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A Perestroika for Belarus?

Posted on the 14 April 2017 by Center For International Private Enterprise @CIPEglobal
A Perestroika for Belarus?

18th Annual Assembly of Business Circles

Seven years ago a blog with this title would seem ridiculous. In the aftermath of the 2010 elections, President Lukashenko had several opposition members imprisoned, had others harassed, and cracked down hard on demonstrators. Five years earlier, Secretary of State Rice named Belarus the “last dictatorship of Europe.” However, in March, I observed how far Belarus has come to opening up to civil society. Sitting in a meeting with a leading minister, a dozen business associations were discussing the merits and potential modifications to a forthcoming presidential decree. The minister asked the association representatives thoughtful questions and addressed their concerns with straight-forward answers and promises to follow-up where answers were not readily available.

Is this really Minsk?

At the 18th Annual Assembly of Business Circles, held on March 1, over 400 leading business associations, small business leaders, and investors presented the 10th annual platform for business reform, which contains 86 recommendations to change legislation or regulation to foster a better business climate. This platform was presented to over 100 representatives from the Belarussian government, which has already accepted over 400 such suggestions over the past nine years. These same officials also pragmatically engaged with Jaroslav Romanchuk when he presented a much bleaker economic picture than that of the official government, promising to investigate further. More importantly, minister after minister (and vice ministers) addressed the assembly and took questions from the audience, in some cases facing heavy criticism. Assembly delegates kept comments and questions fact-based and focused, never delving into ad hominem attacks; they were razor sharp nonetheless.

What happens next?

The first risk to any economic reform effort in Belarus may be its neighbor to the east. Russia and Belarus have deep economic and social ties, and if an effort to diversify and reposition the Belarusian economy is viewed as a threat to turn towards the West, the situation could escalate to one similar to Georgia or Ukraine. Presidents Lukashenko and Putin are already in a deep dispute over oil and gas prices, with Russian public opinion generally holding that the oil and gas subsidies Belarus receives have been a drain on Russia’s resources for years. But Belarusian stakeholders are not willing to undercut their standard of living to benefit a new oligarchic class, as occurred after Ukraine’s Orange Revolution and the Revolution of Dignity, the economic results of which are widely reported in Belarus.

There is also the possibility that, if Presidents Lukashenko and Putin reach a new agreement on oil and gas prices, the window for meaningful economic reform will close as the economy returns to a reliance on natural resources purchased at below-market rates. Such a reversal would lead to further economic stagnation and a floundering labor market that continues to lose its best and brightest young minds to both East and West. A return to the status quo would only delay necessary economic reforms another five to ten years, thereby increasing the likelihood of a rougher transition period when reforms finally do arrive.

Despite these risks, there is an opportunity for President Lukashenko and a diverse team of economic reformers to guide the country through economic reform and a transparent privatization process. The risks of moving forward with economic reform are high, but a lack of meaningful progress on economic reform is certainly just delaying the inevitable.

Finding the Belarussian path to development

In Belarus’s 25 years of independence, it has not undergone a dramatic economic transition to a market economy. This can be its “last mover” advantage. There are certainly some bad examples to learn from to make the transition. To the east is the example of a resource-rich authoritarian state, which Belarus lacks the natural resources to emulate. To the south, in Ukraine, is a rapidly privatized oligarchy that has gone through two popular uprisings but has still not developed the institutions necessary for a robust market economy. There are also some success stories of privatization in Poland and the Baltic states, each of which has gone on to become integrated in world markets while lifting the standard of living for its citizens.

For the moment, the decision to engage with the world and develop a market in Belarus comes down to the decision of one man. If President Lukashenko can overcome the nomenklatura and listen to the voices of the Belarusian business community as they call for economic reform, there is a chance the world could see the beginning of a Belarussian perestroika that takes lessons, positive and negative, from its neighbors and will offer its citizens the economic development and independence they desire.

Eric Hontz is Program Officer for Eurasia at CIPE. 


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