The centre of the Belarusian capital Minsk has changed dramatically over the last few years, with newly-opened bars, restaurants, and cafes helping to create a lively portrayal of the country. The city centre now has a modern vibe thanks to the young people working in the IT sector, who earn much more money than the average wage and have created a bubble of wealth within Belarus.
The changes are partially driven by the country’s Hi-Tech Park, which was established in 2005. The park offers exemption from corporate income tax, real estate tax and VAT, among other things. It has become a magnet for tech companies - such as the developers of the famous game World of Tanks and the secure messaging app Viber - helping it gain the moniker “Silicon Valley of Eastern Europe.”
Still, the park is not representative of the country, explains Kamil Klysinski, a senior fellow at the Centre for Eastern Studies, a think-tank based in Poland, whose focus is Belarus. “The Hi-Tech Park is a nice exception in Belarus, but it is only an exception,” says Klysinski. “It is a business card which can be shown to people, such as journalists, who can get a picture of a kind of modern country with a promising future. The truth is that the economy is in stagnation.”
'An island of growth in a sea of stagnation'
Artyom Shraibman, a Belarusian political analyst at Carnegie Moscow Center, agrees with Klysinski, telling Euronews that Hi-Tech Park is “an island of growth in a sea of stagnation.” According to the World Bank, the Belarusian economy has been sluggish since 2014. It comes after rapid growth since 1994, when the current president Alexander Lukashenko took charge of a flat-lining economy suffering deeply after the collapse of the Soviet Union.
The Hi-Tech Park has grown since its inception into a billion-dollar business, while at the same time, numbers from 2018 show that 40 per cent of all companies in Belarus are experiencing a decline in revenue, according to Centre for Eastern Studies. Furthermore, 15 per cent of companies, which are mainly state-owned, are unprofitable.
The economic situation in Belarus has become one of the defining issues of the upcoming presidential election on Sunday, in which incumbent Alexander Lukashenko faces an opposition with three women at the forefront.
Svetlana Tikhanovskaya, a 37-year-old former teacher and a stay-at-home mother, is leading the opposition with Maria Kolesnikova and Veronika Tsepkalo - they are trying to unseat Lukashenko, threatening his power like no one before. She decided to run instead of her husband Sergei Tikhanovsky, a famous YouTube blogger arrested back in May who, along with other opposition candidates, has been prevented from running.
“The fact is that the economy is stagnating. It is inefficient in agriculture and industry, and there is a lack of will for structural reforms because Lukashenko is afraid of reforms,” says Shraibman, pointing out that state companies control most of the economy. “Lukashenko does not want to privatise the economy because he fears losing power, even though the current economic direction is not sustainable in the long run,” he says.
Beneath its modern veneer, not everything in Belarus resembles the centre of Minsk. Not far from the fancy bars, people live in ragged wooden houses in neighbourhoods where people still get their water from wells. Outside Minsk, it is not uncommon to see people still using horses to plough their backyards with furrows for potatoes or other vegetables they rely on to make ends meet. Local human rights organisation Viasna told Euronews that government employees are forced to work two to four days a year without salary, a sort of collective labour law within an economic structure reminiscent of the Soviet Union.
In a recent television address, Lukashenko presented a new five-year plan to kick-start the economy, promising to double the average salary in Belarus within five years. The problem, according to Klysinski, is that Lukashenko, who was previously a leader of a Soviet collective farm, still has a mindset that harks back to the Soviet Union, one that maintains communist ideas which make him unwilling to pursue liberal reforms.
“His problem is the growing number of unhappy people who have seen that their salaries have remained the same for 20 years while food prices have become much higher,” says Klysinski. “It is a huge challenge for him.”
Hi-Tech Park was an exception for Lukashenko, he adds, who usually is not very happy to transform the economy because it might mean losing power.
“The IT sector is very famous for its development and success. It is a success, but driven by low taxes,” says Klysinski. “Clever advisors promised Lukashenko high income in a new sector which will not threaten his authority, such as privatisation of state companies could do.
“The Hi-Tech Park was something that Lukashenko could accept, but it is not the case for heavy industry or other sectors of the economy, because he sees these as strategic assets.”
Growth of the Hi-Tech Park
The Hi-Tech Park offers excellent opportunities for IT companies, being highly competitive to other countries, Andrew Afanasenko, the chief operations officer at IT company Godel Technologies, told Euronews. Godel Technologies has its headquarters in the UK but has seven bases around Belarus where it services British companies with IT solutions.
There is a good level of cooperation between management and politicians overseeing the Hi-Tech Park, he explains, and that it is easy to work with schools and universities in Belarus to elevate both the quality and quantity of future IT workers.
“The IT industry is the top industry in Belarus. It probably has the reputation as the best industry to work for,” says Afanasenko. “There are higher salaries because we are part of the international market. We have to give competitive salaries to get people to work here,” he adds.
“The average salary in the IT sector is probably around $2,000 (€1,690), while the average in Belarus is around $500 (€420). So, it is around four times more than the average.”
From the office windows of Godel Technologies, Afanasenko can see the construction of a new Olympic-standard pool, and behind his building, a new business centre is underway. He has experienced the transformation of Minsk in recent years first hand, but he is reluctant to say that the change is all due to the Hi-Tech Park and the IT industry in general.
“The city has changed a lot, but I can’t say that this is because of it. I believe that the country is growing overall because you see construction everywhere.”
Reliance on Russian funds
Belarus’ economy has indeed grown a lot since Lukashenko took power in 1994, but as experts point out, much of this has happened because of Russian subsidies. In 1994, the Belarussian GDP was around $23 billion (€19 billion), and it grew to $63 billion (€53 billion) in 2014 before the recent stagnation.
Shraibman agrees that the Hi-Tech Park has done a lot for the country, but believes it has also been a source for the growing dissatisfaction seen in the run-up to the elections. As he points out, the income gap between people in Minsk and the rest of the country used to be small, but it has been growing as people in the IT sector have started to earn more and more. It has made it clear to people living in the regions that things could be better.
If Lukashenko wants to change this, he will need to reform the country and privatise some of his state-owned companies. But he does not want to do this, according to experts. According to Valiantsin Stefanovic, the deputy chairman of Viasna, the human rights group often receives reports of how people criticising the authorities lose their jobs at state factories or farms. It is just one way that Lukashenko is able to keep power. He is reluctant to reform, Stefanovic says, because reforms will mean the loss of jobs in state companies.
“We have 80 per cent of the economy under state control. Most people work on short contracts for one to three years, and it gives the authorities great power,” he tells Euronews. “If you lose your job in the small cities, it is a catastrophe because it is hard to get a new one.”
“If the government fires you, many are forced to leave the country to find work, simply because it is so hard to find work in Belarus if you are banned from state companies,” he adds.
While it is widely believed that Belarus needs change, it is not seen as an easy task for Lukashenko to transform the country, create economic growth and silence some of his critics, says Klysinski. One option is to seek help in the West, but that would mean reforming Belarus, which Lukashenko does not want to do, he explains. The other option is to integrate more with Russia, which today heavily subsidises the Belarusian economy to the tune of 10 per cent of GDP. However, subsidies have been dramatically curtailed by Russia since 2006, when it peaked about 20 per cent and accounted for much of the progress seen in Belarus.
Resisting the pull of Russia
The reduction of subsidies was a means of pressuring Belarus into accepting political and economic union, Klysinski explains. While he has long relied on cheap Russian energy and subsidies to grow the Belarus economy, Lukashenko is reluctant to sign the Union Treaty between the two countries, something which Russia is eager to see happen. The treaty was agreed back in 1999 and would mean that the two countries would become integrated with a common constitution.
“Russia wants Belarus to implement the Union Treaty, and they have made that very clear,” says Klysinski. “They want Belarus to stick to the roadmap of deep integration both economically and politically. It is dangerous for Lukashenko - and he does not want to do that - because he knows that the lack of independence in Belarus means that he will lose power.”
Both Klysinski and Shraibman agree that Lukashenko might have considerable difficulties delivering on his promises, securing economic growth and silencing his opponents, even if he can win the election on Sunday. As Shraibman points out, just because people have a comfortable, secure income from a job in the IT sector does not mean that they do not want change.
Euronews contacted the Belarusian Ministry of Economy for comment but it had not responded at the time of publication.