The past year was not marked by any noteworthy actions in any direction taken by the Mikhail Myasnikovich Cabinet, either reformative or counter-reformative. The government thus displayed a classic mode of functioning of all Belarusian governments over the past decade. Three main features of this mode can be outlined: (1) thorough elaboration of decrees of the political authorities rather than goal orientation; (2) the launch of a mechanism of shifting the burden of increasing costs of the flawed economic policy onto the population; (3) the never-ending paperwork on the planning of reforms, i. e. baking of large number of strategies and plans by the economic ministries, which do not contain realistic measures to achieve the desired state of affairs.
- The paralysis of the national policy expressed in the unconditional acceptance of most directives by top officials in the absence (imitation) of actions to implement them is getting heavier;
- The focus on reforms, which is reduced completely to the preparation of plans and strategies without any touch with reality, is basically declarative.
‘Elaboration’ of policy decisions rather than their implementation
Since the very beginning of 2014, the head of state made it clear that the Mikhail Myasnikovich Government would not stay in office for long, and make the powers of the government and the prime minister personally directly dependent on the achievement of the planned economic targets in the first, then the second and subsequent quarters. All year, the government’s efforts basically reduced to regular statements by the prime minister (of varying degrees of forcefulness) about how exactly the president’s directives should be complied with. These statements, however, did not suggest that the directives would be implemented even if it came directly under the jurisdiction of the premier.
For instance, early in the year, Myasnikovich said that an economic breakthrough in 2014 would involve outsourcing from the small business sector to serve Belarusian industrial giants. 1 However, except for the calls to small and medium businesses to set up ancillary productions, no governmental action in support of this initiative ever followed.
Moreover, this ‘strategy’ apparently contradicted the prescription given by the government in 2013, i. e. to set up self-standing full cycle productions with labor productivity equal to that in the European Union as a driving force of economic growth. 2 Ten or more facilities of the kind were supposed to be arranged in each region of Belarus. The fact that 60 (at least) high-tech facilities did not materialize in 2013 in no way affected the prime minister’s optimism about the involvement of the new driver of economic growth – the outsourced production.
The government was acting pretty much the same way on other directions. In particular, this concerns the preparation for Belarus’ accession to the Eurasian Economic Union (EEU), which took place in May 2014. Right before the EAEU treaty was signed, the Belarusian prime minister rebuked members of the Council of Ministers for their passiveness in establishing the common market without exclusions and limitations following the president’s instruction. 3 His criticism was heard, but nothing was done, actually, to further the cause. No solutions to the problems associated with the preparation for the launch of the EAEU were offered, although the coordination of activities of the Council of Ministers and shaping of the agenda come within the duty of the prime minister.
The widely praised hosting of the World Ice Hockey Championship in Minsk was a splash of color against the background of apathy and paralysis when it came to making non-trivial and difficult economic decisions. Although the entertainment program cultivated on the meager substrate of bureaucratic creativity was rather labored, the 2014 World Championship was well-organized with a healthy portion of enthusiasm. The organizing committee headed by Prime Minister Myasnikovich demonstrated that Belarusian administrators are able to effectively coordinate complex performances if set clear and consistent tasks.
Despite this particular success, which can be credited to the organizers, the Myasnikovich Cabinet was dismissed in late 2014 among other things due to the sharp aggravation of economic problems in the second half of December 2014, which was not totally the fault of the government, though, because, in many respects, it was a delayed reaction to the currency crisis in the Russian Federation. Anyways, the Cabinet was replaced, and Andrei Kobyakov, who has experience working in the government and the Presidential Administration (the main agency in charge of policy making), was appointed prime minister.
The launch of a mechanism of shifting the burden of increasing costs of the flawed economic policy onto the population
According to expert reviews, 4 Belarus’ treasury revenues were still going down in 2014 alongside a decline in performance of large enterprises (and, consequently, a decrease in the amount of the income tax paid to the budget). In this situation, the government chose the tactics of compensating for the shortfalls, imposing additional taxes and levies on individuals.
Since late August, the government kept offering various ideas on how to increase budget revenues at the expense of the population, such as to raise the income tax, increase VAT, or raise the tax on incomes from the lease of apartments, or the excise duties on tobacco products and alcohol. When announcing these changes in taxation, the government promised the targeted use of extra revenues for socially important goals (e.g. to increase allowances to large families). Whatever they say, the experience of 2013 when the authorities imposed a tax on car owners shows that no extra funding is allocated for socially important goals, while the money obtained from the raised taxes and levies are used to patch holes in the budget.
In late 2014, the government stepped up efforts to substantiate the president’s initiative to impose a tax on so-called ‘social parasites’, i. e. individuals, who are not officially employed, but enjoy ‘free’ social benefits like tuition-free education, healthcare, subsidized public transport, etc. 5 According to experts, originally conceived as a tax on the Belarusians employed outside the country (first of all in Russia), i.e. temporary migrants, this measure may increase social tension in Belarus, the economy of which continues to stagnate, as the returning migrants can become the real, rather than virtual unemployed.
Long-term plans and strategies without any linkage to the present situation
The past year saw very intense efforts of the government to develop a variety of long-term plans. At the end of 2013, Prime Minister Myasnikovich announced a concept of the development of science and economy titled ‘Belarus 2020.’ The start of the preparation of this concept was timed to the second congress of scientists held in March 2014. Delegates to the congress apparently discussed the points, which could be used as a foundation of the new concept.
However, after several statements by the premier, the work on the concept came to naught probably because the government, especially the economic ministers, already focused on elaboration of a new document – the National Strategy for Sustainable Socio-Economic Development of the Republic of Belarus for the period till 2030. An ad hoc group supervised by Minister of Economy Nikolai Snopkov and presidential aide Kirill Rudy produced a 143-page document 6 with consideration for three-week public debates, which involved international organizations and civil society.
According to the developers, this strategy will determine national priorities for the next fifteen years. Independent experts say that although the strategy provides a detailed description of the desired state of the economy, business and society by the end of the planning period, in fact, it does not contain either a description of mechanisms for the implementation of these plans, or steps to prepare executors. The fact that the government did not hold consultations with local authorities when working on the strategy means that this document is a product of creativity of top officials and does not imply its general adoption by local agencies of state administration, which is hardly appropriate considering that a significant part of the strategy-2030 describes a transformation of the economy management system specifically on the regional level.
Presidential aide Kirill Rudy was heard the most when the public administration reform was talked about. Since February, Rudy stated the necessity to educate Belarusian officials abroad, invite foreign experts (mainly for the business sector) and offer them executive positions in the state administration system. Many experts agreed that this idea was quite reasonable mainly in the segment of economic education. It is clear, however, that the ‘calling of the Varangians’ will not help to resolve problems of the Belarusian state administration. Anyway, this idea did not go further lacking any tangible implementation by the end of 2014.
As in previous years, the Belarusian government was mainly simulating the execution of orders given by the political leadership for achieving socio-economic development targets. This mode of functioning is a kind of a way to sit and wait until the rough time is over and the economic situation changes for the better. Will the Kobyakov government differ from its predecessors in this respect?
Although Lukashenko said that he was waiting for “breakthrough ideas” from the new government, the chance that it will produce any is very slim. All newly appointed ministers responsible for the economic policy are career functionaries who came to the government form the offices of deputy ministers. Their service records lack not only successful reforms, but even more or less creative solutions.
Moreover, the current phase of the acute economic crisis has caused the natural reaction of Belarusian officials towards tightened control over the economy, which contradicts not only long-term plans of the government, but also the national policies of other members of the Eurasian Economic Union. The activation of the ‘manual control’ of the country’s economy is likely to result in poorer performance of Belarus’ economy in comparison with those of the EEU partners.
The government will most likely continue to put its hand in people’s pockets under various pretexts to compensate for the shortfall of taxes resulting from the underperformance of Belarusian industrial giants. In late 2014, officials started talking about a tax on money borrowed by individuals, and, in April 2015, Alexander Lukashenko endorsed decree No. 3 On prevention of the social parasitism. No doubt, the government still has plenty of such ideas.
It is obvious that in the current situation, statements about the coming ‘breakthrough’ in economic development, stimulation of new sources of economic growth, etc. made by senior officials are nothing but noncommittal slogans, which do not affect the foundation of the Belarusian socio-economic model even in its declarative dimension. The cabinet ministers interpret this stage of the economic crisis not as systemic, but as temporary and ‘caused by external factors.’