REFORUM. National competitiveness of Belarus: a brief review of the main trends

This study, conducted in the framework of the project “REFORUM”, analyses whereby Belarus may increase its attractiveness for investment and business, and on what parameters country performs lower progress than its neighbors, and how it should implement reforms in order to increase performance in parameters of country competitiveness.

Since 2011, statements about the need for improving national competitiveness have been ingrained in the official rhetoric of the Belarusian authorities. Although the authorities mostly referred to efforts to further promote Belarusian export supplies, ideas about the competitiveness of the country as a whole, going beyond the necessity to enhance the appeal of Belarusian goods in foreign markets, were voiced increasingly frequently.

Improvement in Belarus’s international rankings as an individual area of activities was for the first time was included in the Action Plan of the Belarusian Government for 2011–2015. Furthermore, Kiryl Rudy, who was appointed economic aide to the President of Belarus in June 2013, started voicing the need to improve the national competitiveness of Belarus versus the other countries of the region. The objective of this research study is to identify the place of Belarus among the countries of the region by the level of the main competitiveness indicators, as well as to provide a brief description of these indicators.

The main difficulty in the analysis of Belarus’s competitiveness lies in the fact that the main international rankings measuring competitiveness, namely, those by the Institute of Management and Development (IMD) and the World Economic Forum (WEF), do not include Belarus in their calculations because of their insufficient confidence in its statistics. This brings about a challenge of the quantitative evaluation of the degree of Belarus’s competitiveness.

This challenge might by addressed by analysis of the components of Belarus’s competitiveness based upon the analysis of proxy indicators. Various rankings can be used as such proxy indicators, including the World Bank’s infrastructure quality ranking, Doing Business ranking, macroeconomic indicators, etc.

The analysis of changes in indicators demonstrates that in terms of the components of competitiveness Belarus shows a lot less progress than the countries of the region. In order to increase these indicators Belarus needs to implement reforms in different spheres.

We assume that these reforms should primarily pertain to privately-owned companies and should be aimed at increasing the contribution of the private sector to GDP. As we already mentioned, the rapid expansion of the Belarusian economy in 2000–2010 was to a great extent encouraged by Russian subsidies, rather than high labor productivity at companies. Although economic growth is the ultimate goal of high national competitiveness, in the case of Belarus it was attained owing to the use of external aid: preferential terms of trade in energy resources and priority access to the Russian domestic market. To ensure “competitive” economic growth, Belarus needs to implement a set of reforms to enable its business to make a better use of the available potential.

The current system of state administration in Belarus seriously limits the potential of business. This dimension calls for improvements in the quality of governance, increased transparency of legislation, as well as combat against corruption — these efforts will enable business to operate in more predictable administrative and regulatory frameworks.

When it comes to infrastructure, Belarus needs to additionally develop and improve the quality of logistics in order to develop its transit potential as an economic growth driver more effectively.

In terms of the overall conditions for doing business, Belarus can improve its competitiveness by reducing administrative barriers in business regulation, and liberalize and reform its labor market in order to create stronger incentives for workers to improve their productivity.

In macroeconomic policy and trade, Belarus needs to change from the policy of macroeconomic populism towards structural reforms. They will allow promoting national competitiveness through the creation of a stable macroeconomic environment enabling business to operate in conditions of increased economic predictability.

Read the study in pdf.