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GOVERNMENT: LIBERALIzATION LIGHT
Polina Makarova
Summary
For the Belarusian government the year 2017 was a year of ambitious plans to remove barriers to business, engage experts in drafting bills, and carry out a large-scale 'optimization' of the state machinery. On the other hand, the year was marked by mass protests against decree No.3, the most questionable in its essence, ill-conceived in terms of execution tools, and massive in terms of encompassing normative legal acts in the history of Belarus. Efforts made to remove barriers to private entrepreneurship were a government's matter-of-course response to the problems of hidden unemployment and poverty in the regions that could no longer be ignored. The shift of attention to the so-called new areas of the economy - primarily the IT industry - was logical, given the paralysis of public sector reform. According to this new economic strategy, the private sector of the economy as a whole and the IT industry in particular will cover the costs incurred by state-owned enterprises.
Trends:
• The dominance of political over economic conditioning persisted: directive increases in wages outstripped economic growth;
• NGOs remained a junior and unequal partner in public consultations with the state regarding economic policy issues;
• The state administration reform came to nothing but insignificant staff cuts in government agencies that did not change the system of assigning objectives and performance evaluation.
Public consultations, light version
Mass protests against the decree on 'social parasites' across the country, including district centers, which, unlike the capital and regional centers, have never been too much inclined to protest, in many respects determined the vectors of government's efforts in 2017. In order to bring down public outrage, the authorities resorted to the crackdown scenario on the Freedom Day, March 25. Unleashed police brutality and hectic mass arrests alerted even the most loyal European politicians. Both the government and the Presidential Administration drew conclusions from what they saw, one of them is that the habit of testing legislative
initiatives right on people without a preliminary assessment of possible impacts can exhaust the patience of Belarusian society, which seemed to be able to tolerate anything.
The head of state voiced dissatisfaction with the performance of the country's major think tank — the Information and Analytical Center under the Presidential Administration — as far back as February. 'It is supposed to be the best expert analytical center. What analysis they produce there? What kind of studies? Who needs them?' he said.1 Following the mass protests, at a meeting on the development of Belarusian science, Lukashenko stressed the need for consultations with experts in developing normative legal acts that was an apprehensive response to the fiasco of the botched 'decree on parasites.'2
The univocal public rejection of decree No.3 produced two main results. Firstly, the decree was de facto frozen and only reappeared profoundly revised in January 2018.3 Secondly and more importantly, state bodies received an incentive and a kind of carte blanche for holding consultations with the public and experts when drafting regulations. A number of interdepartmental advisory groups, which, along with representatives of state bodies, included experts and heads of some public organizations, were formed in early 2017.
It became known in spring 2017 that, on behalf of the president, the government was working on a package of documents (presidential decrees) meant to legislatively define minimum requirements for doing business, give way to private entrepre-neurship and improve the investment climate. According to Prime Minister Andrei Kobyakov, Lukashenko also instructed to
«Лукашенко недоволен работой некоторых организаций Администрации президента.» БелаПАН. 6 Feb. Web. 28 Mar. 2018. <http:// belapan.com/archive/2017/02/06/887405/>.
«Президент: необходимо активнее привлекать ученых к решению важнейших государственных задач.» БелТА. 7 Apr. 2018. Web. 28 Mar. 2018. <http://www.belta.by/president/view/prezident-neobhodimo-aktivnee-privlekat-uchenyh-k-resheniju-vazhnejshih-gosudarstvennyh-zadach-241633-2017/>.
«Сбор с тунеядцев отменен. Президент подписал декрет №1.» TUT.by. 25 Jan. 2018. Web. 28 Mar. 2018. <https://finance.tut.by/ news578412.html>.
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organize a public discussion of the draft decrees in April-May.4 The president also stated the need to increase the role of the Presidential Administration's Entrepreneurship Council. Sitting in the Council were more than 20 persons, large businessmen among them, including those who fell from grace recently. In October, 60% of its members were replaced, and the Council was given the right to send proposals to state bodies. Its budget remained unspecified, though. It also remains unclear how to make government agencies respond constructively to the Council's proposals.
The appointment of Irina Kostevich as minister of labor and social protection in March 2017 gave rise to some hopes for a more substantiated social policy. She held high offices in the National Statistics Committee for almost a decade and served as deputy minister of economy for two years. Some experts expected her to take first steps in creating an adequate system of protection and support for the unemployed, first of all by increasing unemployment benefits. In early 2017, the ministry made recommendations on the development of the unemployment insurance system to meet the 'market requirements'. Those who lost their jobs were supposed to be paid up to 60% of their previous wages while looking for new jobs. However, as soon as May, Kostevich told parliamentarians that unemployment benefits would not be raised until the government approves the unemployment insurance bill.
Narrow-scope consultations with the public and experts also covered a number of other social policy areas, in particular planned innovations stimulated by the support of international institutions. The Ministry of Economy announced consultations with commercial banks on a women's entrepreneurship development program, and the Ministry of Labor and Social Protection initiated the formation of an ad hoc group to study paternity leave options. Along with state officials, the group included representatives of trade unions, employers' associations and women's organizations.
«Кобяков: Проект декрета "О развитии предпринимательства и исключении излишних требований, предъявляемых к бизнесу" предусматривает кардинальное изменение механизмов взаимодействия государства и бизнеса.» БелаПАН. 20 June Web. 28 Mar. 2018. <http:// belapan.by/archive/2017/06/20/908528/>.
Lively interest was aroused by the new composition of the public council at the Ministry of the Interior announced in November 2017.5 The new council was composed of representatives of NGOs (from Gender Perspectives to the Belarusian Society of Hunters and Fishers) and the leadership of the High-Tech Park.
Optimization, light version
Former vice-premier Natalia Kachanova was appointed presidential chief of staff in early 2017. She was given several conflicting assignments: renewal (recruitment of new people), optimization (understood as the dismissal of those already working) and de-bureaucratization (a reduction of state bodies' functions and transfer of some of them to enterprises).
The situation with the renewal and de-bureaucratization was not made clearer in 2017, although a task group chaired by Kachanova was formed to simplify administrative procedures for business. The optimization seems to have acquired its usual meaning of downsizing.6
By May, judging by the chief of staff's reports, optimization took place in the Administration itself, and only detailed plans were drawn up in relation to other state bodies and organizations. The president categorically forbade raising civil servants' salaries before the optimization is completed. This suggests that pay rises from the funds saved as a result of staff cuts (as in 2014) was the main goal of the optimization, although de-bureaucratization and enhanced performance were officially prioritized.
As soon as November, according to the available statistics, the nominal salaries in state administration bodies increased
«Состоялось заседание общественного совета при МВД в обновленном составе.» Министерство внутренних дел РБ. 14 Nov. 2018. Web. 28 Mar. 2018. <http://mvd.gov.by/main.aspx?guid=254273>. «График совместных заседаний аналитических групп по упрощению административных процедур.» Бизнес-союз предпринимателей и нанимателей им. Профессора М.С. Кунявского. Web. 28 Mar. 2018. <http://bspn.by/fs-po-uproshcheniyu-administrativnykh-protsedur/1397-grafik-sovmestnyh-zasedanij-analiticheskih-gmpp-po-uproshheniju-administrativnyh-procedur>.
37.1% and real ones 30.8%.7 The correlation between the rise and the reduction in the number of officials remains nontransparent, although some assumptions can be made, for example, judging by such documents as the Council of Ministers' resolution on measures to optimize the government agencies system issued in May,8 according to which employees in some positions in state organizations lost the status of civil servant and, therefore, were not accounted as such.
Some government agencies reported on optimization individually. Foreign Minister Vladimir Makei said the MFA personnel were reduced 30% and the staff of embassies and consulates by 15%.9 It remains a mystery how this reduction is supposed to enhance their efficiency and the de-bureaucratization of the Foreign Ministry and other agencies.
Economic liberalization, light version
The economic bloc in the government traditionally worked in two actually different directions. The first task set by the head of state in March was to achieve an average wage of 1,000 Belaru-sian rubles by the end of the year. The second one was to ensure sustainable economic growth by the end of the year.
Kostevich described the first task as 'hard' and linked the increase in wages with the adoption of more effective management practices. Economy Minister Vladimir Zinovsky reminded that this target would be impossible to achieve without higher labor productivity and boosted exports of quality commodities.
According to the forecasts for 2018 that the Ministry of Economy made in May, the second task seemed more feasible, although all growth scenarios were based on the assumption
«Зарплаты чиновников госуправления демонстрируют рекордный рост.» TUT.by. 25 Oct. 2017. Web. 28 Mar. 2018. <https://finance.tut.by/ news566501.html>.
«Оптимизация госаппарата в действии. Каких работников исключат из числа госслужащих.» TUT.by. 31 Aug. 2017. Web. 28 Mar. 2018. <https://finance.tut.by/news558300.html>.
«Центральный аппарат МИД Беларуси по итогам оптимизации сокращен на треть.» БелТА. 18. Jan. 2018. Web. 28 Mar. 2018. <http:// www.belta.by/politics/view/tsentralnyj-apparat-mid-belarusi-po-itogam-optimizatsii-sokraschen-na-tret-284996-2018/>.
that oil prices will stabilize, Belarus will enter into advantageous economic agreements with Russia, and Belarusian products will be in higher demand in foreign markets.10
Almost all these factors are beyond control of the Belarusian government, being just a reflection of external economic trends. And yet, according to independent experts, systemic economic reforms can result in a rise in wages provided that there will be a favorable market behavior, but wage hikes can quickly bring down the modest achievements in the economy.
It seemed early in the year that the economic bloc would primarily focus on these two tasks and Lukashenko's order to control prices, but one more important task was outlined closer to the end of the second quarter: to prepare a package of decrees aimed at simplifying requirements to businesses and fostering entrepreneurship. Two expert groups working on the decriminalization of economic risks held a joint meeting in early summer. The first group was working on proposals to decriminalize economic risks of economic entities, and the second one was working on improving administrative liability provisions. Along with civil servants, both included representatives of business unions and industrial associations.
Concurrently, business associations proposed to establish the institution of an ombudsman to defend the rights of entrepreneurs and resolve issues that arise in the relationship between businesses and the state. However, despite the demands of international organizations (including current and potential creditors), business liberalization in Belarus cannot yet go that far and make the business community and the state equal partners. It is no coincidence that at the end of the year, in response to the reminder of the promise to transform the Entrepreneurship Council under the Presidential Administration into the institution of business ombudsman, Lukashenko said that there was no need for such an institution, since he is the best ombudsman himself.11
«Минэкономики: Каждый из сценариев прогноза на 2018 год предполагает рост экономики.» БелаПАН. 19 May 2017. Web. 28 Mar. 2018. <http://belapan.by/archive/2017/05/19/903760/>. «Лукашенко считает, что в Беларуси есть уполномоченный по проблемам предпринимательства — он сам.» TUT.by. 22 Dec. 2017. Web. 28 Mar. 2018. <https://news.tut.by/economics/574228.html>.
The package of decrees on stimulating entrepreneurship was signed in late November. Decree No.7 'On the Development of Entrepreneurship' was the main one, although genuine interest was also stirred up by decree No.8 'On the Development of the Digital Economy' signed later in December, which provides for significant privileges for the IT sector and offers unprecedented opportunities for companies dealing with crypto currencies.
According to the statement made by the economic leadership of the country right after the decrees were endorsed, the government expects that the effect of the new regulations will not be long in coming and will stimulate economic growth as soon as the first half of 2018.12 International and independent experts thus warn against the intent to immediately take advantage of the expected fruits of business emancipation, and to issue directives on increases in wages and investments.
Conclusion
In 2017, the government set itself ambitious tasks, primarily in the economy. The orientation towards new drivers of economic growth (entrepreneurship and information technologies) is expected to remove the urgency of such problems as the un-reformed public sector of the economy and, consequently, its inability to fulfill its social obligations (employment above all). However, it is still possible that the political leadership will want to reap the fruits of economic reforms before these fruits ripe, and, by doing so, will once again jeopardize the business and investment climate in the country.
In our opinion, the main objectives of the government in 2018 are (1) reconsideration of approaches to social policy, which should play the role of a buffer in the period of unsustainable economic growth and reduction of state support for unprofitable enterprises, (2) alleviation of social tension in society through expert and public discussions of decisions to be made, and (3) public administration reform with a view to really enhance the performance of public sector entities.
«Замминистра экономики ожидает активизацию предпринимательства в связи с принятием декрета № 7.» Naviny.by. 1 Dec. 2017. Web. 28 Mar. 2018.
