The Belarusian Military-Industrial Complex is at risk

After a protracted growth period, the national military-industrial complex faces increasing economic difficulties, which can be hushed up, but no longer entirely hidden.

One of the domestic MIC flagships, the Minsk Wheel & Tractor Factory (MKZT), published its latest financial results. The company’s performance in Belarusian roubles has deteriorated; profit fell by more than two thirds, and revenue decreased by 12.3%. Taking into account the 22% devaluation of the Belarusian rouble relative to USD in 2020, the decline looks even more severe: revenue shrank from more than 152 million in 2019 to 115 million in 2020, or almost by a quarter; net profit fell from nearly 11 million to about 2.95 million. The company’s net profit has been declining since 2017, having decreased over this period by more than 90% in dollar terms.

In 2019 and 2020, no official data was published on the export performance defence products. Salary growth provides an indirect indicator of the health of the domestic military-industrial complex, and in 2020 this was below the level of inflation; for the first time in recent history, salaries in the defence industry began to decrease in real terms. Moreover, as of 01-10-2020, 21.1% of State Military Industry organisations’ salary bill was funded via loans. If it were not for this extension of credit, defence industry salary growth would have been flat in nominal terms.

It is worth noting that the Belarusian MIC is an export-oriented sector of the national economy. Out of 25 organisations of the State Committee on Military Industry (Goskomvoenprom), only 10 participate in the fulfilment of domestic defence procurement. The Belarusian defence industry is characterised by a high concentration of industrial production. The three largest companies (MZKT among them) traditionally provide more than 70% of industrial output under the Goskomvoenprom system. Deterioration in the performance of flagship industries will have an impact on the entire sector.