It has been 100 days since Alyaksandr Lukashenka, who has ruled the country for 12 years, was sworn in for a new presidential term. Statements and decisions made by top officials after the spring election suggest that economic changes are looming on the horizon. Businesspeople, officials, the opposition and monopolists - all anticipate economic changes.
It is not easy to forecast a trend reversal in a market of commodities. It is even more difficult to predict the reversal of a business cycle. One needs business instinct and political courage. President Lukashenka's vision of the future is not based merely on statistical data supplied by the cabinet. He relies on his intuition, ignoring logical judgments.
The head of state probably had found himself entrapped by the replicating forecasts. Officials have a knack for achieving with precision any target he sets. During the first 100 days of his new term, Lukashenka did not make a single attempt to curb the cabinet's zeal to produce growing numbers, thus increasing risks of economy overheating as a result of the government's vigorous investment policy and the growing household spending propelled by a rise in income and cheap credit availability.
The Belarusian leader made five big mistakes in the first 100 days.
1. It was a mistake to keep the cabinet almost unchanged. As long as it includes planned economy champions like Prime Minister Syarhey Sidorski, Finance Minister Mikalai Korbut, presidential aide Syarhey Tkachow and Economy Minister Mikalai Zaichanka, it will not shift its policies toward market-oriented reform.
2. Lukashenka has failed to force regional leaders to remove barriers to goods manufactured in other regions.
3. It makes little sense to increase public spending on the construction sector and agriculture. The cabinet is aware that enterprises would be unable to meet targets without financial support from the government. However, no one seems to care about the expediency of such spending.
4. The government has not done enough to restrain the households' passion for spending and encourage people to keep their savings in banks. Banks have been advised to make cheap credit easily available and continue lending to enterprises without due consideration for their financial position. The bankruptcy mechanism has been blocked.
5. The government proved unable to improve the business and investment climate in the country. It failed to substantially improve company registration procedures, liberalize prices, reform the tax system, simplify business licensing rules and safeguard enterprises against administrative interference in their business. A sharp decrease in Balaruskali's potash output and the build-up of inventories proves that bureaucrats can ruin any business, even the most profitable one.
There were welcome developments during these 100 days too.
1. Lukashenka refused to sell Beltranshaz, Belarus' gas pipeline system operator, on conditions proposed by Gazprom. By doing so, he can take credit for promoting independence and national identity irrespective of his inner motives. Even if Belarus were blackmailed into selling assets of Beltranshaz and other strategic enterprises, the risk of their subsequent nationalization remains high.
2. The government is determined to keep the focus on demographic issues and support of families. It is clear that heavy spending alone cannot boost the birthrate, but there is hope for education infrastructure development (kindergartens, sports facilities for children and apartments for young families) and better employment opportunities for young people.
3. The Belarusian leader criticized officials for failure to reform the tax system, poor budget planning and low quality of public services. In his annual address to the National Assembly, he also stressed that his country should integrate into the international labor market.
4. Another welcome development was Lukashenka's decision to appoint Anatol Tozik, former chairman of the State Control Committee, as ambassador to China, a move that significantly weakened the audit agency. Officials in the government have been discussing the possibility of limiting powers of the State Control Committee and transforming it into a standard audit chamber.
5. The executive authorities have increased cooperation with independent experts and international economic and financial institutions. Although sporadic contacts have not yet led to a fully-fledged dialogue between the authorities and think tanks, it is good that such contacts are taking place at all. Lukashenka is torn between his inherent desire to rely on loyalists and the need to let new intellectuals and ideas into the government.
The first 100 days were the easiest for Lukashenka in the first 12 to 18 months of his new term. This fall, he faces difficult gas price talks with Russia and the need to adapt the 2007 budget to new pricing conditions. Public discontent is likely to grow and the sticks-to-carrots ratio is likely to change. The government will be forced to cut budget spending. One way or another, changes are inevitable.
Lukashenka is aware of the impending changes, trying to persuade others to embrace them too. The government has not yet made any decision on its future policies. Will Lukashenka be able to resist the lazy, inert and reactionary nomenklatura in the name of new, competitive Belarus? The question remains unanswered.