Belarus' economy reaching alarming dysfunction

AFP MINSK

Belarus' iron-fisted President Alyaksandr Lukashenka's attachment to Soviet-style economic practices is driving his isolated country into an economic morass, experts have warned.

"The strategy of 'market socialism' which Lukashenka has enforced seven years in a row, is falling apart – the economy is in stagnation, the people are poor, even though he promised to double and triple salaries half a year ago," independent economist Yaroslav Romanchuk said.

By March this year, 1,098 Belarusian enterprises – nearly half of all companies functioning in the ex-Soviet republic – were unprofitable, according to the Statistics Ministry.

Factories find it hard to sell their output, and some $610 million dollars' worth of various products had piled up in storage houses by April 1.

"The main problem is that the economy is not restructured, the industry remains at a low technological level, and industrial giants continue working simply because if they stop, thousands of workers will lose their jobs," expert Mikhail Zalessky said.

"There is no small business here, and there will be no one to employ these people. So Lukashenka's policies are risky and adventurous in the extreme," he added.

So far, only 2.6 percent of Belarus' work force are officially unemployed, but experts suggest that the real figure may be far higher, as the complicated bureaucratic procedure for registering for welfare puts many off.

The cost of keeping on such an unproductive work force is becoming an increasing strain for the cash-strapped government, which also devotes subsidies to keeping the price of consumer goods artificially low.

For the moment, even with relatively low average salaries of $95 a month, the Belarus population has been shielded from poverty, but the longer reforms are postponed the more the country will dig itself into a hole, experts say.

"The situation will not get better unless someone makes Belarus a gift," economist Leonid Zlotnikov said.

And there is little hope of that, as Belarus is shunned by international lenders and got only $16 million in foreign investments in the first quarter, far below the government's aim of attracting $400 million of foreign capital this year.

The World Bank in January said in a report that the economy in Belarus, 10 years after the breakup of the Soviet Union, was "one of the least reformed" among the 15 ex-Soviet republics.

The Belarus economy grew by 4.1 percent in 2001, with industrial output up 5.4 percent, but investment pumped into the inefficient sector under the Socialist-style command economy starved investment elsewhere, the World Bank said.

Overall investment fell by 6 percent during 2001, according to official statistics.

The country's gross domestic product in 1999 represented 89 percent of its 1990 level, much higher than the average in ex-Soviet countries (62 percent), the Washington-based international lender said.

But this was mainly because the country was subsisting on subsidies granted by neighboring Russia for political reasons, including gas supplies at privileged prices and barter deals, it pointed out.

Alarmed by the gloomy statistics, Lukashenka unleashed a sharp attack on his government last month, slamming the policies of Prime Minister Gennady Novitsky and sacking the heads of four public enterprises as well as Health Minister Vladislav Ostapenko.

"Lukashenka feels that he cannot cope with the economy, that he needs to change something. But he won't change anything," former head of Belarus' National Bank Stanislav Bogdankevich scoffed.

"Belarus will continue its inefficient course and draw nearer and nearer to countries like North Korea and Cuba," Bogdankevich warned.