Generation of lost opportunities

On November 25, 2010, CASE Belarus experts, Aleś Alachnovič and Sierž Naŭrodski, held a press conference at the Foundation of Civic Development Forum (Poland) concerning the release of the Foundation’s latest analysis titled “Belarus lost a generation”.

According to the analysis, the initial abandonment of economic reforms in the 90′ and then implementing them in a limited extent have not allowed Belarus to avoid the high social costs of economic transition – reduction in life expectancy and relatively low households income. Even 20 years after the dissolution of the USSR the foundations of economic growth in Belarus are still very fragile and dependent on cheap Russian energy resources.

In 20 years after the beginning of economic transition there is a noticeable gap between Poland and Belarus although two decades ago Belarus could pride itself with a higher GDP per capita at purchasing power parity in comparison to Poland. In 2010 Belarusian average salary is three times lower than the Polish one and by 30% lower than the Polish minimum wage. Life expectancy in Belarus is two years shorter than it was in the eve of the dissolution of the Soviet Union and about six years shorter than it is in Poland.

The Belarusian economy is artificially driven by imports of Russian oil and gas at prices much lower than world prices. Price for 1 thousand m3 of gas for Belarus in the first quarter of 2010 amounted to $169 while for Ukraine and Poland it was $304 and $330 respectively. Belarus use only one-third of imported oil from Russia on the domestic needs, the rest is processed and exported to the West at market prices. Over the past 15 years, i.e. from the beginning of the creation of union of Belarus and Russia, the cumulative difference between market prices and the price for Belarus of Russian oil and gas sold to Belarus amounted to $52 bn. This means that Russia had subsidized Belarus annually at around 15% GDP.

Russian subsidies will disappear soon since Russia wants to join the World Trade Organization, which requires the introduction of market prices for all goods and services traded with other countries. After withdrawal of Russian subsidies and facing the increasing difficulties in repaying foreign debt, which in the past three years has more than tripled — from $6.8 bn at the beginning of 2007 to $22 bn on January 1, 2010, the Belarusian authorities would be forced to accelerate economic reforms.

It may happen that there would be no other choice than to choose a model of radical transition, such as in Poland but about 20 years or one generation later.

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The full text of the analysis (in Polish) prepared by Aleś Alachnovič and released by the Foundation of Civic Development Forum is available at the www.for.org.pl or here.

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