By David Marples

Tuesday, August 14, 2007

In the aftermath of the latest round of the ongoing gas dispute with Russia, the Belarusian Ministries of Labor and Social Protection and Statistics have provided figures on the economic and demographic situation in the country that shed a favorable light on living standards and economic progress in the country. Added to President Alyaksandr Lukashenka's comment that the payment of debt to Gazprom has not had any impact on internal stability (Belorusskie novosti, August 11;, August 10), the authorities are assuring citizens that the government has overcome this "minor crisis."

The figures are reminiscent of Soviet-era accounts in painting a uniformly rosy picture. Over seven months of 2007, GDP rose by 8.8% compared to the same period last year, keeping pace with the official prognosis of 8-9%. In this same period, industrial output increased by 7-8% and consumer goods output by 6.2%. Production of food goods fell slightly to 99% of the 2006 level, but labor productivity increased by 8%, within the range of the official target of 7-8.6% (Belorusskaya delovaya gazeta, August 11).

To these figures can be added the surprising revelation that the demographic problems the country has faced for the past 12 years appear to be abating. According to the authorities, over the first six months of 2007, the national birth rate has risen by 108.8% compared to the same period in 2006. The biggest rise is in towns (109.8%), but is still notable in rural regions also (106.2%). The most significant improvements are to be found in Homel and Brest oblasts, whereas Vitsebsk region experienced a net loss once again. In turn the mortality rate has dropped to 95.8% of last year's level with the only significant rise to be found in Minsk. According to the Ministry of Health, the average lifespan for Belarusian men is 63.3 and for women, 75.5 (Belorusskaya delovaya gazeta, August 11; Belorusskie novosti, August 10).

Reportedly, the reason for such a dramatic turnaround is to be found in the National Program for Demographic Security, 2007-2010, in connection with which the Health Ministry has allotted payments equal to five minimum salaries ($432) to families for the birth of a first child and seven ($605) for the second. A program is being elaborated to provide free food for children during the first year of life. Still the figures cited above do not denote a positive population growth and the assessment of the effectiveness of the program seems premature.

The number of people working in the Belarusian economy has risen from 4,362,000 (2006) to 4,409,200, and it is anticipated to increase to up to 4,448,000 in the future with trade, construction, and industry taking up the lion's share of employees (BELTA, August 11). However, such figures are not an indicator of economic efficiency and only about one-third of Belarusian industries are operating at a profit, and evidently even those are not always taking advantage of government support. Deputy Minister of Economy, Tatsyana Starchenka commented that in the current period, 93 important investment projects are under way, which include the modernization of several large enterprises, including "Belarus Potassium," "Belarus Tires," the Minsk thermal electric station, Minsk Automobile Factory (MAZ), and a newsprint factory in Shklou (Belorusskaya delovaya gazeta, August 11).

The rise in energy prices has not yet had a serious impact on the Belarusian economy. However, the current emphasis on government achievements hardly masks the obvious problem: the failure to modernize and privatize companies. Foreign investment has led to some joint ventures, including a Chinese-Belarusian enterprise to produce home appliances, which is to be formed on the basis of the Horizont factory. Venezuela is also prepared to extend credit of $500,000 at an interest rate of 3.5% over 15 years, which is partly directed toward the establishment of joint enterprises in the South American country (Belorusy i rynok, August 6-13).

But Belarus needs cash and credits badly. According to one report, the country has gold reserves amounting to $3 billion, and thus the recent crisis with payments to Gazprom may have been exaggerated. On the other hand, these reserves could become depleted rapidly. The foreign trade and goods deficit in the first five months of 2007 was $881.6 million and is expected to rise further by the end of the year (BELTA, July 31). In addition, economic relations with Russia are clouded by fears of the larger country's political goals. As one writer noted, the two presidents do not seem to be on the same wave length (Belorusy i rynok, August 6-13) and the state enterprises of Belarus could easily fall prey to Russian businesses, enhancing the political leverage of Russia if the government is forced to de-nationalize key enterprises.

Lastly, the Lukashenka regime's political power rests largely on its image of fostering prosperity and stability. Reports of glowing successes are obligatory in order to shore up confidence in the government. However, they belie very serious problems, particularly outdated factories and a shortage of ready cash. Venezuelan friendship is beneficial but small-scale, and the Chinese are not yet ready to make major investments in Belarus. The Lukashenka regime cannot continue to report such "successes" indefinitely, especially once it starts to pay world prices for gas supplies. To date there is little sign of any solution to these underlying problems.