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July 24 – July 30, 2017

Belarusian state is gradually replacing inefficient public sector with loyal large business

The situation has not changed
Belarusian state is gradually replacing inefficient public sector with loyal large business

Last week, the following trends developed: the persecution of public managers on corruption charges, this time, in the financial sector has persisted; the IT industry has anchored as one of the main drivers of the economy; the authorities have revised their economic policy approaches with a stake on large private business in re-industrialization projects.

The Belarusian leadership has enhanced discipline in the financial sector through anti-corruption persecution of bankers. Amid dwindling state resources, the state continues to redistribute resource flows among businesses engaged in public procurement through power pressure and corruption charges. For instance, a letter of the State Control Committee with the attached anonymous letter about the purchase of computers at allegedly inflated prices, prompted the criminal proceedings against former leaders of the Belarusbank. The country’s top leadership has de facto authorised the power block’s involvement in the redistribution of financial flows, which helps retaining their loyalty.

The authorities use the IT sector as a test ground for the subsequent adjustments in the state’s economic policy. The IT is represented mainly by loyal private companies. The country’s top leadership aspires to preserve the informal agreement with the IT business on non-interference with politics in return for comfortable environment for further development. In addition, large IT businessmen have been authorised to expand their activity to other economic sectors, for instance, the president gave the go-ahead to Viktor Prokopenia to purchase the Paritetbank for USD 50 million.

Amid discussions about the IT development, industrialists have lobbied yet another project within the re-industrialisation framework. The president has supported businessman and MP Shakutin’s idea to build another tractor plant in Belarus. The Belarusian leadership lacks a common vision of the re-industrialization and is duplicating industries which would compete with the already existing industrial giants. The government managed to convince the president to do so due to the signs of some economic recovery and the growth in exports of Belarusian products. That said, a tied Chinese loan has been granted to a private company Amkodor, not the state MTZ. This could indicate that the president, who always sought to retain a high share of public sector in the economy, has somewhat changed his views.

Apparently, the top leadership is beginning to test a new economic model predominated by large private business under the government’s efficient control. Meanwhile, the authorities aspire to preserve the social function of industry, i.e. absorbing excess labour and preventing the growth in social tension. The beginning of the investment project this year would also create a positive background for the autumn-winter political campaign due to growth in GDP, employment and salaries.

The state policy and the distribution of state resources are determined by the proximity to the main decision-making centre, President Lukashenka. Hence, the influence of the agro-industrial complex has reduced, while the role of new technologies and large business in the economic policy have stepped up. Apparently, the Belarusian authorities are considering the option of replacing the existing economic model dominated by the public sector with that resting on several dozen large private companies.

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.
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