Belarus May Be Aspiring To A 21st Century 'Singaporean' State Socialism -- According To Private Western Economic/Financial Report
"The 'Belarusian economic model' seems to defy economic theory. An economy entirely consisting of the old, unreformed Soviet industrial base, manages to churn out high single digit growth in gross domestic product (GDP), provides guaranteed monthly income and full, if not always full-time, employment, even as it remains in a state of complete isolation from the modern world. It is this model that causes Belarusians to feel fearful of changes that may unleash a chaos, criminality, and suffering associated with reforms in Russia and Ukraine -- the reference countries for the average Belarusian.
The model is based on three foundations: a favorable valuation of Russian energy, efficient internal controls, and supply-side problems that [currently] beset the rest of the former USSR, where most Belarusian output is exported.
Russia charges Belarus $47 per 1,000 cubic meters of gas and $27 per barrel of oil compared to world prices of $230 and $60, respectively. For a country consuming about 20 billion cubic meters of gas per year and 250,000 barrels of oil per day this amounts to direct fiscal support of $6.6 billion annually. Besides consuming oil for its own needs, Belarus is also reselling it in the form of refined products processed at the two refineries whose capacity far exceeds the country's internal needs. Statistics confirm that the country imports about 100,000 barrels a day more than it consumes....
The main user of Belarusian exports (36 percent) is now Europe, by way of buying refined petroleum....
The total effect of the energy price discount amounts to over $7 billion a year, or 30 percent of the nation's GDP. This is a staggering proportion ...
[Discounted energy from Russia] supports the second main feature of the Belarusian model -- its relatively effective management. Lukashenka, who portrays himself as an anticapitalist crusader, is in fact the country's chief businessman. He presides over a company that has reached the scale of a nation. Almost all Belarusians work for the state enterprise, run by the "vertical," a hierarchy of administrators appointed by the president. This state-owned corporation, Belarus Inc., is a multiline conglomerate with revenues of about $25 billion that would place it in the top segment of the Fortune 500 list....
While controls disintegrated in Russia and Ukraine, in Belarus they were preserved and even improved by introduction of the vertical and appointment of the personally loyal corps....
Two significant risks threaten this model. First, is the risk of a repricing of the energy valuation if Russia gains a controlling stake in Beltranshaz, Belarus's gas-transport company. Deprived of its transit monopoly, Belarus would lose a key bargaining advantage and could be forced to pay higher rates....
A greater risk comes from within the system. In the 12 years of Lukashenka rule there has been no investment to modernize the 1950s asset base that is now 80 percent worn out. The oil windfall of recent years has been spent, not invested in the future. ... As the industrial output declines, the Belarusian GDP relies increasingly on refining Russian oil for speculation.
This opens the future for several scenarios. One could be called "Singaporization." Lee Kwan Yu ruled Singapore for 30 years as a dictator but he also opened the country up for trade, welcomed foreign investors, guaranteed their rights, and achieved the level of living that surpassed that of Britain by using a mix of market economy and state planning. The Belarusian regime is well positioned to do the same, more likely seeking partners in the East than in the West ...
Another scenario is a complete change of power. Besides being unlikely [sic], it also poses the danger of energy repricing, as in Ukraine. ...
Finally, conserving the current arrangement is also possible, as long as Russia does not challenge the status quo in exchange for political subservience. This would not remove the problem of the worn-out assets and obsolete technologies, but it seems to be the bet the Belarusian president is making at the moment." ...
Siarhej Karol "The Belarusian Economic Model: A 21st Century Socialism?" American International Group (AIG) [a global financial services company] via Belarus, Ukraine, Moldova Report -- Radio Free Europe/Radio Liberty March 9, 2006.
http://www.rferl.org/reports/pbureport/default.asp
The restoration of Minsk's Historic Upper Town, largely destroyed by the Nazis in the Second World War, is now nearing it's completion with the reconstruction of the Old Town Hall, the Market Square Ensemble, and two early 20th century Style Moderne buildings -- a Luxury Hotel and a Luxury Shopping Gallery. The Old Upper Town District is also the home to several European Embassies to Belarus, the World Bank Mission to Belarus, the Public Affairs Office of the United States Embassy to Belarus, and the Minsk National Conservatory and Academy of Music.
Photo credit: Embassy of Belarus to Poland. With thanks.
The model is based on three foundations: a favorable valuation of Russian energy, efficient internal controls, and supply-side problems that [currently] beset the rest of the former USSR, where most Belarusian output is exported.
Russia charges Belarus $47 per 1,000 cubic meters of gas and $27 per barrel of oil compared to world prices of $230 and $60, respectively. For a country consuming about 20 billion cubic meters of gas per year and 250,000 barrels of oil per day this amounts to direct fiscal support of $6.6 billion annually. Besides consuming oil for its own needs, Belarus is also reselling it in the form of refined products processed at the two refineries whose capacity far exceeds the country's internal needs. Statistics confirm that the country imports about 100,000 barrels a day more than it consumes....
The main user of Belarusian exports (36 percent) is now Europe, by way of buying refined petroleum....
The total effect of the energy price discount amounts to over $7 billion a year, or 30 percent of the nation's GDP. This is a staggering proportion ...
[Discounted energy from Russia] supports the second main feature of the Belarusian model -- its relatively effective management. Lukashenka, who portrays himself as an anticapitalist crusader, is in fact the country's chief businessman. He presides over a company that has reached the scale of a nation. Almost all Belarusians work for the state enterprise, run by the "vertical," a hierarchy of administrators appointed by the president. This state-owned corporation, Belarus Inc., is a multiline conglomerate with revenues of about $25 billion that would place it in the top segment of the Fortune 500 list....
While controls disintegrated in Russia and Ukraine, in Belarus they were preserved and even improved by introduction of the vertical and appointment of the personally loyal corps....
Two significant risks threaten this model. First, is the risk of a repricing of the energy valuation if Russia gains a controlling stake in Beltranshaz, Belarus's gas-transport company. Deprived of its transit monopoly, Belarus would lose a key bargaining advantage and could be forced to pay higher rates....
A greater risk comes from within the system. In the 12 years of Lukashenka rule there has been no investment to modernize the 1950s asset base that is now 80 percent worn out. The oil windfall of recent years has been spent, not invested in the future. ... As the industrial output declines, the Belarusian GDP relies increasingly on refining Russian oil for speculation.
This opens the future for several scenarios. One could be called "Singaporization." Lee Kwan Yu ruled Singapore for 30 years as a dictator but he also opened the country up for trade, welcomed foreign investors, guaranteed their rights, and achieved the level of living that surpassed that of Britain by using a mix of market economy and state planning. The Belarusian regime is well positioned to do the same, more likely seeking partners in the East than in the West ...
Another scenario is a complete change of power. Besides being unlikely [sic], it also poses the danger of energy repricing, as in Ukraine. ...
Finally, conserving the current arrangement is also possible, as long as Russia does not challenge the status quo in exchange for political subservience. This would not remove the problem of the worn-out assets and obsolete technologies, but it seems to be the bet the Belarusian president is making at the moment." ...
Siarhej Karol "The Belarusian Economic Model: A 21st Century Socialism?" American International Group (AIG) [a global financial services company] via Belarus, Ukraine, Moldova Report -- Radio Free Europe/Radio Liberty March 9, 2006.
http://www.rferl.org/reports/pbureport/default.asp
The restoration of Minsk's Historic Upper Town, largely destroyed by the Nazis in the Second World War, is now nearing it's completion with the reconstruction of the Old Town Hall, the Market Square Ensemble, and two early 20th century Style Moderne buildings -- a Luxury Hotel and a Luxury Shopping Gallery. The Old Upper Town District is also the home to several European Embassies to Belarus, the World Bank Mission to Belarus, the Public Affairs Office of the United States Embassy to Belarus, and the Minsk National Conservatory and Academy of Music.
Photo credit: Embassy of Belarus to Poland. With thanks.
posted by Garth Trinkl at 11:53 AM
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