The government of Belarus is better to resign.
On October 16 Lukashenka held on to the import substitution issue again at the meeting with Prime Minister Siarhei Rumas. The ruler stressed that Belarusian enterprises had to "adopt world technologies, to buy in a relevant equipment, and to substitute imported goods."
Meanwhile, experts of the Eurasian Bank offered Belarus to follow the example of Russia and to avoid dollar-based transactions.
What impact will these "know-how" have on the economy of the country? Are they justified? Well-known economist Leu Marholin answers questions of Charter97.org:
- You know, Lukashenka's "import substitution" mantra is older than the Russian one. Only after sanctions of 2014 Russia has come up with it, Lukashenka has been pursuing this idea since early 2000s. I stress that this idea is crazy. One cannot produce everything.
There is the term "international differentiation of labour". That is, one produces things one is better skilled at. It's a norm when a country exports things it can do best, and imports things other countries a more skilled at.
Unfortunately, Lukashenka does not realize it, and from time to time he comes up with own mobile phones, vehicles and so on . It all appears and fades away. He is excited when someone offers him to produce our own product instead of an imported one. This is crazy.
- Everything's clear with the import substitution. But is the de-dollarization, the Eurasian Bank hints at, possible in the Belarusian economy?
- What concerns the de-dollarization, this is completely Russian know-how. As soon as America imposed sanctions with expectations of new ones, Russia turned on the idea to give up dollar in international settlements.
As the key member in the Eurasian Bank, Russia uses it as the lever to influence countries-sattelites.
However, the idea is likely a waste of time. Of course, Belarus may avoid dollars in settlements. Though it does not work in our favor; after all, neither Russian nor Belarusian curriencies are hard. Since a supply and a delivery of a product take some time, someone takes a winning side, and someone does not.
At least, it's possible in theory while settlements between Russia, Belarus, and Kazakhstan. Given all other international settlements, this scheme will not work. It was explained properly by former Chairman of the National Bank Stanislau Bahdankevich in his latest interview. He said "settlements in a national currency are possible only after at least five years of its stability."
After all, it is of great importance for every specific supplier. For example, I supplied goods valued at a million dollars, and I want to be paid this million. If we agree to price, for example, in Russian rubles, it will equal to 68 million rubles, according to the current exchange rate. As of the moment of settlement these 68 millions will equal at 900 thousand dollars. It bears 100 thousand dollars of net losses.
In general, it will be extremely complicated to convince someone to settle in rubles. The de-dollarization idea, as well as import substitution, is doomed to collapse.
- How will the de-dollarization influence the Belarusian ruble exchange rate?
- I guess it will not have any influence. Debt repayment and its service have more influence on the Belarusian ruble exchange rate. If currency is bought, new credits are taken and bonds are placed at high interest, it may have more severe impact on the Belarusian ruble unlike a vague de-dollarization.
- How reliable are statements of Lukashenka about import substitution, when we can see potatoes from Ecuador at shops?
- You know, substitution of potatoes and apples is real. The thing is that until we miss a normal economy with free market mechanisms, we will import bananas and potatoes from Ecuador, and apples from Poland.
Though, it has been recently informed that enterprises of the Kalinkavichy district are ordered to buy domestic apples.
It would seem easy to substitute Polish apples with Belarusian. But it requires efforts! Apples should be of the same size, good quality and look as well as Polish. But it's easier to use administrative methods, as it was done in the Kalinkavichy district. To restrict import and order "buy Belarusian goods!"
In general, it's an old story with no ending.
- What could you advice to the government of Belarus?
- You know, it does not make any sense, because, unfortunately, the government does not make a difference. There is the person who decides. If he believes that the import substitution is our "safety boat", then it will be like it. After all, it's hard to overpersuade the person of his age.
If the government respects itself, it should realize that the strategy of the economic development needs changes. If it fails, then its members should resign at once. Unfortunately, it is barely possible.