will impact the decision to be made by the Fund on whether or not to provide the 6th tranche of a EurAzEC loan at amount of USD 440m.
Another sign of possible revitalisation of the privatisation process and the readiness of authorities to get rid of state property is the administrative transfer of state enterprises from privately owned telecom operator OJSC “Velcom” to OJSC “MTS”, which the state controls 50% of its shares. The reason for this transfer from state to private hands is still unclear. However, it could potentially help the state to sell its shares in “MTS”, which the authorities have been trying to do over the last 4 years.
Until now the main problem consisted in finding a compromise on the price. Belarus planned to get around USD 1bn from that sale. However, the maximum price from investor offered was around USD 600-700m, and this occurred before the crisis hit the Belarusian economy in 2011.
This action will likely have a positive impact on the successful sale of the state's shares. The transfer of state enterprises from one telecom to another will increase the client base of the state asset in the latter. Moreover, the corporate segment of a client base always brings in a large portion of a companies’ revenue. The increase of this segment will raise the estimated real value of the company and help Belarus sell it for the maximum possible price.
Nervousness in the entrepreneurial sector
The forthcoming highly likely implementation of new technical regulations, that oblige entrepreneurs to certify light industry produced goods, is an issue of great concern for individual entrepreneurs due to the fact that this novelty will negatively impact business performance as a result of the expensiveness and length of the procedure to receive certification.
These regulations will possibly come into force by 1 January 2014. Thereafter entrepreneurs will have either to provide the required documentation, which is unlikely, or go through certification procedure, which will bring additional costs for them to do business.
It should be mentioned that during the meeting of subcommittees of Eurasian Economic Commission in August 2013 it became clear that these technical regulations apply only to importers and producers, and not entrepreneurs involved in retail trade. However, it looks like the authorities unreasonably expanded the scope of appliance of technical regulations all on their own.
As a result, entrepreneurs reacted to this situation in the form of a declaration of their unwillingness to work under these circumstances, an action, that if it were to be carried out, is very undesirable for the weak economy.
Ambiguous perception of the economic situation
At the end of October the Ministry of Economy repeatedly revised its estimations of GDP growth towards a more and more optimistic scenario and changed the number from 2.4 to 3.3 percent. The officials explained that these changes occurred due to adjustments in foreign trade and an expectation to end up with a surplus in the country's trade balance.
They relied on additional sales of potash, coupled with the growth of exports of meat and automobile industries. These optimistic expectations regarding the exports of potash fertilisers raise certain concerns because of the ongoing conflict with Uralkali and the decreased price of potash on the world market.
On the other hand, very different views on the situation are present in the banking and real sector. In the beginning of November the last state bank stopped issuing loans for purchasing housing. Thus, there is only one commercial bank left in the market and it provides loans with 55% interest rates. Uncertainty in the market appears to be the main reason for suspending lending, and forces banks to hold out until interest rates become stable.
This indicates that the current tendencies remain unsatisfactory for the banking sector and raises concern regarding the latest developments. As for the real sector, the results of the latest monitoring of enterprises, conducted by the National Bank, showed that the enterprises evaluate their economic situation as more pessimistic when compared with similar evaluations a year ago.
According to the survey, the real sector deteriorated due to lending conditions and the volatility of the currency exchange rate explain such a negative trend. Nearly all respondents expect a significant slowdown in the growth of the physical volume of production due to uncertain economic situation.
Maryia Akulava, 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)
Kulturkampf Against the Belarusian Language
Last week, the Belarusian Supreme Economic Court approved recalling the license of a major Minsk-based publishing house. The government apparently shut it down for publications which seemed too political. This decision dealt a serious blow to Belarusian-language culture since few publishers have produced as many books in Belarusian as the Lohvinau publishing house did.
A major victim of the political confrontation is the Belarusian language. The total circulation of books in Belarusian in the 2010s constituted just a third of the level under Soviet rule. The Russian language is a monopoly in Belarus. A sad fate for a country which between the world wars had four official and effectively functioning state languages.
The Belarusian language-based culture struggles to withstand the pressure from Lukashenka's government and Russian popular culture. Earlier, those who published Belarusian books could rely on the Western sponsors. Not so much anymore – even the usually generous Open Society Institute closed its book publishing support project.
Everything is Politics
To justify recalling the licence from the publisher Lohvinau, the Ministry had referred to a court decision which found “extremism” in a photo album Press Photo Belarus 2011. The album, which was published by Lohvinau, contains quite ordinary photographs of everyday life in Belarus. Some of them presented the prevailing reality in an implicitly critical vein – for instance showing a Belarusian conscript watching state TV news.
Over the fourteen years of its existence, the Lohvinau publishing house printed around 700 titles, more than half of them in Belarusian. It effectively made Lohvinau a major privately-owned publisher of books in Belarusian. They also tried to stay away from any open political involvement. Not an easy task in Belarus where too many things have become "political," and from the regime's viewpoint – "extremist."
Last year, the state agencies also halted the work of the Belarusian-language Arche journal – presumably because Arche touched on sensitive historical themes from the World War II and Soviet era Belarusian history. To eliminate Arche completely would be to create a void in the intellectual community. But a few months ago the authorities allowed Arche to be published again.
This means that Belarusian publishers have to obey the countless rules, both formal and informal, that have been established to avoid "political" issues. State repression renders serious damage to an already fragile and vulnerable domain of Belarusian-language culture. Its ability to recover remains very limited.
The market of Belarusian language publications has either decreased or stagnated since 1990s. We found no comprehensive data on the book market in 2012, yet the 2011 statistics illustrate the situation well. Only one book in Belarusian came out for every ten books issued in Russian in 2011. Two years earlier, the situation looked better: Belarusian-language books made up 14% of titles and 23% of total circulation of books published in the country.
Table 1. Book Publishing in Belarusian, 2009-2012
|Titles (books in Belarusian)||1,884||940||1,074|
|Titles (books in Russian, exemplars)||no data||9,452||9,578|
|Circulation (books in Belarusian)||5.26mln||2.9mln||3.96mln|
|Circulation (books in Russian, exemplars)||no data||29.7mln||no data|
The situation does not worry the state authorities. The state media and officials have kept silent as they did in 2011 when the total circulation of books in Belarusian fell by 27.5 per cent in comparison to the previous year, while the circulation numbers of Russian-language books remained the same.
Mortal Laissez-Faire for Belarusian Language
The predominance of Russian language books, media and cultural products in reality is even more overwhelming than these numbers indicate. Cultural and media products in vast quantities comes from Russia itself. Moreover, taxes on books publishing in Belarus are heavier than in Russia, as Belarusian publisher Zmitser Kolar explained in his interview Novy Chas daily. It makes books from Russia – usually in Russian – cheaper.
Belarusian-language books continue to become more expensive due to their smaller circulation – they have a much more limited audience. Given these circumstances, in early the 1990s, the government did not tax the Belarusian language and children books at all. Now the state created circumstances in which Belarusian culture, as far as books and media are concerned, have few chances to be profitable.
Despite this, book publishing in Belarus has become primarily a private business. In 2009, the Belarusian Ministry of Information admitted that it was private publishers who produced the majority of books in Belarusian. The government deals with Belarusian-language books in the way that it normally handles private initiatives supporting the Belarusian language – just like it did the Budzma public campaign.
Essentially, it allows private persons do their business as long as no politics are involved. Yet the state avoids providing any meaningful kind of support. Any sign of even potential political engagement becomes a fatal omen for every campaign or organisation.
In fact, the Belarusian language-based culture has provided a powerful backbone for many people who disagree with Lukashenka's rule Read more
Of course, the Belarusian language's culture grew increasingly linked to the segment of Belarusian society which supports the opposition. In fact, the Belarusian language-based culture has provided a powerful backbone for many people who disagree with Lukashenka's rule. On the other hand, this reality contributed to the stigmatisation of the Belarusian language by the officials and Lukashenka himself has openly ridiculed Belarusian speakers.
At least some foreign donors supporting civil society and democratic values in Belarus initially understood this situation and allocated money to support Belarusian language culture in general and books in particular. This includes Pontis and the Stefan Batory Foundation who support Arche magazine and its publishing initiatives. Unfortunately, this situation has deteriorated drastically in recent couple of years, as several people working in the publishing industry, who wish to maintain their anonymity, have reported to Belarus Digest.
According to them, the new generation of donors fail to understand that supporting books in Belarusian is not simply cultural philanthropy but helps to provide Belarusians with cultural foundations to pursue change. Still, last year the Open Society Institute closed its special Belarus Project which for years provided publishers a means to publish Belarusian books.
A different system of cultural coordinates
After Lukashenka came to power, the Belarusian government in the late 1990s provided special support for Belarusian language-based culture and established its place in the first years of independence. After that, it went further and, in the 2000s, renounced almost all forms of support for Belarusian language-based culture that remained from the times of Soviet Belarus. This resulted in the collapse of Belarusian-language publications (see Table 2)
Table 2. Circulation of Books and Periodicals in Belarusian, 1990-2005
|Total Circulation of||1990||2000||2005|
|Books in Belarusian (mln)||9.3||5.9||2.9|
|Periodicals in Belarusian (annual, mln)||312.0||215.6||138.9|
Over the recent years, Lukashenka has publicly spoke in the national language only a couple of times. The Belarusian language has become rarity on TV and in public events in stark contrast to even Soviet times. Of course, the state still supports the publication of books considered to be Belarusian classics to published for schools and holds yearly the Day of Belarusian Writing in September to celebrate the first Belarusian book in published by Francysk Skaryna in 1517.
The evident ad hoc political and economic Belarusian nationalism of Lukashenka and his retinue contrasts sharply with the essentially Russian cultural foundation of his regime. It prevents the establishing of firm foundations of Belarusian statehood and makes the country vulnerable in face of foreign pressure.
In these circumstances the Belarusian people need a cultural alternative, a different system of cultural coordinates, which is precisely what Belarusian language-based culture offers. Moreover, the opponents of the current government need this cultural basis to expand its political and intellectual influence. To support Belarusian language-based culture means investing in long-term changes and development which may prove to be as effective or even more effective than financing political actors.