Belarus is often described as the “mini-USSR” in terms of how it runs the economy. This metaphor is, to a large extent, true.
The state still owns a large chunk of economic wealth in the country and is very reluctant to give it up.
The World Bank estimates the share of the state in the Belarusian GDP at 47%, and at 75% – in the industrial output. State sector employs about half of Belarusian workforce. These enterprises are on average less efficient than private ones and far more often produce losses instead of profits.
However, against all odds and despite IMF and World Bank advice, Belarusian government continues to support many of its long-kept assets with subsidies, cheap loans and energy, and other similar policies.
Why be so stubborn? Well, the reasons deal with politics more than with pure economic logic.
Belarusian president calls these large industrial plants and factories “brand enterprises”. Being himself somewhat nostalgic about the Soviet Union, Alexander Lukashenko sees the preservation of these symbols of the “glorious past” as one of his historic political achievements.
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It also makes him popular among the broad segments of the Belarusian and other post-Soviet societies, namely the people who miss USSR and the perceived stability it provided.
“If nothing else, at least Lukashenko have preserved the industry” is a quite frequently met sentiment in Ukraine or Russia till present.
Obviously, to privatize or to restructure ineffective state enterprises means to lay off thousands of men and women working there. In some parts of the country, there might be no employment alternative to a huge state-run plant or a collective farm (‘sovkhoz’).
In Soviet times, many towns were literally built around industrial giants. Shutting down such enterprises implies heavy social costs for locals. Retraining, relocation and other solutions take time and tons of money.
In the meantime, Belarusian authorities remain very cautious about any change that might be politically explosive in the short-term perspective.
Fear of oligarchs
Belarus is quite an unusual post-Soviet country when it comes to the oligarchy, or to be more precise, its absence.
Such state of affairs has always been kept on purpose – Lukashenko, as an authoritarian leader, does not want to share his power with anyone, including the big business.
Privatization almost inevitably gives birth to the class of wealthy “industrial barons”. Sooner or later these people tend to demand to have a political say in how the country is run. This perspective itself is hard for Lukashenko to contemplate, but it is especially so, given the capital might come from Russia.
Loss of the lever
People working for the state are easier to control. If an average Belarusian dislikes the president and wants to participate in some opposition or protest activity, there already are a few risks he or she has to face.
But stakes are much higher when a person works for a state enterprise. In addition to being fined or arrested for a while, he or she risks losing the job. When half of the country’s population work at state companies, they are effectively excluded from political activity.
This is a purely psychological, but still an important factor. Belarusian president is used to micromanaging things. He visibly enjoys touring the country, instructing local heads of factories or farms how to work, whom to sell their products to and what technologies to use.
Occasionally, Lukashenko himself publicly fires officials and low-level state managers for poor work. He does it at their industrial sites he visits in the presence of TV crews. Call it PR, call it political style, but being this “down-to-earth: leader is very important for the Belarusian president. But one can hardly instruct and fire managers or CEOs if they work for someone else.
The views expressed in this article do not necessarily reflect the opinion of the editorial staff. Pictures used are for illustration purpose only.