Why Viciebsk Region Lags behind
According to official statistics for April, Viciebsk region owes more money to public sector employees than the rest of Belarus combined. 133 enterprises from the region owe $3m to their workers. One employee even climbed on a crane to demand payment of his salary arrears.
Currently a quarter of enterprises are loss-making and some are even bankrupt. Even Naftan refinery, the major enterprise on which the whole region remains over-reliant, made 30 times less money in 2015 than in 2014.
The region is experiencing depopulation, and property prices in Viciebsk have dropped more than in other Belarusian towns. It seems that with the outflow of human capital and in the absence of moves to improve public administration and the economic system, the region has no future but further degradation.
Region of Lukashenka’s birth and Naftan refinery
Viciebsk region, located in the north west of the country, is the only Belarusian region which borders three other countries: Latvia and Lithuania to the north and Russia to the east.
A few well-known people have origins in the region, such as artist Marc Chagall, writer Vasil Bykau – probably Belarus' best – and Belarusian president Alexander Lukashenka.
The region has quite poor soil and a cold climate, so agriculture is not its strong point. However, Viciebsk region has a developed industrial sector, especially its oil and chemical industry. The Naftan refinery based in Navapolack is one of two Belarusian refineries, surviving on cheap Russian oil and significantly contributing to the state budget.
Like all other Belarusian regions except Minsk, Viciebsk has been facing depopulation for a long time. According to official data, between 1996 and 2016 the region's population decreased from 1.4 million to 1.2 million.
How life became worse in Viciebsk
All Belarusian regions are suffering from the economic crisis more than Minsk. According to official statistics, salaries dropped by several percentage points more in the regions than in the capital and migration is flushing out the human capital needed for regional development. But there are a few bits of evidence that show that Viciebsk region is experiencing these pressures more than other regions.
In April 2016, 167 Belarusian enterprises owed debts to employees, according to the Belarusian Statistical Committee (Belstat). 133 of them were based in Viciebsk region.
A number of workers have not received payment for several months and feel increasingly desperate. On 28 April, a Viciebsk resident climbed on a crane in Minsk demanding payment of the $4,000 that he was owned from his employees.
Companies are failing to pay wages because many of them remain heavily in debt. Naftan refinery traditionally provided salaries and contracts for the entire region. But in 2015 the enterprise earned only $4m, 30 times less than in 2014. The company has also been subject to several corruption investigations in recent years.
As Naftan's income has significantly reduced, many other companies have became loss-making. According to Mikalai Snapkou, deputy head of the Presidential Administration, more than a quarter of the region's enterprises worked at a loss in 2015. Several companies are undergoing bankruptcy or readjustment.
One story stands out here. On 10 June, a Belarusian court will announce its decision on Hanna Shareika, former member of the the upper chamber of the Belarusian parliament. Previously, she chaired the Viciebsk broiler farm, which was then one of the most profitable enterprises in the region. But after Shareika’s arrest in 2014, the company became loss-making.
According to Shareika, the company lost around $12m in a year and a half. So far, the Court has dropped most charges against Shareika and the whole trial illustrates that law-enforcement agencies by their actions are contributing to weak economic development.
The entire region is losing hope for the economic future, so even the prices of apartments have fallen here more than in other regions. According to Realt.by, the major site for real estate in Belarus, prices for apartments in Viciebsk have fallen by 50 per cent over the past two years. At the same time, 1,100 fewer apartments were built in Viciebsk in 2015 compared to 2014.
How to break the pattern
Viciebsk's development strategy remains similar to other regions. The main difference is that low oil prices have made the problem obvious. And the public administration cannot recover economic growth, as the Belarusian economy remains over-dependent on a few state-run enterprises like Naftan. So there is no solution other than liberalising the economy and making it more diversified.
Apart from changes to the political economy, Viciebsk region needs new managers with better ideas. Currently, rulers of the region and central government lack good policy proposals for how to fix the problem.
Officials' statements only set different targets. According to the chairman of the Viciebsk Region Executive Committee Mikalai Sharstniou, "200 enterprises should be created in Viciebsk region in 2016". Meanwhile, according to deputy head of the Presidential Administration Mikalai Snapkou, "investments in the region should not be less than $2.5bn in 2016-2020".
It is no accident that these officials use the passive voice in their statements. No one is taking responsibility for creating these enterprises or bringing in investment. Free elections, or at least co-option of competent representatives from the opposition elite, would bring more accountability and transparency to public management.
But while such changes remain unrealistic, ordinary people have no choice but to leave the region. In just 15 years, the number of school children has dropped from 204,000 to only 111,000 in 2015/2016. There are several factors behind such dramatic depopulation, but one thing seems obvious – with the flight of human capital and without real changes, Viciebsk region will further deteriorate.