The autumn of liberalisation – digest of the Belarusian economy
On 26 September 2017, Belarusian officials declared plans for the liberalisation of the economy by developing a new decree on freeing up Belarusian entrepreneurship.
Moreover, on 28 September, the First Deputy Prime Minister of Belarus Vasily Matyushevsky announced the government’s intensions to encourage further growth of the IT-sector.
The latest statistical figures on the development of the Belarusian economy, though optimistic, are still far from promising.
Economic growth: searching for optimism
According to the latest data from Belstat, a government agency for official statistics, the Belarusian economy is slowly starting to recover. In the first eight months of the year, growth of industrial production equaled 6.1 per cent, GDP grew by 1 per cent and the volume of foreign trade rose by more than 20 per cent (see Figure 1).
However, a deeper analysis of the figures reveals that officials’ increased optimism rests on shaky ground. First, trade turnover in 2016 dropped by 12.4 per cent, while a year earlier it declined twice as much.
Second, the rise in global commodity prices mostly explains current achievements. For example, compared to last year the price for the Belarusian refinery products rose by 63 per cent, and ferrous metals by more than a third. Overall, export prices increased by 20 per cent, while the physical volume of export supplies improved only by 3.1 per cent.
Third, Belarus’s export structure has not changed. It still comprises mostly agricultural products, refinery products, potash fertilizers, and metals. Moreover, the share of high and medium-technology goods in total volume of Belarusian exports to the EU does not exceed 2 per cent.
Finally, despite the best efforts of Belarusian officials, the share of exports to Russia in the first half of the year accounted for more than a half of total turnover (not much different from last year). Accordingly, the trade turnover with EU countries increased only by 14 per cent, with the total share equalling 23 per cent.
Therefore, any optimism about a recovery seems a bit premature, taking into account the absence of assurance that current pricing trends will continue longer into the future.
Entrepreneurship: approaching liberalisation
Meanwhile, on 26 September, the government submitted a key document to aid liberalisation of the Belarusian economy, the draft decree “On the Development of Entrepreneurship,” for consideration by Belarusian president Alexander Lukashenka .
The decree proposes the following changes. First, the government will systematise and reduce administrative requirements (procedures for obtaining certificates, approvals and other permits) in order to simplify entrepreneurial activities.
Second, the decree advocates the formation of predictable tax legislation with the aim of ensuring a stable situation in the tax sphere. In particular, the government plans to introduce a ban on the introduction of new taxes or the increase of tax rates till 2020.
Third, the decree introduces a new notification procedure (by way of “one window” services or by implementing an e-services portal) for some of the most common types of economic activity for small and medium private enterprises (household and travel services, transportation of passengers and cargo, production of agricultural goods and building materials).
Fourth, the decree cancels the need for licenses for 3 of the 36 currently licensed business activities. It also streamlines 20 additional licensing components for the remaining activities. Finally, the government will attempt to transform the economy to focus on information technologies. Particularly, the First Deputy Prime Minister of Belarus Vasily Matyushevsky has acknowledged further development of Belarus High-Tech Park.
As a whole, the decree aims to change the mechanisms of interaction between the state and businesses. The hope is to minimise state intervention in the activities of private companies and to strengthen the mechanisms of self-regulation for entrepreneurs. However, the government still insists on maintaining a level of control over the economy.
The real sector: waiting for investments
Later, on 28 September, during the Belarus Investment Forum held in Minsk the First Deputy Prime Minister of Belarus Vasily Matyushevsky praised the success of the measures taken by the government to support businesses in general.
Matyushevsky stated that Belarus occupies the 37th place in the latest World Bank’s Ease of Doing Business ranking and grades among the ten countries-leaders in the reform of legislation. As a result, the number of companies bringing in foreign capital is growing—40 per cent more in comparison with 2014.
Discussion during forum touched on several topics, including investment in the real sector, technological and human resources of Belarus, and growth drivers for the Belarusian economy. Additionally, participants have evaluated the possibility for a transition from a “catch-up development” strategy for Belarus to a “harmonious integration into international value chains” strategy, which envisions generating a stream of FDI into the country.
Moreover, the officials have stated that Belarus will continue reforms in order to support promising sectors of the economy, developing modern technologies, and increasing of the role of private sector.
However, World Bank Country Director for Belarus, Moldova, and Ukraine, Satu Kahkonen has argued that, along with the many opportunities, several risks remain in store for Belarus.
Kahkonen noted that Belarus can no longer rely on its traditional position in the market. Global driving forces have changed: the prices of raw materials will not be as high as in previous years. This means for Belarus that it cannot rely further on high commodity prices. If Belarus stops developing and reforming, it will fall into the trap of slow growth.
She added that additional growth factors for Belarus should include high level education, infrastructure development and taking advantage of its geographic location between EU and non-EU states.
In total, while the government demonstrates commendable efforts in the legislative sphere and tries to assure foreign investors with good economic development prospects, the economy still awaits more proactive steps and shows only temporary signs of recovery.
Aleh Mazol, 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)
Analytical Paper: Optimising EHU’s Impact on Belarus
The European Humanities University (EHU) was forced into exile in 2004 when the Belarusian authorities withdrew its licence. This followed the EHU’s refusal to acquiesce to government pressure to change its leadership. The exiled University found its new home in Vilnius, which is less three-hours by train from Minsk.
The current rector of the EHU should step down soon in line with the requirements of Lithuanian law, having served two terms. The Centre for Transition Studies publishes a paper authored by Yaraslau Kryvoi and Alastair Rabagliati which aims to launch a constructive public discussion on the direction of the EHU under the new leadership, to deal with the challenges facing both the EHU and Belarusian society.
The authors interviewed by e-mail and by telephone over 20 individuals related to the EHU, including its alumni, lecturers, administration, donors and well as representatives of Belarusian civil society who worked with the University in the past. Many agreed that an open discussion would benefit the university.
The EHU is an important and valuable institution for the future of Belarus. However, public information and debate about the direction of the university has been limited. Most media coverage has focused on the story of the university going into exile rather than its effectiveness. This paper intends to fill this gap.
The EHU is at a Crossroads
With no change in Belarus on the horizon, the university needs to prepare itself for continued exile. Ten years after the EHU established itself in Vilnius, many donors continue to support the EHU as they have taken natural sympathy for their struggle. However, they are now paying increasing attention to the impact of the funding, and considering in more detail whether the University could increase its self-funding.
Most media coverage has focused on the story of the university going into exile rather than its effectiveness. Read more
As this paper demonstrates, the university has recently shifted its focus from Belarus-related courses, publications, staff and the Belarusian language towards an institution aiming to cater a broader group of students from the countries of the former Soviet Union. The Belarusian component was more prominent during its early years in exile. Now the vision of the University mentions Belarus primarily as a source of students, among other students from the region rather than as the main target of its activities.
The internationalisation of the University, which features prominently in the description of the University’s vision for the future, is likely to lead to a decrease in Belarus-focused studies, staff and students. The EHU risks losing its distinction from other regional private universities, which raises the question about why it should continue to be eligible for donor’s support.
For example, Polish universities (especially private ones, like Lazarski University) have neither specific donor support, nor a special focus on Belarus. However, their prices are affordable and Belarusians are ready to pay for the benefits of an EU education. Perhaps ironically it is Lazarski University that has organised a series of conferences on historical and political perspectives on Belarus that observers argue should be the EHU’s trademark.
Another concern is that joint programmes with other universities are liable in reality only to amount to subsidising Belarusian students to study at regular regional universities rather than creating a specific Belarus focused environment.
Therefore to fulfil its role as a university in exile and centre of academic development for a new generation of Belarusians, the University should retain its Belarusian character and focus on areas of “added value” for Belarus. Rather than becoming an ordinary “internationalised” university, the EHU should learn from other successful émigré universities, notably the Ukrainian Free University in Munich, which educated generations of Ukrainians.
Towards Greater Sustainability through Focusing on Belarus
With its location away from the restrictive political climate of Belarus, areas where the EHU is well positioned to provide “added value” include political science, Belarusian history, human rights, Belarusian language and literature as well as journalism.
The EHU with its new concept of internationalisation risks losing its distinction from other regional private universities, which raises the question about why it should continue to be eligible for donor’s support.
The EHU has the potential to become the main scientific hub for Belarus, both for research and academic studies. In this way it would be ideally placed to obtain further funding (such as through EU university research programmes) or donor support (linked to democratisation in Belarus).
The EHU could work on meeting the need for high quality research on Belarus, especially linked to developing concrete plans for reforms in Belarus. Currently there is a lack of organisations that are able to perform this role.
To increase interest among young Belarusians in programmes such as political science, history or Belarusian studies the university should not only offer scholarships but also recruit and retain high calibre academics working in these areas providing them with job security guarantees typical for EU universities.
The paper suggests establishing a robust disclosure mechanism of research, teaching and policy impact based on measurable indicators. This mechanism could take the form of expanding existing oversight bodies to ensure that relevant donors, implementers, Belarusian civil society, Belarusian diaspora and the Lithuanian government all have a chance to review reports and be consulted on the most important decisions.
While the aim of a sustainable EHU, less dependent on donors’ funding, is supported, this paper argues that donors should continue to firmly back the EHU as a valuable institution, which could play a unique role in the future of Belarus. External support, however, should be targeted at the “added value” areas while other EHU programmes could be paving the way for self-funding.