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Belarus economy to survive if we produce more goods and sell them to partner countries only, economist Kovalev says

The dean of the Faculty of Economics of the Belarusian State University Mikhail Kovalev gave an interview to Yegor Khrustalev in the TV program Simple Questions. Today our guest is the dean of the Faculty of Economics of the Belarusian State University, Professor Mikhail Kovalev. Thank you very much for the opportunity to talk with you. Of course, I would like to continue the topic of the Big Conversation with the President.

What do you think was the main issue of the Belarusian economic model discussed exhaustively?

Mikhail Kovalev, the dean of the Faculty of Economics of the Belarusian State University:
As for the Belarusian economic model, there are concerns that it allegedly accumulates too many resources and then redistributes them in an inefficient manner. I don’t agree with this statement. Indeed, 10 years ago, probably, it was true when the state withdrew about 40% of the GDP and then redistributed it. But according to the budget plan for 2017, the state is to withdraw only 24% and spend it on free education, free medical care and so on. There are countries where this figure is less than 24%, indeed. For example, the USA and China. But there is no free education in China. The Chinese government has exempted from charges only secondary schools in villages.

In the majority of other countries, such as Sweden, Finland, Great Britain, and Japan redistribution through the budget is much larger. So, let’s stop talking that the Belarusian government takes too many resources and spends them inefficiently – it is the matter of the past.

Does this mean that the Belarusian economic model won’t undergo any changes, including the proposals on the baseline reforming voiced during the Big Conversation?

Mikhail Kovalev:
I think our economy won’t undergo major changes. The Belarusian model has very much in common with the high-efficient Chinese model. The only thing that, in my opinion, has been done in China more quickly and efficiently is the rapid growth of the private sector. By the way, it took place without privatization.

The President announced that the government has created the commission that is to regulate audit activities.

About five years ago, Belarus was below 200th place in the World Bank’s Doing Business rating, but today our country ranks 44th. Thus, the conditions for doing business in Belarus are getting better and better. But, in my opinion, the public sector could be improved. We’d better borrow Chinese expertise in public sector management. We are not going to conduct hasty privatization of big public enterprises.

You are preparing new staff and, of course, assess how effectively they will work in the future. It is very difficult to compare a government official with a private entrepreneur, though, in general, as you say, there are such examples in China too.

Mikhail Kovalev, the dean of the Faculty of Economics of the Belarusian State University:
Unfortunately, only a few of my graduates go to work in the public sector: in the ministry or at state-owned enterprises.

The majority prefers working in the private sector.

By the way, for example, we had some difficulties with the trade balance: we imported many goods, but we couldn’t sell our goods abroad. One of the reasons is that there are foreign companies that attracted the best potential of Belarusian specialists.

How did China manage to tackle this problem? Why do they have such effective management in the public sector?

Mikhail Kovalev, the dean of the Faculty of Economics of the Belarusian State University:
Firstly, China has huge population. So, it has a bigger choice of specialists than Belarus does.

Secondly, the Chinese government succeeded in the public sector, because it managed to return those people who studied abroad. It was made by means of high salary and other favorable conditions. Almost all the Chinese students who studied in the US, the UK and other advanced capitalist countries came back to China.

Many people in Belarus insist on the need to close unprofitable enterprises. As a result, there will be a huge number of the unemployed. As the experience of our northern neighbors shows, the new generation is leaving the country in large numbers.

Mikhail Kovalev, the dean of the Faculty of Economics of the Belarusian State University:
Well, today not so many people leave Belarus. In particular, we have always had a lot of IT specialists. Moreover, they are to export software products worth $1 billion this year alone, and these are only official figures.

Yes, the rate of unemployment could increase up to 5-6% from the current 1%, but it is necessary to think over the strategy of their further employment. I agree, that every big public enterprise has more staff and departments than it is necessary.

The first thing that could be done in these big enterprises is the creation of incubators for small and medium-sized businesses. Particularly, we must move all sorts of auxiliary services, auxiliary units and so on outside the enterprise. People will be temporarily employed here, in these small private firms. If they work hard, they will receive orders not only from its parent company, but also from other companies. Everything depends on people.

You know, not everyone understands the difficult economic language you speak. But it’s quite clear that people were promised to get $500 monthly salary. We already had $500 and even bigger salary.

Mikhail Kovalev, the dean of the Faculty of Economics of the Belarusian State University:
It was almost $600.

Everyone remembers those times when we could travel abroad more often. And then we lost it. And not because we began to work worse.

Mikhail Kovalev, the dean of the Faculty of Economics of the Belarusian State University:
I am deeply convinced that decrease in salaries and decline in production for the last two years is primarily related to the sanctions applied against Russia. Russia doesn’t have enough money. It can’t buy as many Belarusian goods as it previously bought, or Russia imports them at a significantly lower cost due to the devaluation of the Russian ruble. For example, we supply to Russia the same volume of food products as before, but we get several billion dollars less now.

This also caused the salary decrease in Belarus.

Moreover, Russia, for reasons unknown, linking oil supplies with the gas issue supplied to Belarus approximately 6 million tons of oil less than it was expected. You understand, Belarus has lost minimum 1% of the GDP failing to process these 6 million tons of oil.

In my opinion, everything will depend on whether Russia will be able to establish relations with the new American president and whether Russia will have money.

It’s important to understand – miracles won’t happen.

We must produce more goods and sell them to those countries the President has established good relationships with.

You are absolutely right having said if all the officials worked as the President, we wouldn’t have superfluous tractors and MAZ vehicles.

Thank you for the very interesting information. I don’t know whether it is understandable for the general public, but in any case, the information you provided is urgently needed.

Professor Mikhail Kovalev