Reassessing Lukashenka

Belarus in Cultural and Geopolitical Context

G. Ioffe

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137436740
• eBook ISBN: 9781137436757
• Topic: Politica e relazioni internazionali
• Subtopic: Politica culturale

What are the factors of Lukashenka's longevity at the helm of power? This question is addressed in the context of Belarusian history and identity, not as an outcome of a form of government deceitfully imposed on an allegedly benighted people whom better positioned and informed outsiders seek to enlighten and liberate.

1

Belarusian Economy

A detailed account of Belarus’s economic development under the Soviets is contained in my earlier publications.¹ It follows from that account that despite the ingrained systemic flaws of the Soviet economic model, Belarus was by and large a Soviet success story. A country of dismal workshops and unproductive wetlands in the beginning of the 20th century, 70 years later Belarus was dominated by large-scale industry and vastly modernized agriculture. In the 1980s, more than half of the industrial personnel of Belarus worked for enterprises with over 500 employees. Most of the large-scale processing and assembly operations were located in Minsk and the eastern part of the republic.

The industrial core of eastern Belarus took shape due to its transit location. Three transportation axes crossed in this region: between Moscow and the most economically advanced of the East European satellites of the Soviet Union, between Leningrad and Ukraine, and between the Baltic ports and Ukraine. Ten manufacturing giants and dozens of their smaller subsidiaries form the industrial core of eastern Belarus. These enterprises fall into four branches: mechanical engineering, petrochemical, radioelectronic, and ferrous metallurgy. Mechanical engineering is represented by six giants: MTZ (Minsk; tractors), MAZ (Minsk; trucks), MoAz (Mogilev; self-propelled scrapers and earthmovers and trailers for underground works), Gomsel’mash (Gomel; harvesting combines, mowers, and sowing machines), MZKT (Minsk; an offspring of MAZ; heavy-duty tractor trailers), and BELAZ (Zhodino, Minsk region; heavy trucks for mining operations). The technological cycles of all these factories are entwined.

The petrochemical industry is based on two refineries: NAFTAN, based in Novopolotsk, Vitebsk region, and Mozyr NPZ in Mozyr, Gomel region. NAFTAN is the largest refinery in Europe, with a processing capacity of 20 million tons of crude oil a year, while Mozyr NPZ can process up to 12 million tons a year. The refineries are located on two different pipelines from Russia. The products of NAFTAN are further transported through pipelines from Novopolotsk to Ventspils suited for gasoline and diesel fuel. So, the Latvian port of Ventspils appears to be the major transshipment site for NAFTAN. The Mozyr NPZ receives crude oil from the pipeline Drouzhba; gasoline and other products are then delivered to Central Europe by tank trucks and rail. The combined capacity of the two refineries exceeds domestic demand by a factor of three, and so export has been the major function of Belarus’s refineries from the outset. Several chemical plants connected to the major refineries by local pipelines operate in Novopolotsk, Polotsk, Mozyr, Mogilev, and Grodno.

The leading enterprise in radioelectronics in Belarus is Minsk-based Integral, offering a broad array of automotive and power electronic products (e.g., monochip voltage regulators and temperature sensors), timers, sensors, microcontrollers, LCD drivers, plasma-panel drivers, and integrated circuits for electronic contact cards, transporters, and consumer electronics, including watches, thermometers, and TV sets. Integral is technologically linked with other enterprises like Minsk-based Gorizont, the largest producer of TV and radio sets in the Commonwealth of Independent States (CIS) and also a producer of systems for satellite and cable TV.

Yet another industrial giant is the freestanding Belarusian Metallurgic Plant in Zhlobin, Gomel region, whose principal products are steel cord and steel wire.

Other components of Belarusian industry, mostly based in eastern Belarus, include textiles and the production of potassium fertilizers. The latter represents the only production cycle located in, and controlled by, Belarus in its entirety as Soligorsk district in the Minsk region is where potassium is mined. All industries other than production of potassium are deeply integrated with Russia and, to some extent, Ukraine. They either process raw materials from Russia (petrochemical industries) or depend on parts and semifinished products from Russia and Ukraine (as do all plants in the mechanical-engineering sector, which receive up to 80 per cent of all their parts from outside Belarus). Some Belarus industries are attached to major consumers in Russia, as are factories producing electronic and optic devices for the Russian army and enterprises producing household appliances like refrigerators and TV sets.

Economy since independence

The cornerstone of Belarus’s economic development during the post-Soviet period – or at the very least a feature highly divergent from other post-Soviet economies – has been a lack of radical deindustrialization, as a result of which the share of the post-Soviet countries in the global economy had declined from 13.9 per cent in 1990 to 4.4 per cent in 2010.² In many areas, Belarus’s industrial output has declined as well since the breakup of the Soviet Union, but the production of refrigerators, cement, buses, and washing machines has grown tremendously. Nonetheless, even in the areas where industrial decline did take place, Belarus’s share in the total output of the post-Soviet countries has climbed sharply. Case in point – tractors: While Belarus now produces roughly half of what it did in 1990, its share of the aggregate output of tractors in the former Soviet Union has reached 75 per cent, and the remaining 25 per cent is produced under Belarusian license.

In Belarus, the retention of the late-Soviet low-tech industries has been accompanied by vigorous development of information technology (IT). Belarus’s High-Tech Park (BHTP) was established in 2005 by presidential decree with the aim of developing modern technologies and expanding exports, as well as attracting both Belarusian and foreign technologies to the sector. BHTP is headed by Valery Tsepkalo, who served as Belarus’s ambassador to the United States from 1997 to 2002. Today, the BHTP, located in the northern periphery of Minsk is one of the leading high-tech clusters in East and Central Europe. At the end of 2012, it encompassed 112 resident companies employing 14,500 people. The attractiveness of the BHTP is propped up by tax breaks and by the availability of highly skilled professionals, whose pay, $1400 a month, is twice Belarus’s average but considerably lower than in high-tech clusters in the West or in Israel. The graduates of Belarusian institutions of higher learning receive additional training at IBM, SAP, Oracle, Microsoft, and other global IT leaders. Software developed by the resident companies of the BHTP is purchased by such companies as Coca-Cola, Google, Halliburton, Chevron, Citigroup, Sears, Colgate-Palmolive, Thompson Reuters, Viacom, Siemens, Mercedes-Benz, Bosch, Philips, Samsung, Barclays, and the London Stock Exchange.³ In 2011, Global Services, a reputable online publication, included six resident companies of the BHTP on its list of 100 best providers of IT services. For five years in a row, Software magazine has been including resident companies of the BHTP on its list of the most significant software developers. Software-500, according to which EPAM Systems, the major resident company of the BHTP, is the top software developer and provider of IT services in Eastern and Central Europe. EPAM is headed by Arkady Dobkin, a native of Minsk who received his education in the former Belarusian Politech (currently National Technical University) and then emigrated to the United States.

High-tech firms also evolve beyond the BHTP framework, which they subsequently join due to its preferential tax regime. Companies that set up shop at the BHTP pay no corporate taxes, and their employees pay income tax at a rate 25 per cent to 70 per cent lower than that of workers elsewhere in Belarus. One important recent addition to the BHTP is Viber, a mobile phone application and a seemingly successful competitor of Skype. Viber is more mobile phone-friendly than Skype as it enables people to talk and text without paying a fee. Talmon Marco and Igor Magazinik cofounded Viber in 2010. They run the business from Israel but developed the Viber application in Belarus. The Viber operation is now located in the city of Brest and employs 40 people. An article in Bloomberg Businessweek reporting the stunning success of this operation (in August 2012, it had 100 million users and was adding ten million users a month) begins with the requisite reference to Lukashenka, who “has ruled the country’s 9.5 million people with cudgel and knout. The country’s political culture is that of intimidation, censorship, and marked ballots; the police recently imprisoned a man for publishing a photo of a teddy bear holding a sign supporting free speech.”⁴ Yet, by the third paragraph, the article changes its tune. It appears that

upon arrival in Minsk . . . foreign visitors might find themselves surprised. The streets aren’t cluttered with food wrappers or prostitutes. A charming modesty permeates the population. The place has an efficiency so infrequently seen in this part of the world that it feels liberating. What’s most unexpected is that Belarus has become a promising place to do business and the home of one of the hottest apps in the world.⁵

The same source also reports that, since 2005, Belarusian software exports have grown by 2000 per cent to $270 million in 2011 and that the US companies buy half of the country’s software products.

While the biggest success of Belarusian IT companies constitutes outsourcing, traditionally a domain of the developing world, led by India with its cheap and abundant labor force, there are notable exceptions from that rule. Besides the Viber operation, this is Wargaming.net, the company that has developed the award-winning online game World of Tanks, which has 60 million registered players.

In the first three quarters of 2013, the BHTP has shown a strong 155 per cent growth, with its exports totaling $307 million.⁶ Seven Belarusian companies entered the global “Software 500” rating. If the current rate of the IT sector growth continues, the branch will achieve the ambitious goal of $1 billion in yearly revenue well before the end of the decade. If that comes true, Belarus will claim a share of the global high-tech pie without abandoning the industrial legacy of the Soviet era.

In what follows, I will first compare some structural characteristics of Belarusian economy with those of Russia and Ukraine. The time frame for that comparison is from the early 1990s to the eve of Belarus’s financial crisis of 2011. The analysis of that crisis and of the formational identity of Belarus’s economy will come next followed by the special role of aid from Russia and most recent developments.

Comparing the comparable: Belarus versus Russia and Ukraine⁷

The best reason to compare Belarus with these two countries is that Belarusians themselves most frequently compare developments at home with those in Russia and Ukraine. As will be shown in Chapter 2, most Belarusians do not even consider Russia to be a foreign country. And Ukraine seems to be treated similarly. From 2001 to 2011, however, the number of Belarusians willing to pursue the creation of a union state with Russia declined from 80 per cent to 40 per cent,⁸ so it looks like Belarusians view their own country as a better place to live. Indeed, in 2008, the number of Belarusians who said life in Belarus is better than in Russia exceeded the number of those with the opposite opinion by a factor of five.⁹ The importance of these data is exacerbated by the fact that as a matter of principle Belarusians may not be averse to exchanging state sovereignty for better life.¹⁰ This is a unique vulnerability of Belarusians as a community, much underestimated by Western analysts. Needless to say, considering the numerous family connections among the citizens of all three East Slavic countries, and above all, the spread, if not dominance, of the Russian language in those countries (especially among urban populations everywhere except westernmost Ukraine), Belarusians are better informed about developments in Russia and Ukraine than anywhere else. Much of Russia, Belarus, and Ukraine have been integral to the same polity (the Russian Empire and then the Soviet Union) for more than 200 years. As Victor Martinovich, an opposition-minded journalist, mentioned in a Radio Liberty talk show, Russia, Belarus, and Ukraine are the only countries of Europe where most people do not consider the communist period in their history to be a result of foreign domination.¹¹

Last but not least, at the end of the Soviet Union’s life span, Russia, Belarus, and Ukraine had the highest per capita gross domestic products (GDPs) in the Soviet Union minus the Baltics. Considerable leveling of living standards within the Soviet Union occurred as a result of financial transfers from the donor republics, particularly from Russia. For example, if Russia’s per capita GDP in 1990 was 100, the index for Belarus would be 97 and for Ukraine 79.¹² By contrast, the corresponding index for Turkmenistan was 46, Uzbekistan 38, and Tajikistan 31. The identical calculation for personal consumption yields the following results: Belarus 93, Ukraine 86, Turkmenistan 59, Uzbekistan 54, and Tajikistan 49.¹³ This implies that Ukraine did gain somewhat from transfers, but its gains were dwarfed by those accruing to Central Asian republics (and to Trans-Caucasus as well). It then appears that Russia, Belarus, and Ukraine had similar starting conditions on the eve of systemic transformations in their economies.

In what follows, I will provide comparisons between Belarus, Russia, and Ukraine across privatization strategies and such indicators as reform rankings, GDP growth, wages and pensions, income distribution, labor productivity, social spending and health, composite indices of wellbeing, and agricultural productivity.

Reforms in all three states were initiated in a political setting heavily influenced by the communist past. But while in Russia and Ukraine former communists quickly transformed themselves into champions of raw capitalism, in Belarus the story was different. From the breakup of the Soviet Union to 1994, the country was run in a Soviet way, with most economic and social institutions intact. In 1994, the post of president was introduced in Belarus, and the incumbent Prime Minister Kebich lost elections to Alexander Lukashenka. Unlike Boris Yeltsin and Leonid Kravchuk of Ukraine, Lukashenka did not belong to the Soviet nomenklatura, having worked as a state farm director before moving to Minsk in 1990 as a member of the parliament. Unlike his Russian and Ukrainian colleagues, however, Mr. Lukashenka did not show any preference for market reforms and continued running Belarus in the manner of his predecessors, that is, using command methods rather than promoting market mechanisms in economy and pluralism in politics.

Privatization

Meanwhile, in Russia and Ukraine, the early 1990s were a time of fundamental transformation. Mass privatization was arguably the single most important policy that put these two larger East ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Tables and Figures
• Foreword
• Acknowledgments
• Introduction
• 1. Belarusian Economy
• 2. Belarusian Society
• 3. Belarus and the West: From Estrangement to Honeymoon and Back to Estrangement
• 4. Lukashenka’s Rise to Power and Belarusian Politics
• 5. Lukashenka’s Personality and Worldview
• Conclusion
• Addendum
• Notes
• Index