Government: Economic necessity vs. social obligations

Ina Ramasheuskaya

Summary

2016 was a year of interesting – albeit limited in scope – changes in Belarusian government functioning and a growing reformist rhetoric of its leadership. Social policy thus became less consistent with the planned changes. In general, anti-reform, conservative trends dominated government activity.

Trends:
Managing the old way

Belarus entered the year 2016 with a new/old government. In conformity with the law, a government resigns once a president is elected or re-elected. It does matter who is chosen as premier, vice premier and Cabinet ministers when key reforms are being discussed, as it shows what development strategy will prevail. Alexander Lukashenko was re-elected in October 2015. He took an unusual time-out before appointing a new government. No wonder the expert community was quite agitated. The suspense did not last long, though, and all members of the Council of Ministers, except the minister of trade, were simply reappointed shortly before the New Year holidays.

Presidential Chief of Staff Alexander Kosinets shaped the Cabinet’s agenda, saying that “The year 2016 will be difficult, since the processes associated with international conflicts are getting aggravated.” 1 However, according to Kosinets, the government should focus on economic problems, the more so, as the Belarusian public administration system has no big problems with staffing. “Generally speaking, we have well-trained personnel. They just need to adapt to the present day environment ... and ... take a more active a combative position to advocate the interests of their enterprises and institutions.”

Vice-Premier Natalia Kachanova, who replaced Anatoly Tozik in office this year, showed an example of such ‘combative position’ in defending the interests of her institution in 2016. With enviable energy, she rushed to justify the government’s social policy, and, in February, made several loud statements about salaries in the budget-funded sector, saying, basically, that officials and employees of publicly funded institutions “must assess the situation in the country adequately” and be satisfied with minimum salaries. 2 In Kachanova’s opinion, low salaries should be compensated by the enthusiasm of young specialists.

Decree No. 78 ‘On Measures to Improve the Efficiency of the Socio-Economic Sector of the Republic of Belarus’ endorsed by the president in February did not inspire optimism about the Belarusian leadership’s willingness to initiate reforms. Experts called the decree an example of wishful thinking right away: the president set a number of tasks to the government, and the chance to cope with them was unrealistic, to put it mildly.

In a nutshell, the main provisions of the decree are as follows: the government is to take action, as a result of which state-controlled enterprises will become profitable, exports will increase, production costs will decrease, prices will not grow, debts will be paid off on time, and 50,000 new jobs will be created every year. 3 Instead of reforms, the president instructed the government in late February to develop material production and sell commodities produced in Belarus.

Continuing to mention the welfare orientation of the Belarusian economic model, which is not subject to reform, in mid-April, the president, nevertheless, issued a decree on a gradual increase of the retirement age by three years (to 63 years for men and 58 years for women). Although all experts pointed at the ‘cosmetic nature’ of this measure, which will not solve the problem of the replenishment of the Social Protection Fund or give the people an opportunity to choose between various pension accumulation options, the decision was made without public consultation and with full support of the Ministry of Labor and Social Protection.

The poor quality of social policy resulted in aggravated problems connected with the implementation of the so-called “decree on parasites” (decree No. 3 ‘On the Prevention of Social Parasitism’ of April 2, 2015). Since the main role in identifying potential payers of the ‘tax on parasites’ was assumed by the tax authorities, many people received tax notices due to the absence of income records for various reasons (often technical). The reluctance of government agencies to admit their mistake and take a step back triggered public discontent in the first quarter of 2017.

Plans for the medium term

In the meantime, reform advocates in the government went to the media. Presidential adviser for economic affairs Kirill Rudy compiled, edited, and wrote a part of the monograph ‘Financial Diet: Public Finance Reforms in Belarus’, 4 which included recommendations on how to improve the efficiency of the use of public finance. Former Prime Minister Mikhail Myasnikovich proposed to develop the Belarusian economy through fostering high-tech industries. 5 As premier, Myasnikovich repeatedly voiced such plans, but never saw any steps in this direction. Rudy did not have an opportunity to see what his recommendations lead to either: three months after the book was published, he was appointed ambassador to China.

Unsupported by the head of state when talking about economic reforms, on which, among other things, the two main potential creditors of the Belarusian government – the IMF and the Eurasian Fund for Stabilization and Development – insisted, the government got to making plans for the period until 2020 to present them at the All-Belarusian People’s Assembly. According to the socio-economic development program for 2016–2020, Belarus’ GDP is supposed to start growing together with exports of goods and services. The fact that none of the eleven macroeconomic indicators set for the previous period of 2011–2015 was achieved 6 did not embarrass the authors of the program and did not prompt the government to think that something was wrong with the previous forecast. Experts assumed with reason that the government’s plans were based on the hope for an increase in the price of oil (from to USD 42 per barrel when the program was published to USD 65) and the Russian market would recover enough for Belarusian commodities.

A cursory analysis of the government’s role in achieving economic growth leaves an impression that different parts of the plan were written by different organizations, which never exchange ideas with each other. For example, the paragraph ‘Economic Policy Instruments’ states the intention “to differentiate the two functions of the state as regulator and proprietor”, which has been dragged about from one government plan to another. Most of the other paragraphs prescribe what commodities and product lines private companies should manufacture, what livestock production indicators agro-industrial enterprises should achieve, and so on. Despite these obvious inconsistencies in the stated goals and expected actions, delegates to the Assembly did not have any objections and approved the program unconditionally.

The government announced a new approach to the development and financing of government programs, which experts met with a certain optimism. The number of programs for 2016–2020 was reduced to 24, the connection between goals, objectives and program activities became clearer, and the tasks were instantiated with quantitative performance indicators. Funds for the programs will be allocated for two or three years instead of one. This will make it possible to plan actions with deferred results for a longer period.

The Ministry of Antimonopoly Regulation and Trade was formed on the foundation of the Ministry of Trade in September in line with presidential decree No.188 of June 3, 2016. The new ministry is in charge of public procurement and monitoring of pricing with a view to prevent monopolies. Experts welcomed both the creation of an antimonopoly agency and the intention to divide the functions of monitoring and regulation of public procurement in the long term.

In October, at the initiative of the Ministry of Economy, Council of Ministers’ decree No. 802 set out measures to increase the role of public advisory councils and transparency in drafting regulations, which change terms for doing business.

Reforming ourselves

At the start of the year, the presidential chief of staff was pretty optimistic about the quality of public administration personnel. However, government documents hinted at a possible revision of staffing approaches. In early April, the public (and a little earlier the All-Belarusian People’s Assembly) was presented with a government’s action program for 2016–2020. 7

Among system tasks, the program mentions an “improvement of the quality of state management of the economy” (whole separate chapter No. 14). The quality is supposed to be improved, among other things, through the “enhancement of the prestige of civil service, increase in the quality of staffing and civil servants’ skills.” It was planned to form a task group to work out proposals for administrative reform already in 2016. Two stages were planned: (1) audit of the functions of the state machinery and determination of key performance indicators; (2) revision of the structure of government agencies and optimization of the number of public officers. However, the program does not mention the functions and tasks of the agencies that are not directly involved in the management of the economy, so it remains unclear whether the prestige and professionalism of their representatives is supposed to increase as well.

Also, according to the plan, public officers (presumably this is about those engaged in economic management again) will be hired on a competitive basis in compliance with transparent procedures, and undergo training in business schools in Belarus and outside the country. 8 The goal of all these reforms is to create a more efficient and compact state machinery by 2020.

As in previous years, the topic of responsibility of personnel ran like a scarlet thread through president’s speeches. Above-mentioned decree No.78 has a separate paragraph on the criteria for assessing the performance of heads of various government agencies. The prime minister and his first deputy’s actions will be assessed in terms of achievement of macroeconomic stability and effective management of the government’s foreign debts; chairman of the Board of the National Bank will report on financial stability, repayments of foreign debts by the National Bank, and increase in the international reserve assets; deputy prime minister and minister of foreign affairs are to report on the growth and diversification of exports. Successes of heads of republican agencies of state administration will be assessed in terms of FDI amounts and well-targeted import substitution. Heads of state-run enterprises will give an account of net profits and a reduction in the cost of commodities, works and services, etc.

In May, Vice Premier Vasily Matyushevsky said that the government was working on proposals to reform state machinery activities. The proposals were supposed to be submitted to the head of state before June 1 and lay a foundation for provisions to be discussed at the All-Belarusian People’s Assembly. In particular, according to Matyushevsky, it was about approaches “related to a profound modernization of the functions of the government, an increase in its efficiency and improvement of the quality of public services.” These proposals were included in the socio-economic development program for 2016–2020 adopted at the Assembly.

However, officials and state-controlled media began speaking about machinery reforming and the quality of personnel on much rarer occasions since then. Only in late 2016, this topic became relevant again after Lukashenko’s meeting with his chief of staff Alexander Kosinets. When discussing personnel matters, neither of them mentioned the proposals contained in the government’s strategic plans. As usual, they went back to initiatives dating from more than three years ago, particularly the ‘staff optimization’, i. e., a reduction of the state machinery, but on condition that all officials, who will be selected for redundancy, will be given new jobs. 9

Along with these multidirectional initiatives in the area of personnel policy, several international programs were started in 2016 to enhance the efficiency of public administration in Belarus. In collaboration with the World Bank, the Ministry of Finance is going to upgrade the budgeting system, increase the transparency of budget processes and create an information management system for public finances.

The program ‘Development of Inclusive Local Governance in the Republic of Belarus’ funded by the Danish International Development Agency (DANIDA) managed by the Danish Foreign Ministry was launched in May. The project is being implemented by the UNDP in Belarus jointly with the Presidential Academy of Public Administration, Presidential Administration and the National Center of Legislation and Legal Research of the Republic of Belarus. The goal of the project is to involve Belarusians in decision-making processes at the local level.

Conclusion

The year 2016 saw increasing contradictions between the economic and social policies pursued by the Belarusian government. Members of government in charge of the economy cautiously call on liberalizing the economic sector, facilitate doing business and effectively distribute public finances, while the Ministry of Labor and Social Protection entrenches itself proclaiming conservative aspirations and wanting people tied down to jobs in the inefficient public sector. This opposition is likely to get stronger next year. Without an effective and all-encompassing social protection system that can mitigate the effects of structural changes in the economy and create a foundation for a quality labor market, effects of the poverty trap will overtake more and more regions of the country.

Increased social tensions in early 2017 largely stemmed from the non-transparency and irrationality in making state decisions based on ideologically motivated directives of the head of state and his Administration.

In 2017, the government will deal with the following main tasks: (1) harmonization of economic transformations and social policies, which contribute to a more efficient redistribution of labor in the country, and protection of vulnerable segments of the population; (2) alleviation of social tensions in society through dialogue and increased transparency in government decision-making; (3) reorganization of the work of the state machinery in order to reduce interference in the economy and improve the quality of public administration.