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Stanislau Bahdankevich: Belarus needs democracy and market economy

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Stanislau Bahdankevich: Belarus needs democracy and market economy
Stanislau Bahdankevich

To receive wages of $1,000, Belarusians needs to get rid of the authoritarian system.

Stanislau Bahdankevich, a former chief of the National Bank of Belarus, tells Radio Svaboda why Aliaksandr Lukashenka won't be able to keep power if he does not carry out economic reforms, says what should be done with loss-making plants and what average wages Belarusians deserve.

– Independent experts often say about the collapse and death of the Belarusian economic model. It sounds so often that people stopped reacting to such statements. The current situation is unique. The Belarusian economy has been in a recession for the first time since 1997, and GDP is declining. Do you think the Belarusian economy reached the critical point or the current difficulties are just an episode?

– I really think the Belarusian economy has reached the line. If you look at the list of loss-making companies, you'll see that it covers almost entire automotive, machine building and tractor industries and so on. It hampered the economic development. It shouldn't be so. It's a deadlock. We live only because we cover losses at the cost of processing of crude oil and potassium.

I think the development model based on taking and spending foreign loans on food must be closed. We need a model of common sense – market economy.

– A decline in production will be recorded at the end of the year. Should the Belarusians accept the idea that we will live in recession for several years, that Belarus will face a softer version of the 1990s?

– I think we have an opportunity to make institutional and structural changes in the economy. We just need the political will. I outlined 12 steps and programmes that the government should adopt immediately – upgrading the economy, state machinery and production structure, privatisation, demonopolisation, etc.

– Plants have been laying off staff for the last few months. Can it be the first step to the recovery of the economy?

– I regard it as a negative measure. Small and medium-sized business should be developed to employ excessive staff of big plants, and conditions for attracting foreign investments should be created. The share of small and medium-sized business in Belarus is 23%, while it is 74% in Estonia, 78% in Latvia, and about 70% in the EU. We need to develop small business that will absorb the ineffective workforce from state-owned plants that make products the market doesn't need. We can restore Belarus's economic potential in two or three years.

– So, your optimistic forecast is that if reforms are launched, the economic growth will be restored within two or three years. How does the pessimistic variant look like? What can we expect if reforms are not launched?

– I think they cannot but begin. The Belarusians are hard-working, talented and bright people not worse than people of the Baltic States, Poles or the Czech people. Why should we lag behind?

– Reforms must be carried out by the political leadership rather than the masses...

– I suppose the Belarusian leadership will have to do it. I think Lukashenka will have to launch structural and institutional changes after the elections. He won't be able to keep power without them. We didn't have a foreign debt in 2005, but now it is about 40 billion. The time when we could use it has passed. Oil and gas prices decline, so Moscow won't be able to give money to Belarus. I am an optimist, and I think Lukashenka will have to launch changes, whether he wants it or not. Life will make him do it.

– Even the most successful reforms lead to a temporary deterioration at the beginning. They don't give an immediate result...

– The situation has already deteriorated. What should be done? Firstly, taxes must be reduced so that those working well could get more income, more profit. We need to make employees and managers focus on profit rather than on gross revenue. The real economy will have more money in this case. We will be able to motivate employees and develop production. These are obvious things.

– What economic sectors can be left and what can be allowed to die and give space to imported goods?

– The role of the state should be increased. Not reduced, as some of my colleagues, liberal economists, say, but increased. We need the state to secure the stable rate of the national currency, an inflation rate of 3-5% a year, foreign investments of 5-7 billion dollars and a share of investments of at least 40% of GDP. To achieve it, we need a programme that should be implemented.

– The Russian ruble has continued its fall recently amid a decline in oil prices. Can we say that difficulties in the Russian economy amid sanctions and oil prices are not temporary, so, the Belarusian export should be refocused? Does the Belarusian leadership hope the dust will settle and the old course of things will work?

– I wouldn't say our authorities do nothing. But cost of goods should be reduced and new markets should be found, because Russia will be in the recession for the nearest three or five years. Russia still has resources. They have 400 billion dollars of forex reserves. Russia declines due to the oil price fall. We shouldn't expect miracles here.

Our government gives directors of plants tasks on production volumes. We need to give up this practice. The minister who gives a task to increase production of tractors must be punished, because tractors are not sold, they are stored at warehouses. You'd better pay the unemployed $500. It will be cheaper than spending money on materials, power and transport expenses. This is the absurd economy.

The state should support the companies that produce what the market needs. Lukashenka says he will help those who can work successfully and won't feed deadwood from the state funds. He releases the document under which MAZ and Gomselmash plants receive a trillion of rubles of assistance. But they work bad, they don't pay VAT. This is abnormal. They should produce as many products as many buyers they have.

– In this case half of workers at such plants can be laid off.

– Sure. That's why I say we need to adopt laws on the development of small and medium-sized business and attracting investments. We need a package of measures to allow the new sector to absorb employees of ineffective plants.

I looked at the latest statistical data. More than half of workers receive less than 6 million rubles. This is terrible. Lukashenka said we will earn $1,000 in 2015. We don't have it! It's time to make conclusions and transit to the economy of common sense.

– People sometimes argue what wages the Belarusians deserve in the current state of society and economy. Some say we have what we deserve, whiles others say wages are low only due to the wrong policy of the authorities.

– I think we receive exactly what we deserve. We don't manage economy and property successfully and don't carry out reforms. It's not one person who governs the country. The state is ruled by people at all levels, by directors, engineers, officials. Why do they agree with everything? Why don't they say no? Four hundred dollars is our ceiling for today. This is what our economy can afford.

It could afford $1,000. I am convinced we are not stupider than our neighbours. To achieve it, we need democracy and market economy. We want to have the authoritarian system and command economy but earn much. But it is impossible. We have what we deserve.

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