In 2012, the government as usual played second fiddle to the Presidential Administration, and even the few top ranking officials who used to be thought of as “cautious reformers” seem to have lost any hope of lobbying any changes whatsoever. At the same time, the government stopped taking even remotely seriously the non-stop “last warnings” coming from the president as it became obvious that no government – no matter how talented – could achieve the socioeconomic targets set for the year 2012.
The scant attention paid to the “most ruthless commands” and “final warnings” obviously did not escape the Head of state’s notice and led to the record number of “on the spot” dismissals.
The president’s growing concern was also caused by visibly shaping alliances between directors of state-run enterprises and government officials who were cautiously lobbying privatization, often on behalf of Russian businesses.
The government led by prime minister Myasnikovich focused on three major tasks: (1) to keep looking for external sources of financing, (2) to “buy” the loyalty of the directors’ corps as potential partners in privatization programs (carried out under the guise of modernization), and (3) to retain control over the socioeconomic situation.
- The deepening crisis of relations between the government and the Presidential Administration, with the signs of the government neglecting the president’s instructions;
- The continued public policy crisis where the few reformers in the government still have their hands tied and the government overwhelmingly busy maintaining the feeble status quo;
- The imitation of modernization efforts aimed at replacing the ideological model of a social (welfare) state losing its economic foundation, and infusing enthusiasm in the bureaucracy and directors’ corps.
Looking for external sources of financing
The problem of external funding arose again in all its acuteness in mid-2012, when it became apparent that Russia would not be able to shush the media uproar about the “solvent and diluent business” without serious damage to its image. 1 Around the same time, upbeat media reports on the speedy recovery of Belarus’ economy thanks to the streamlined governmental regulation and effective work of public officials, once again were replaced by explanations for the need to seek external funding.
Although the regular tranches from the EurAsEC Anti-crisis Fund were coming almost in time – without regard to Belarus fulfilling (or rather failing to fulfill) its obligations before the Fund – the country was once again experiencing a widening trade deficit and therefore needed to secure external financing to cover the gap. Already in August the Prime Minister expressed his dissatisfaction of his officials’ performance and the way public funds were used by state-run enterprises. 2
Also around this time the Cabinet publicly proclaimed the necessity of a large-scale upgrade of Belarus’ production capacities. Meanwhile, the old controversies between the president and the government – on where the funds for this monetization and also for maintaining the living standards should come from – were stirred up again. Myasnikovich in particular continued to stress the need to attract foreign investments and carry out privatization, whereas the president insisted that it is possible to boost hard currently earnings through increased exports. Several times it came down to direct refutations of each other’s statements. For instance, during the Investment Forum in November, Myasnikovich said that “following the president’s instructions, the government lifted all restrictions on the privatization of state-owned enterprises ... Any enterprise can now be privatized.” Barely a day later Lukashenko refuted this statement by claiming that only a few select enterprises are available for privatization.” 3
Finally, the president’s position on the funding source prevailed, at least verbally. When meeting with students of the Belarusian State University of Informatics and Radioelectronics in late December (literally on the next day after coming back from Moscow), Lukashenko announced that the Russian government agreed to allocate USD 2 bn for modernization of Belarusian enterprises. 4
On three occasions in 2012 – in February, May and June – the government gave government agencies the deadline of one month to produce comprehensive plans for modernization of existing production facilities and creation of new ones. 5 “Every enterprise should have a modernization plan,” Mikhail Myasnikovich said. “All plans should be individualized, but at the same time have shared goals and output targets that can be monitored.” 6 The Cabinet’s resolution issued in September assigned the key enterprises to individual high-ranking officials personally in charge of modernization there. 7 Special emphasis was put again on investment projects: the premier insisted over and over again that the enterprises should secure external sources of funding through their own efforts instead of relying on the state budget as they are used to.
Throughout the autumn, Myasnikovich wooed potential investors, both abroad (in Vietnam, Myanmar, Kazakhstan, India, and Bangladesh) and at home. What he said to them during this period could be perceived as a cautious suggestion to bypass the president’s absolute authority on approving investment projects.
For instance, at the VII Belarusian Investment Forum in Minsk the Prime Minister suggested that investors address him personally with proposals and questions. “Please contact my office should you encounter any problems with investment projects, or if you have any suggestions how to improve the investment process. Let me know if you have an idea for investment project. Write me about that,” he said. Economy Minister Mikalai Snapkou echoed the Premier during the Global Entrepreneurship Week. He called on investors “not to politicize routine business processes” and “not to bother the country’s leadership.”
Judging by the frequent statements that “nomenklatura privatization” and “attempts to sell the country” would not be tolerated Lukashenko did realize that the modernization program could pave the way for loosening Presidential Administration’s centralized control over the bureaucracy and directors’ corps. Not coincidentally, throughout the year, especially in its second half, the president made frequent trips to the regions visiting state-run enterprises where managers were fired and appointed with a stroke of the pen. 8 However, despite such harsh steps and promises of the most brutal punishments in case of failure, one could not escape the impression that all those fireworks no longer made the subordinates shiver. It often turned out that the fired directors continued to work as if nothing happened, and nothing really changed at the poorly managed enterprises. 9
The Head of State also tried to stimulate enthusiasm of officials financially as he sensed that public excoriations no longer have the desired effect. Pay rises under the pretext of eliminating redundant staff were discussed all year round, and top ranking officials were given new extra earning possibilities through memberships in a variety of supervisory agencies, councils and banks all the time.
Retaining control of the socioeconomic situation
The clash of opinions between the government and the president became even bitterer by the end of the year. Addressing the audience at the Investment Forum in November, Mikhail Myasnikovich said that the real GDP growth will differ from the forecast at the year’s end, but emphasized that the government prioritize quality over quantity. “Small fish are sweet. We should have real economic growth. We believe this year Belarus’ economy will recover, so our paramount goal is to ensure steady economic growth, real economic growth,” he said. 10
However, while hearing Myasnikovich’s report just a few days later, the president shook this assuredness off the premiere and demanded in a categorical manner to comply with all the targets set for 2012, especially GDP growth. The prime minister assured the president that all his orders would be executed without fail, although by that time GDP growth in the first ten months made up 2.5%, and no miracle could bring it up to the planned 5.5% in the remaining two months. 11
The miracle of course did not happen, and the GDP growth rate was still at the level realistically expected by the government at the end of 2011. Surprisingly, the government – and the premier – retained their jobs, and in early 2013 the president strongly denied that he ever tried to influence the government’s economic plans in any way. 12
When it came to foreign investors, the government and Myasnikovich personally had to smooth down image-damaging effects of the presidential decision on the nationalization of confectioneries Kommunarka and Spartak, which contravened the law, interpreting it as a one-time and carefully thought-out step. 13 Despite Myasnikovich’s assurances, this nationalization apparently left potential investors shocked. Belarus’ greatest attraction – the possibility of high returns secured by “special” business relationships – showed its downside.
The high rate of real unemployment and its consequence – labor leaving the country – did not discomfort the government much despite clearly being a time bomb for the national economic development. It looked like the government has accepted the outflow of in-demand specialists like builders, doctors and teachers as a necessary evil and even tried to find a bright side in that. 14
In the social sphere, Vice Premier Anatoly Tozik was the major newsmaker of the second half of the year. Tozik served as ambassador to China in 2006–2010, and made himself a name as a propagandist of China’s experience in different areas of social policy. His statements about eradication of welfare dependency, reduction in the number of free-of-charge services provided by the state, termination of funding of higher education for the professions which he claimed the state does not need caused much alarm as they were inconsistent with the government’s social policy (at least the one proclaimed officially). 15 He declared that “the social sector no longer had the right to burden the real sector of economy” which gave many analysts a reason to say that the socially oriented model of Belarusian state begins to give way to an industrial and, particularly, export oriented model.
In none of his numerous speeches the Head of State took an issue with the vice-premier’s controversial statements (until spring 2013).
In one stark example, at the meeting with students of the Belarusian State University of Informatics and Radioelectronics in December Lukashenko raised the question of the cost of education in Belarus. “We should slow down the increase in tuition cost. Because we have already inflated the price of education so much that we will soon be ahead of the rest.” The government however ignored this hint. The yearend saw another rise in tuition fees. When asked by reporters how this was consistent with the position of the Head of state, Minister of Education Siarhei Maskevich said there are no resources to cut the fees, and there was no need either. 16
In 2012, the public administration in Belarus was still concentrating on preservation of the status quo despite the repeated statements about the planned modernization of the country. Interests of top officials seemed to clash with the interests of the political leadership. Their future relations will be almost entirely determined by Russia’s position on privatization of Belarus’ key enterprises.
If the Russian government chooses to maintain the policy of granting loans to Belarus with minimum obligations, the top-level bureaucracy and directors would not be ready to openly protect their own privatization interests, instead preferring to participate in the distribution of funds under the guise of modernization programs. The balance of power between the political leadership and the government may be seriously disturbed should the Russian authorities pressurize Belarus to make it surrender – in one form or another – the most attractive enterprises to Russian companies in exchange for loans and other kinds of economic support. Once a sufficient number of officials come to the conclusion that Belarus almost completely depends on the attitude, or, to be more exact, the appetite of the Russian leadership, they are likely to attempt to secure their future well-being by lobbying and advancing interests of Russian companies. It will be clear to what extent these aspirations are common among top ranking officials in the Belarusian government as soon as in mid-2013.
Public administration development in Belarus is thus entering the phase of uncertainty. It is premature yet to talk about a split inside the ruling elite, but the very fact of doubting its integrity already reflects a fundamentally new situation. The top bureaucracy does not look ready enough to unite and stand up for a common position, and moreover, there is no reason to assume that it will happen any time soon. At this stage, it is clear that the government lacks strong-willed reformers capable of sacrificing political leadership’s favor for the sake of pushing through the needed reforms.
The increasingly clear aspiration of the bureaucracy to make personal provision for the future and explore all possible options to secure their own prosperity was the most serious negative trend of 2012, which is likely to continue in the coming year as well. The situation of 2013 will depend on what Belarusian “apparatchiks” will choose as the most promising option: the good old-fashioned tapping Russia for loans, privatization (nominal or formal) in collaboration with directors, or privatization enforced by Russia.