CASE Belarus experts, Sierz Naurodski and Uladzimir Valetka, made the pioneering attempt to calculate Economic Value Added (EVA) for Belarus at the industry level using aggregate indicators according to the common methodology.
The following conclusions were drawn according to EVA estimation results for Belarusian industries:
i) Six industries created in 2008 more than 2/3 of economic value added in Belarusian economy: manufacture of chemicals, whloesale trade, transport and communication, agriculture, construction and manufacture of refined petroleum products and coke. Evidently these six industries contributed substantially to overall economic performance in Belarus in 2008.
ii) Almost ¼ of the entire economic value was added in 2008 in chemical industry (manufacture of chemicals, chemical products and man-made fibres). We can stаte that comparing to other sectors enerprises in chemical devision invested in more profitable projects. This leading value-creating industry played then the most important role in Belarusian economy in 2008.
iii) Four sectors create no economic value and have negative EVA indicator: education, health, community, social and personal services, and, suprisingly, real estate activities. Such negative EVA indicates that either cost of capital for an industry is higher than return on capital (the firms are currently earning less than expected giving the their cost cost of capital) or capital invested does not create enough of value for specific investment projects. The first three mentioned sectors have clear “social” charakter in Belarus by receiving substantial governmental support and subsidies. We can state that these sectors and real estate operate “at the cost” of other industries.
iv) The most striking finding of our estimations is that the lowest EVA indicator among all Belarusian industries shows the division called “Real estate acvtivities”. This can be explained by having a close look at the sector’s further structure. According to NACE “Real estate activities” behind direct services of selling estate and real estate agencies includes also management of estate on a fee or contract basis, the services of numerous halls of residence. In Belarus the latter are simply maintanace services for households which is traditionally low-profitable and government-subsided. A governmental straight involvment in construction sector production, providing of preferential rates for housing construction credits and other economic peculiarities in Belarus have led to unexpected result that firms from a should-be profitable NACE class “Development and selling of real estate” does not create economic value.