ЭКОНОМИКА БЕЛАРУСИ (последнее)
Belarus's Economic Growth in 1997: controversial assessments
Актуальные публикации по вопросам экономики Беларуси.
The assessments of the Belarus's social-economic development in 1997-depending on the views of a particular expert-often seem to be contradictory. Admittedly, there are grounds to have a wide range of opinions on this issue. Every individual first of all looks at what he or she wants to see, especially if political motives play a role in an individual's assessment. Nevertheless, there have been positive and negative aspects in Belarus's economic results in 1997.
If we are talking about the positive aspects, we can use the wording of the official statistics, claiming that in 1997 "the situation in the real sector of the economy stabilised, investment was growing, the social sphere was developing, the standard of living of the population rose." In general, one can agree with this statement. In 1997, according to statistical agencies' preliminary data, the country's GDP, compared to 1996, rose by 10% and reached 351 trillion Belarusian roubles in current prices, of which 175.4 trillion were related to the production of goods, and 125 trillion Belarusian roubles-to services. The output in industry, the leading sector of the nation's economy, increased by 17%, and the production of consumer goods increased by 21.2%. As an achievement, other macroeconomic indicators can be mentioned: capital investments had an increase of 19.5%, retail sales-19.6%, paid services-7.4%, foreign trade-25.4%.
Nevertheless, together with these convincing results, experts point to the conspicuous shortfalls. First of all, these are related to such important indicators as inflation, growth of imports, agricultural production. In 1997, consumer prices rose by 63%, and industrial manufacturers' prices-by 90%.The volume of imports increased by 24.6%. As a result of such an increase in imports, foreign trade negative balance increased by 16.3% and reached $1,497.2 million. This makes up 20.9% of the last year's total exports. With no reserves and hard currency credits to satisfy the demand for hard currency in the Belarusian market, the price for hard currencies grew. While in the beginning of 1997 the dollar exchange rate established by the National Bank of Belarus was equal to 15.5 thousand Belarusian roubles, by the end of the last year it reached 30.74 thousand Belarusian roubles, that is, the rate has almost doubled (increase by 198.3%). The commercial exchange rate of the U.S. dollar, as any other hard currency, and of the Russian rouble too, was even higher than the official one approximately by 30%. These are substantial negative aspects bearing on the national economy.
These are the factors that cause pessimism and cast doubts on the reality of the growth. Indeed, with such an inflation rate and the devaluation of the Belarusian rouble, how should one estimate rate of growth in real prices? What are the causes for the growth and to what extent these are reliable and sustainable?
There is no simple answer to these difficult questions. Nevertheless, we will try to analyse the situation using indicators based on real prices. It is in real prices that re-venue and expenditure are calculated, and, therefore, based on real price, calculations are made to see how legal entities and the population are doing. In the analysis, we will also compare the physical volumes of production.
What were the dynamics of the general indicator-the GDP? In 1997, the GDP's total nominal increase was 95.2%, with a 92.5% increase in production of goods, and 72.8%- in services.
Table 1
The structure of the GDP growth by sectors of the economy
(% change on year earlier, in nominal prices)
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
From the data in table 1, one can see that the GDP's total growth in nominal prices is commensurable with the rate of devaluation of the Belarusian rouble (195.2% and 198.2% accordingly). Also, one can see that a faster growth of GDP was made possible through a 293.9% increase in taxes on manufactured goods and on imports, and through a 213.7% increase in the industrial production. Only in the last two cases the growth rate exceeds the rate of devaluation of the Belarusian rouble.
The production of goods has the largest share in GDP-more than 50%, which includes a 33.2% share of the industrial production. Moreover, compared with the 1996 level, the share of industry in GDP grew in 1997, showing industry's increasing importance for the general results.
The 4.6% increase in the share of taxes on production and imports- from 9.1% to 13.7%-points to a higher level of withholding of revenues from the population and legal entities, something that can hardly be seen as a po-sitive development.
In industry the volume of manufactured goods and services in current prices rose by 212.6% and amounted to 390.9 trillion Belarusian roubles. The production output in all sectors of the economy and the production of most goods have increased: in 1997, the volume of production in the fuel-energy sector in current prices was 54.1 trillion, which means a 94.6% increase (see table 2).
Table 2
The production of the main goods in fuel-energy sector
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
The production of electricity increased by 10.1%. The output of the other goods has decreased. Here, the output depends, on the one hand, on demand, on the other-on the level of crude oil supplies to the refineries. The industrial growth will be determined, first of all, by energy-oil and gas-supplies.
In 1997, chemical and petrochemical industries produced goods worth of 51 trillion Belarusian roubles, which means an increase of 115.2% (see table 3).
Table 3
Production of selected goods in chemical and petrochemical industries
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
One can see that the volume of production of all goods, except for nitric fertilisers, has increased. However, the volume of production in this sector is determined by the export potential. Of all production of potassium fertilisers, 88.7% were exported. In 1997, the export of car tires had a 107% increase from the previous year's level.
In 1997, the output in machine-building and metal-working industries amounted to 89.9 trillion Belarusian roubles, an increase of 100.4%, and this was 23% of the total industrial production.
Table 4
Production in the machine-building goods and construction materials
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
Compared with the 1996 level, the output of almost all these goods (see table 4) increased. However, in 1996 manufacturing facilities were used at half of their capacity-if compared with their use in 1990. In 1997, the output of construction materials amounted to 13.7 trillion Belarusian roubles in, which was an increase of 64.9%; the output in light industry amounted to 29.9 trillion Belarusian roubles-an increase of 106.7%.
Table 5
Production of goods in light industry
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
Table 6
Production of goods in the food industry
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
Following machine-building, the food industry is second in the nation's industrial sector. It provides 15.2% of the total production. In 1997, this industry's output increased in nominal prices by 70.3% and amounted to 59.6 trillion Belarusian roubles.
In 1997, the volume of production of the agricultural sector decreased by 5.5%. However, the production of the most important food products has increased.
It can be noted that in 1997 the potato crops decreased by 36%, vegetables-by 2%, and flax-by 47%.
Thus, the data in tables 1-7 show that in 1997 a phy-sical growth in production, first of all industrial, was re-gistered.
The assessment of the growth in terms of costs and value seems to be more complicated. Complicated accounting, conditions that are difficult to compare-all this resulting from the prices dynamics, changing lists of the goods manufactured and the structure of production,-give grounds to question the value assessments. All the mentioned data in nominal prices are based, as a rule, on accounting books, and therefore can be trusted. What matters is how this information will be interpreted.
Usually, and this is done by official statistics, the growth rate is compared with the increase in the price index and, based on this, conclusions on the real growth are made. However, in 1997, in Belarus, mostly because of administratively regulated prices, two indices used-the index of consumer prices (which was 163%) and the index of industrial manufacturers' prices (which was 190%). To this, the index of devaluation of the Belarusian rouble should be added.
In these conditions, in order to determine the real growth rate one can compare the cost component of the growth with the rouble devaluation rate, which reflects the real value of the rouble. Comparing the rate of GDP growth in current prices (95.2%) and the devaluation rate of the Belarusian rouble (98.3%), one can conclude that all the increase in physical output of goods and services has been levelled by the decrease in their real value. This means that there has been no increase in GDP to be allocated for consumption or savings.
Some economists do not share this conclusion. Nevertheless, considering the specifics of Belarus, we believe that this method of comparison is quite justified. This assertion is based, first of all, on the role which foreign trade-and, by the same token, hard currency exchange rate and the value of the currency-plays in the nation's economy. Belarus is a country where foreign trade exceeds not only the volume of added value (GDP), but also all the industrial output. For example, in 1997 foreign trade amounted to 418.2 trillion Belarusian roubles, with exports of 189.2 trillion Belarusian roubles and imports of 229 trillion Belarusian roubles This makes up 120% of the country's GDP and 107% of its industrial production.
In 1997, the increase in production was caused, to a significant degree, by the increase in the exports of Belarusian products. Overall Belarusian exports has increased by 26.5%, and those to Russia-by 53%. Special conditions of the customs union with Russia, the revival of the economy there, and-what mattered more- the exchange rate of the Belarusian rouble and the scale of barter deals, all these have made it possible to expand exports on the Russian market.
Considering the scale of barter deals between legal entities in Belarus and Russia and the scale of unregistered exports of Belarusian products to Russia, one can assume that these two factors were the main reason for devaluation of the Belarusian goods and fall in the nation's revenues. However, barter deals have had some positive effect. These have made it possible to significantly expand sales markets and to alleviate the problems of non-payments and shortage of the Russian currency. The Gasprom's decision to increase the share of cash payments for the supplied gas can dramatically reduce the level of barter deals and make the sale of Belarusian products problematic.
To a certain extent, growing internal demand played a role in the revival of the economy. This demand was caused by an increase in the money supply and nominal cash incomes of the population. According to the National Bank of Belarus, in 1997 the aggregate monetary base grew by 88,7%, while its annual average active component grew by 2.1 in comparison with the previous year. This growth has been secured mostly through the increase in net internal assets of the banking system.
Undoubtedly, the resource support from the banking system has been one of the main causes for the growth of both GDP and the industrial production. However, precisely these credit emissions have triggered inflation and deva-luation of the rouble. This "stimulator" is still producing effects this year. In January-February of 1998, consumer prices rose by 7.1%, and in the mid-March the value of Belarusian rouble went down to 50 thousand Belarusian roubles per one U.S. dollar.
The growth of production can be encouraged through issue of money- this is often the case in the world's practice. But the scale of emission should be much smaller. The stabilisation of the monetary and credit system is the main pre- condition to guarantee a flow of capital into the country, and, accordingly, a sustainable growth of the economy.
Table 7
Agricultural production
Source: Statistical Bulletin, Ministry of Statistics No. 12, 1997
The comparison of the 1997 industrial output and that of 1990 makes it clear that industrial capacity is not used fully. However, one should bear in mind that in the last years this capacity has decreased since most of the industrial equipment have been worn out both morally and physically. According to experts' assessments, fixed assets have been worn out by 60-80%. That is why it is impossible to improve the quality and competitiveness of the products without the modernisation of the industry. Moreover, most of the enterprises badly need the working capital.
Statistics show that the fall in investment activity in the country's industry was deeper than that in output. According to expert estimates, investment decreased by 3.5 times compared to the level of 1990. Although in 1997 it grew by 19.5% from the 1996 level, its share in GDP was only 17.6%. At the same time, in manufacturing sector its share is even smaller-about 10%. Therefore, the primary goal is to look for and increase investments so that their share in GDP would be at least 20%.
Taking into account this country's conditions, one can assume that the main sources of investment must be reserves of the enterprises, foreign credits and savings of the population. However, in order to secure this investment appropriate conditions must be created.
As to the resources of the enterprises, these depend on the enterprises' profitability. If the profitability of enterprises is not increased in the near future (in 1997 it was 10.6%), or if this is very low, or enterprises are loss-making, this source of investment will not only fail to grow but may become exhausted in the near future.
One cannot seriously count on attracting savings of the population as investment resources, although there have been splendid practical cases in other countries. But unless we have financial system stabilised and social insurance system reformed, savings are highly unlikely to become a source of investment.
If we look at the domestic investment resources, we can see that these are very limited. The resources of the Belarusian banks are small: their own capital is 4.8 trillion Belarusian roubles, the savings of the population-10.7 trillion Belarusian roubles and temporarily free resources of legal entities-29.3 trillion Belarusian roubles. 1 In total, these resources amount to 44.8 trillion Belarusian roubles, which is equivalent to $1.4-1.5 billion. But funds that are on short-term accounts those can be regarded as investment resources. These comprise legal entities' 4.8 trillion Belarusian roubles and the resources of the population that are on accounts with terms longer than one month-about 6.3 trillion Belarusian roubles. The banks' own resources are not enough even to maintain mandatory reserves. 2 Therefore, the investment resources of the entire banking system of the country make up about 11 trillion Belarusian roubles, which is equivalent to about $350 million.
From this, one can conclude that the most realistic sources of investment growth in Belarus are foreign investment and credits. That is why it is necessary to do everything possible in order to annually attract $2-2.5 billion investment from abroad, including about 25-30% of this sum in the form of direct investment.
Credit lines from Germany, Austria, Switzerland, Spain, Belgium, and Turkey have been extended to Belarus. Possibilities of opening new credit lines are being considered. However, it should be noted that the credit resour- ces obtained as part of intergovernmental crediting are more expensive than loans provided by most of the European banks (the LIBOR rate of 5-6% plus a margin up to 3% to make overall 8-9%, while the interest rate to be paid on intergovernmental loans is approximately 15%). That is why it is important to decrease insurance risks and sign the necessary agreements with the International Monetary Fund which would signal a lower risk and open an access to the world's financial markets for the legal entities of Belarus.
In addition, intergovernmental credit lines-from the point of view of the creditor countries-are export credits which are part of the national systems of support and encouragement of exports. Their main goal is not investment in Belarusian enterprises, but financing of exports of the products and services from the creditor country to Belarus. At the same time, the borrower does not have an opportunity to choose or is limited in its choice of the product supplier. As a rule, not more than 15% of these loans can be used to buy equipment produced out of the creditor country. In case of the large and already used credit line from Germany, imported equipment is required to be produced in the eastern part of Germany. Depending on the particular type of equipment, this share should be at least 50- 70%. All this significantly scales down opportunities to order inexpensive and modern equipment.
The opening of intergovernmental credit lines means that appropriate agreements should be signed and/or government acts issued in the countries that extend cre-dit lines, and appropriate guarantees should be provided by the Cabinet of Ministers of Belarus. The procedure of extending the loans guaranteed by the Belarusian government is long. The proposals should be approved in many ministries and government agencies. They also require an independent expert assessment and bank guarantees.
This means that there is no easy access to intergovernmental credits, especially for small and medium-size businesses.
To ensure future economic growth, there is no alternative to an active search for foreign investors. To do this, the controlling interest in the public-owned enterprises should belong to the private business. Only then enterprises will be able to obtain the capital, technology, and know-how that are needed to become competitive. That is why privatisation is an integral part of the restructuring and revival of the industry.
Investors require a favourable environment. For this, stability and equal conditions for state-owned and private enterprises are essential. It is necessary to liberalise the currency market, continue privatisation, weaken price regulations and administrative control. The creation of new enterprises should be encouraged, and monopolies put out. The private sector should be allowed to raise our well-being through new investment and efficient production. Without these measures, which are part of structural reforms, it is impossible to maintain further growth of the economy and well-being of the people.
1 See Finansovyi analiz , No. 7-8, 1997, p.15.
2 Ibid.
If we are talking about the positive aspects, we can use the wording of the official statistics, claiming that in 1997 "the situation in the real sector of the economy stabilised, investment was growing, the social sphere was developing, the standard of living of the population rose." In general, one can agree with this statement. In 1997, according to statistical agencies' preliminary data, the country's GDP, compared to 1996, rose by 10% and reached 351 trillion Belarusian roubles in current prices, of which 175.4 trillion were related to the production of goods, and 125 trillion Belarusian roubles-to services. The output in industry, the leading sector of the nation's economy, increased by 17%, and the production of consumer goods increased by 21.2%. As an achievement, other macroeconomic indicators can be mentioned: capital investments had an increase of 19.5%, retail sales-19.6%, paid services-7.4%, foreign trade-25.4%.
Nevertheless, together with these convincing results, experts point to the conspicuous shortfalls. First of all, these are related to such important indicators as inflation, growth of imports, agricultural production. In 1997, consumer prices rose by 63%, and industrial manufacturers' prices-by 90%.The volume of imports increased by 24.6%. As a result of such an increase in imports, foreign trade negative balance increased by 16.3% and reached $1,497.2 million. This makes up 20.9% of the last year's total exports. With no reserves and hard currency credits to satisfy the demand for hard currency in the Belarusian market, the price for hard currencies grew. While in the beginning of 1997 the dollar exchange rate established by the National Bank of Belarus was equal to 15.5 thousand Belarusian roubles, by the end of the last year it reached 30.74 thousand Belarusian roubles, that is, the rate has almost doubled (increase by 198.3%). The commercial exchange rate of the U.S. dollar, as any other hard currency, and of the Russian rouble too, was even higher than the official one approximately by 30%. These are substantial negative aspects bearing on the national economy.
These are the factors that cause pessimism and cast doubts on the reality of the growth. Indeed, with such an inflation rate and the devaluation of the Belarusian rouble, how should one estimate rate of growth in real prices? What are the causes for the growth and to what extent these are reliable and sustainable?
There is no simple answer to these difficult questions. Nevertheless, we will try to analyse the situation using indicators based on real prices. It is in real prices that re-venue and expenditure are calculated, and, therefore, based on real price, calculations are made to see how legal entities and the population are doing. In the analysis, we will also compare the physical volumes of production.
What were the dynamics of the general indicator-the GDP? In 1997, the GDP's total nominal increase was 95.2%, with a 92.5% increase in production of goods, and 72.8%- in services.
Table 1
The structure of the GDP growth by sectors of the economy
(% change on year earlier, in nominal prices)
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
From the data in table 1, one can see that the GDP's total growth in nominal prices is commensurable with the rate of devaluation of the Belarusian rouble (195.2% and 198.2% accordingly). Also, one can see that a faster growth of GDP was made possible through a 293.9% increase in taxes on manufactured goods and on imports, and through a 213.7% increase in the industrial production. Only in the last two cases the growth rate exceeds the rate of devaluation of the Belarusian rouble.
The production of goods has the largest share in GDP-more than 50%, which includes a 33.2% share of the industrial production. Moreover, compared with the 1996 level, the share of industry in GDP grew in 1997, showing industry's increasing importance for the general results.
The 4.6% increase in the share of taxes on production and imports- from 9.1% to 13.7%-points to a higher level of withholding of revenues from the population and legal entities, something that can hardly be seen as a po-sitive development.
In industry the volume of manufactured goods and services in current prices rose by 212.6% and amounted to 390.9 trillion Belarusian roubles. The production output in all sectors of the economy and the production of most goods have increased: in 1997, the volume of production in the fuel-energy sector in current prices was 54.1 trillion, which means a 94.6% increase (see table 2).
Table 2
The production of the main goods in fuel-energy sector
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
The production of electricity increased by 10.1%. The output of the other goods has decreased. Here, the output depends, on the one hand, on demand, on the other-on the level of crude oil supplies to the refineries. The industrial growth will be determined, first of all, by energy-oil and gas-supplies.
In 1997, chemical and petrochemical industries produced goods worth of 51 trillion Belarusian roubles, which means an increase of 115.2% (see table 3).
Table 3
Production of selected goods in chemical and petrochemical industries
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
One can see that the volume of production of all goods, except for nitric fertilisers, has increased. However, the volume of production in this sector is determined by the export potential. Of all production of potassium fertilisers, 88.7% were exported. In 1997, the export of car tires had a 107% increase from the previous year's level.
In 1997, the output in machine-building and metal-working industries amounted to 89.9 trillion Belarusian roubles, an increase of 100.4%, and this was 23% of the total industrial production.
Table 4
Production in the machine-building goods and construction materials
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
Compared with the 1996 level, the output of almost all these goods (see table 4) increased. However, in 1996 manufacturing facilities were used at half of their capacity-if compared with their use in 1990. In 1997, the output of construction materials amounted to 13.7 trillion Belarusian roubles in, which was an increase of 64.9%; the output in light industry amounted to 29.9 trillion Belarusian roubles-an increase of 106.7%.
Table 5
Production of goods in light industry
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
Table 6
Production of goods in the food industry
Source: Statistical Bulletin, Ministry of Statistics, No. 12, 1997
Following machine-building, the food industry is second in the nation's industrial sector. It provides 15.2% of the total production. In 1997, this industry's output increased in nominal prices by 70.3% and amounted to 59.6 trillion Belarusian roubles.
In 1997, the volume of production of the agricultural sector decreased by 5.5%. However, the production of the most important food products has increased.
It can be noted that in 1997 the potato crops decreased by 36%, vegetables-by 2%, and flax-by 47%.
Thus, the data in tables 1-7 show that in 1997 a phy-sical growth in production, first of all industrial, was re-gistered.
The assessment of the growth in terms of costs and value seems to be more complicated. Complicated accounting, conditions that are difficult to compare-all this resulting from the prices dynamics, changing lists of the goods manufactured and the structure of production,-give grounds to question the value assessments. All the mentioned data in nominal prices are based, as a rule, on accounting books, and therefore can be trusted. What matters is how this information will be interpreted.
Usually, and this is done by official statistics, the growth rate is compared with the increase in the price index and, based on this, conclusions on the real growth are made. However, in 1997, in Belarus, mostly because of administratively regulated prices, two indices used-the index of consumer prices (which was 163%) and the index of industrial manufacturers' prices (which was 190%). To this, the index of devaluation of the Belarusian rouble should be added.
In these conditions, in order to determine the real growth rate one can compare the cost component of the growth with the rouble devaluation rate, which reflects the real value of the rouble. Comparing the rate of GDP growth in current prices (95.2%) and the devaluation rate of the Belarusian rouble (98.3%), one can conclude that all the increase in physical output of goods and services has been levelled by the decrease in their real value. This means that there has been no increase in GDP to be allocated for consumption or savings.
Some economists do not share this conclusion. Nevertheless, considering the specifics of Belarus, we believe that this method of comparison is quite justified. This assertion is based, first of all, on the role which foreign trade-and, by the same token, hard currency exchange rate and the value of the currency-plays in the nation's economy. Belarus is a country where foreign trade exceeds not only the volume of added value (GDP), but also all the industrial output. For example, in 1997 foreign trade amounted to 418.2 trillion Belarusian roubles, with exports of 189.2 trillion Belarusian roubles and imports of 229 trillion Belarusian roubles This makes up 120% of the country's GDP and 107% of its industrial production.
In 1997, the increase in production was caused, to a significant degree, by the increase in the exports of Belarusian products. Overall Belarusian exports has increased by 26.5%, and those to Russia-by 53%. Special conditions of the customs union with Russia, the revival of the economy there, and-what mattered more- the exchange rate of the Belarusian rouble and the scale of barter deals, all these have made it possible to expand exports on the Russian market.
Considering the scale of barter deals between legal entities in Belarus and Russia and the scale of unregistered exports of Belarusian products to Russia, one can assume that these two factors were the main reason for devaluation of the Belarusian goods and fall in the nation's revenues. However, barter deals have had some positive effect. These have made it possible to significantly expand sales markets and to alleviate the problems of non-payments and shortage of the Russian currency. The Gasprom's decision to increase the share of cash payments for the supplied gas can dramatically reduce the level of barter deals and make the sale of Belarusian products problematic.
To a certain extent, growing internal demand played a role in the revival of the economy. This demand was caused by an increase in the money supply and nominal cash incomes of the population. According to the National Bank of Belarus, in 1997 the aggregate monetary base grew by 88,7%, while its annual average active component grew by 2.1 in comparison with the previous year. This growth has been secured mostly through the increase in net internal assets of the banking system.
Undoubtedly, the resource support from the banking system has been one of the main causes for the growth of both GDP and the industrial production. However, precisely these credit emissions have triggered inflation and deva-luation of the rouble. This "stimulator" is still producing effects this year. In January-February of 1998, consumer prices rose by 7.1%, and in the mid-March the value of Belarusian rouble went down to 50 thousand Belarusian roubles per one U.S. dollar.
The growth of production can be encouraged through issue of money- this is often the case in the world's practice. But the scale of emission should be much smaller. The stabilisation of the monetary and credit system is the main pre- condition to guarantee a flow of capital into the country, and, accordingly, a sustainable growth of the economy.
Table 7
Agricultural production
Source: Statistical Bulletin, Ministry of Statistics No. 12, 1997
The comparison of the 1997 industrial output and that of 1990 makes it clear that industrial capacity is not used fully. However, one should bear in mind that in the last years this capacity has decreased since most of the industrial equipment have been worn out both morally and physically. According to experts' assessments, fixed assets have been worn out by 60-80%. That is why it is impossible to improve the quality and competitiveness of the products without the modernisation of the industry. Moreover, most of the enterprises badly need the working capital.
Statistics show that the fall in investment activity in the country's industry was deeper than that in output. According to expert estimates, investment decreased by 3.5 times compared to the level of 1990. Although in 1997 it grew by 19.5% from the 1996 level, its share in GDP was only 17.6%. At the same time, in manufacturing sector its share is even smaller-about 10%. Therefore, the primary goal is to look for and increase investments so that their share in GDP would be at least 20%.
Taking into account this country's conditions, one can assume that the main sources of investment must be reserves of the enterprises, foreign credits and savings of the population. However, in order to secure this investment appropriate conditions must be created.
As to the resources of the enterprises, these depend on the enterprises' profitability. If the profitability of enterprises is not increased in the near future (in 1997 it was 10.6%), or if this is very low, or enterprises are loss-making, this source of investment will not only fail to grow but may become exhausted in the near future.
One cannot seriously count on attracting savings of the population as investment resources, although there have been splendid practical cases in other countries. But unless we have financial system stabilised and social insurance system reformed, savings are highly unlikely to become a source of investment.
If we look at the domestic investment resources, we can see that these are very limited. The resources of the Belarusian banks are small: their own capital is 4.8 trillion Belarusian roubles, the savings of the population-10.7 trillion Belarusian roubles and temporarily free resources of legal entities-29.3 trillion Belarusian roubles. 1 In total, these resources amount to 44.8 trillion Belarusian roubles, which is equivalent to $1.4-1.5 billion. But funds that are on short-term accounts those can be regarded as investment resources. These comprise legal entities' 4.8 trillion Belarusian roubles and the resources of the population that are on accounts with terms longer than one month-about 6.3 trillion Belarusian roubles. The banks' own resources are not enough even to maintain mandatory reserves. 2 Therefore, the investment resources of the entire banking system of the country make up about 11 trillion Belarusian roubles, which is equivalent to about $350 million.
From this, one can conclude that the most realistic sources of investment growth in Belarus are foreign investment and credits. That is why it is necessary to do everything possible in order to annually attract $2-2.5 billion investment from abroad, including about 25-30% of this sum in the form of direct investment.
Credit lines from Germany, Austria, Switzerland, Spain, Belgium, and Turkey have been extended to Belarus. Possibilities of opening new credit lines are being considered. However, it should be noted that the credit resour- ces obtained as part of intergovernmental crediting are more expensive than loans provided by most of the European banks (the LIBOR rate of 5-6% plus a margin up to 3% to make overall 8-9%, while the interest rate to be paid on intergovernmental loans is approximately 15%). That is why it is important to decrease insurance risks and sign the necessary agreements with the International Monetary Fund which would signal a lower risk and open an access to the world's financial markets for the legal entities of Belarus.
In addition, intergovernmental credit lines-from the point of view of the creditor countries-are export credits which are part of the national systems of support and encouragement of exports. Their main goal is not investment in Belarusian enterprises, but financing of exports of the products and services from the creditor country to Belarus. At the same time, the borrower does not have an opportunity to choose or is limited in its choice of the product supplier. As a rule, not more than 15% of these loans can be used to buy equipment produced out of the creditor country. In case of the large and already used credit line from Germany, imported equipment is required to be produced in the eastern part of Germany. Depending on the particular type of equipment, this share should be at least 50- 70%. All this significantly scales down opportunities to order inexpensive and modern equipment.
The opening of intergovernmental credit lines means that appropriate agreements should be signed and/or government acts issued in the countries that extend cre-dit lines, and appropriate guarantees should be provided by the Cabinet of Ministers of Belarus. The procedure of extending the loans guaranteed by the Belarusian government is long. The proposals should be approved in many ministries and government agencies. They also require an independent expert assessment and bank guarantees.
This means that there is no easy access to intergovernmental credits, especially for small and medium-size businesses.
To ensure future economic growth, there is no alternative to an active search for foreign investors. To do this, the controlling interest in the public-owned enterprises should belong to the private business. Only then enterprises will be able to obtain the capital, technology, and know-how that are needed to become competitive. That is why privatisation is an integral part of the restructuring and revival of the industry.
Investors require a favourable environment. For this, stability and equal conditions for state-owned and private enterprises are essential. It is necessary to liberalise the currency market, continue privatisation, weaken price regulations and administrative control. The creation of new enterprises should be encouraged, and monopolies put out. The private sector should be allowed to raise our well-being through new investment and efficient production. Without these measures, which are part of structural reforms, it is impossible to maintain further growth of the economy and well-being of the people.
1 See Finansovyi analiz , No. 7-8, 1997, p.15.
2 Ibid.
Опубликовано 04 мая 2014 года
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