The Myth of Thriving Belarusian Agriculture
Agriculture was the fastest growing branch of the Belarusian economy in the first half of 2015. Many in Russia and other post-Soviet countries consider Belarus to be a model when it comes to maintaining a viable agricultural sector.
But in reality, the Belarusian government spends more on agriculture than the sector’s value added. Despite substantial subsidies many Belarusian foodstuffs cost more than European equivalents, including Polish cheese, Dutch meat, and Spanish tomatoes.
Agriculture plays a significant role in Belarusian state ideology. Almost every television news report in Belarus contains at least one reference to the agriculture sector, such as the recent story on Lukashenka teaching French actor Gerard Depardieu how to mow with a scythe.
In fact, however, Belarusian agriculture is the least effective sector of the economy. It still resembles the USSR era. Soviet-style collective farms still dominate the market and can barely operate without state subsidies.
The Least Reformed Economic Sector
The share of agriculture, hunting, and forestry in the economy has been diminishing over the last 25 years – from 23 per cent of GDP in 1990 to 7 per cent in 2013, according to the National Statistical Committee. With over 320,000 Belarusians employed in the sector last year, agriculture still accounts for quite a significant part of the economy. By contrast, in Poland the share of the agriculture sector is twice as small.
Private farmers contribute less than two per cent to the total agricultural output Read more
Salaries in agriculture remain among the lowest in the country, and hence the sector suffers from severe labour shortages. Currently, agriculture sector wages are a third of the average national salary (around $300 per month). However, earnings in this sector rose faster than the average in 2011-2013.
Agriculture remains the least transformed sector of the Belarusian economy. Private farmers, the basis of agriculture in any market-oriented economy, contribute less than two per cent to the total agricultural output. Together with production from household plots, i.e. individual gardening for one's own needs, they constitute less than a quarter of the total agricultural output. Yet state-owned collective organizations or collective organisations with significant state involvement make up the vast majority of the rest.
Agriculture has become a very export-oriented branch of the Belarusian economy, with a positive trade balance. In 2014 it accounted for $5.6bn or 15.5 per cent of total exports. The only problem is that virtually all these exports, particularly dairy and meat products, go to Russia.
Ineffective State-Owned Collective Farms
Almost all state-owned collective farms would immediately go bankrupt without state support. Only 10 per cent of agricultural firms could operate profitably without public aid, according to a study published in December 2013 by the Ministry of Economy. The absence of reforms turned agriculture into a very ineffective sector of the economy.
Paradoxically, the Belarusian government uses more resources on agriculture than it produces. In recent years subsidies for the agriculture sector oscillated between 9 and 12 per cent of GDP, according to the Ministry of Agriculture. At the same time agriculture’s contribution to GDP is less than 9 per cent.
On the other hand, with hardly any financial aid from the state private farmers have proved themselves to be more productive than generously subsidised state-owned entities. Over the last 15 years private farmers have increased production by 16 per cent annually, i.e. 10 percentage points faster than the state-owned collective farms. This financial performance also boosts arguments in favour of private ownership.
Occasionally Belarusian officials discuss privatisation of agricultural enterprises. In November 2014, Deputy Prime Minister Michal Rusy stated that nearly 30 per cent of agricultural enterprises were insolvent and said that perhaps it was time to sell them. In mid-July this year the head of Hrodna region, Uladzimir Kraucou, confessed that a third of the 150 agricultural organisations in the region cannot pay off their debts. The local authorities have considered their privatisation or at least reorganisation and have even received business proposals from investors to this end.
Commitments To Decrease Financing For Agriculture
If Belarus were to join the WTO, it would have to cut significantly its financial support to agriculture. Without the prior liberalisation and privatisation of the agricultural sector, this will cause the whole sector to collapse. On the other hand, Belarus has already begun decreasing financing for the sector, and in 2016 subsidies should not exceed 10 per cent of GDP, due to Belarus’ commitment to the Eurasian Economic Union.
Improvement of the business environment can be a successful substitute for the huge financial injections into agriculture. Making it easier to do business and providing equal treatment for all business entities may encourage Belarusian private and foreign capital to replace the ineffective companies or force them to become more effective.
For instance, during the last economic liberalisation in 2007-2010 one of the world's biggest brewing companies, Heineken, entered the Belarusian market. The company has taken a large chunk of the brewing industry, and by doing so has invested in cooperation with many Belarusian agricultural enterprises.
Private Farming Remains The Only Solution
Lukashenka’s policies have hindered the development of the private sector, particularly in agriculture. For instance, Belarus now has around 20 per cent fewer individual farmers compared to 1994 when Lukashenka was first elected as president. Officials have been discriminating against private farmers, sending inspections to their premises more frequently and subsidising predominantly the state-owned collective organisations.
For the last 25 years the authorities have tried to avoid reforming the sector. The absence of private ownership of land remains the real obstacle for the sector’s growth. The agricultural land market hardly exists. Less than one per cent of Belarus’ land areas is under the private ownership of natural persons who are citizens of Belarus. The experience of other post-socialist countries, both in Eastern Europe and in East Asia, shows that the transfer of land ownership boosts the profitability of agricultural activities.
The ability of the Belarusian authorities to maintain a viable agricultural sector remains only a myth propagated in Russia and some other countries. In fact, Belarusian agriculture survives only thanks to gigantic state subsidies. Instead of supporting the systematically unprofitable entities, the government should distribute the financial resources more equally, creating an equal market environment for both collective organisations and private farmers.
Aleś Alachnovič is the Vice President at CASE Belarus and PhD candidate at the Warsaw School of Economics, an alumnus of the London School of Economics.
Belarus and the OSCE: Peacekeeping and Elections Critisism
By the end of August, 40 long-term observers of the Organisation on Security and Cooperation in Europe (OSCE) will arrive in Belarus to keep an eye on the Presidential elections.
Since 1991 Belarus has been a member of this organisation and a constant target of criticism. This year the observers will probably not call the elections free and fair, but the Belarusian authorities hope that at least they will admit to improvements in the election campaign.
The Belarusian authorities also want to reform the organisation and call for moving its focus from elections and human rights to security.
From Love to Hate
Since Belarus is the only country in Europe outside of the Council of Europe, it has no choice but to take the OSCE seriously as it remains the largest European forum where Belarus can advance its own international initiatives and cooperate with the West without gaining Russia's jealousy.
The Vienna-based organisation includes 57 participating countries from Europe as well as Asia and Northern America. The Belarusian authorities appreciate that the decision-making process is based on the consensus of all states.
OSCE Minsk Group that facilitated negotiations between Armenia and Azerbaijan to end the conflict in Nagorno-Karabakh Read more
In early the 1990s, the relationship between Belarus and the OSCE developed well. Belarus quickly reduced its military capacity that remained in the country after the collapse of the Soviet Union, including nuclear weapons.
In 1992, Belarus initiated the creation of the OSCE Minsk Group that facilitated negotiations between Armenia and Azerbaijan to end the conflict in Nagorno-Karabakh. Like in the case of the negotiations with Ukraine, Belarus received respect from the international community for the peace initiative and contribution to European security.
The relationship between Belarus and the OSCE deteriorated with Aliaksandr Lukashenka's 1996 referendum and the dissolution of the Belarusian Parliament. Belarus, depending on the West's willingness to have a dialogue prevaricated on keeping open or closing the OSCE Office in Belarus. The biggest scandal related to the activities of Hans-Georg Wieck, who headed the OSCE Advisory and Monitoring Group in Minsk from 1998 to 2001.
Wieck worked closely with the Belarusian opposition and five days before the Presidential elections in 2001 published an article in which he accused the authorities of involvement in the disappearances of Belarusian politicians. Then Lukashenka promised "to hurl out" Wieck from Belarus after the election and actually did it.
What Belarus Wants From the OSCE
Belarusian authorities traditionally intensify relations with the OSCE on the eve of the election, although Belarus remains one of the biggest critics of the organisation. On 21 July, Lukashenka received in Minsk OSCE Chairman-in-Office, Serbia's Minister of Foreign Affairs Ivica Dacic. The next day, Belarus’ MFA Uladzimir Makiej stated that “Unfortunately, today the main principle of the organisation is to lodge claims and lay mutual accusations at each other”.
According to the website of the Belarusian MFA, Belarus "positions itself as one of the most active and consistent supporters of a comprehensive reform of the OSCE". In short, the Belarusian authorities want two things. Firstly, they want the OSCE to reduce election observation, as according to Lukashenka, "the OSCE is sometimes like a stick in someone’s hands in the run-up to the elections". On the background of the war in Ukraine, Belarus's authorities emphasise the need for the OSCE to engage in security, not democracy and human rights.
Secondly, the authorities want western members of the organisation to stop using sanctions against eastern ones. In 2013, Uladzimir Makiej stated that the OSCE has a crisis of confidence because of "the excessive politicisation of human rights issues, exaggerated attention to some issues to the detriment of others, continued geographical bias with respect to the countries to the east".
Why Belarus Welcomes OSCE Observes This Year
By late August 40 OSCE long-term observers will come to Belarus and another 400 will arrive just before the election in October. Approximately the same number of observers came to Belarus during the presidential elections of 2010 and 2006. This shows that the number of observers does not depend on the political context. It rather reflects the willingness of the authorities to show their own people that Belarusian elections are open for the international community.
Also, the authorities expect that the OSCE will note improvements. During the presidential elections in 2006 and 2010, the government conducted itself brutally in the post-election period. On 19 December 2010, according to the OSCE, "just before midnight, hundreds of OMON personnel (police) violently dispersed the demonstration." As it remains unlikely, that the opposition will hold mass protests this year, the authorities will not need to repress them.
This year, the government will use more transparent ballot boxes at polling stations and for the first time PACE observers will arrive in Belarus. So far, the collection of signatures has taken place without major obstacles from the authorities. Belarus Today, Lukashenka’s main propaganda newspaper, even positively writes about the collection of signatures of Tacciana Karatkievich, who is an opposition candidate.
If the authorities free Statkievich, the only major problems will be the transparency of vote counting and access by the opposition to television Read more
This can be perceived as steps to meet the OSCE Commitments on elections and the 1990 Copenhagen Document that outlines commitments in the field of elections and human rights. According to these commitments the OSCE actually assesses "the extent to which elections respect fundamental freedoms".
Still, these steps are not enough. For instance, the authorities retain several political prisoners, recognised by the West, including Mikalaj Statkievich, the presidential candidate for the 2010 elections. However, on 4 August, Lukashenka admitted that “question of Statkievich’s liberation can be solved in the near future”.
If the authorities free Statkievich, the only major problems will be the transparency of vote counting and access by the opposition to television. According to the OSCE/ODIHR Election Observation Mission Final Report from 2010, “the vote count was flawed and lacked transparency, which raised serious doubts on whether votes were counted and reported honestly”.
It seems unlikely that Belarusian authorities will change the procedure and that the whole election campaign will meet the OSCE Commitments for free elections. But even with lack of transparency the authorities will may hear what they want – that the OSCE has seen some improvements, and noted that gradual changes are taking place in Belarus. That may change relations not only with the OSCE, but the West as a whole.