No matter how the Lukashenko administration runs the country, one must be aware that the previous economic model has completely exhausted itself. Belarus’s growth is entirely dependent on Russian transit and subsidies. In order to reduce this dependence, it is necessary to increase the role of the state in the economy and closer cooperation with other partners, namely with the European Union. For this to happen, a change of power is needed in both cases – when an “independent candidate” comes to power.
“Both scenarios envisage very big economic reforms. How friendly they will be to the market will be understood in the coming days. It will be important that the macroeconomic situation in Belarus and its partner countries deteriorates significantly. Lukashenko’s excessive reluctance to take into account the interests of his country, as well as foreign business in the name of maintaining power, can also have a negative impact on the economy, “Golubovich and Orlov write.
The effects of Covid-19 on the economy are being felt around the world. In Belarus, they have coincided with political problems and increased Russian control, which has almost halted transit from Russia. Restoring the economy will be a difficult task, especially if Lukashenko will retain power for several more months. The European Union’s sanctions will be felt quite quickly.
What needs to be reformed first?
Foreign trade – at market prices and without smuggling. At present, Russia’s share of Belarus’ foreign trade is 50% (41% of Belarusian exports and 56% of imports). The European Union is in second place (32% exports and 20% imports). The main importers of Belarusian goods in Europe are Germany, Poland, Italy, the Netherlands, Great Britain, Lithuania, France and Spain.
If no sanctions are imposed on Belarus and Lukashenko is “suspended from the post of commander-in-chief of the economy”, a number of tasks will be needed.
Firstly, to agree with Russia on market rules for trade in general, and to put an end to the various covert agreements and methods that regulated supplies in the Eurasian Economic Union. The rights of transit operators must also be protected by ending unexpected disruptions to transport flows.
Belarusian companies must also be allowed to purchase energy resources and related services at specialized auctions, in which not only Russian companies but also their Belarusian subsidiaries can participate.
A secret agreement has yet to be reached with Chinese suppliers who want to make Belarus the main platform for exporting their goods to the European Union.
The supply of counterfeit Belarusian goods to Russia, ie the smuggling of Russian-made goods into the European Union on the basis of Belarusian-made goods, has yet to be stopped, thus allowing many officials loyal to the Belarusian government to earn for five years.
Changes must start immediately, because without them it will not be possible to reform the Belarusian economy, as well as the country’s dependence on external forces – uncertainty in business does not allow private business to function normally, which in turn is already damaging the country’s economy.
Industry and services: tax cuts and abandonment of the “national plan”
The Belarusian industrial sector is something unique. It is difficult to compare with the Russian industrial sector, as well as with its counterpart in the European Union. In terms of productivity, the Belarusian industrial sector lags far behind all European countries. One of the reasons is artificially continued employment, but the main problem is the lack of investment in technology.