Thursday 17 January 2019 | 17:54

Why with the success abroad, Belarus’ agriculture keeps failing at home?

20.08.2016  |  Economy   |  Aliaksandr Filipau, BelarusDigest ,  
Why with the success abroad, Belarus’ agriculture keeps failing at home?

Poor economic conditions in the countryside, restrictions, unfair competition, inefficiency of state-owned agricultural enterprises also contribute to this ‘success story’, writes Aliaksandr Filipau.

On 7 August 2016 the Minister of Agriculture and Food of Belarus Leanid Zayats announced that the country received $11m per day between January and June 2016 for exporting its agricultural products; this accounted for 18 per cent of all Belarusian exports.

Moreover, according to national statistics Belarus has become the third largest world exporter of butter and powdered milk, as well as the fourth largest world exporter of cheese.

At home, however, people are blaming authorities for high food prices. Experts point to high expenditures on agriculture, which exceeds income from export. Another problem is strong dependence on the Russian market – 85-98 per cent of Belarusian agricultural exports go to Russia.

The risk of the Russian market partially closing also remain high. On 11 August 2016 Russian authorities once again banned export of certain Belarusian dairy products due to supposedly substandard quality.

An engine for economic development?

Agriculture has remained a priority for Aliaksandr Lukashenka throughout his presidency. Content analysis of his speeches reveals that the president time and again declares agriculture to be the driving force for economic development in Belarus.

Officials emphasise the growth of export as the main reason for the success of the Belarusian agricultural sector. Due to sanctions imposed by Russia against Western food products, Belarus has managed to increase its share of the Russian market. The table below illustrates this:

In August 2015 the Russian Minister of Agriculture Alexander Tkachiov claimed that Belarus, with a total market share of 86 per cent, had almost completely replaced the EU in import of dairy products to Russia.

Tricky statistics

However, more detailed statistical data cast a shadow on the economic success of Belarusian agriculture. The table below depicts Belarusian export of the four most important agricultural products in 2013-2015. All calculations have been made by the author based on data from the National Statistical Committee of Belarus and National Bank of Belarus.

These data prove some very important trends in Belarusian agricultural export.

Firstly, they demonstrate its strong dependence on the Russian market. Russian authorities constantly accuse Belarus of dumping as well as exporting low-quality and / or re-exported agricultural products. Moreover, the deteriorating economic situation in Russia directly influences prices for Belarusian agricultural products. In 2015 they fell significantly compared to 2014.

Preserving Belarus's status on the Russian agricultural market requires significant financial government allocations to agriculture. Even the authorities admit that they allocated more than $40bn for modernization of the agricultural sector.

At the same time, the sector continues to offer some of the lowest salaries in the country - 66-72.25 per cent of the national average. About 35 per cent state agricultural enterprises remain unprofitable, while the total profitability amounts to 0.5-0.6 per cent. Unfortunately, such poor economic conditions are what allow Belarus to maintain its share on the Russian agricultural market.

What's more, the Russian agency 'Rosselhoznadzor' and the Russian Prime-Minister Dmitry Medvedev have have accused Belarus of re-exporting EU agricultural products, prohibited in Russia. Some experts claim that around $2bn out of a total of $4-5bn gained from Belarusian agricultural export comes from re-exporting.

Secondly, these figures confirm the existence of dumping. Prices inside Belarus can be twice as high as prices in Russia. This context makes exports to Russia seem much less profitable.

Moreover, this situation contributes to high risks of devaluation of the national currency. The authorities unwittingly become interested in weakening the national currency in order to increase their profits from trade with Russia.

Elimination of competition

The government tries to concentrate agricultural production in large state-owned farms. About 1,400 milk-producing farms produce 61.5 per cent of all dairy products. Nevertheless, authorities believe that state farms should be producing an even higher proportion of Belarusian dairy and blame private farms for the competition.

The special government programme ‘Development of private farms in 2011-2015’ appeared to eliminate this competition while providing sources of cheap crude products either for further processing or direct export to Russia.

However, the name of the programme should not deceive readers. It stipulates a decrease of food production by private farms and a state monopoly on buying such products. It also requires maintaining ridiculously low farm-gate prices.

A story reported by numerous Belarusian mass-media, which occurred in May-June 2016, illustrates how this system works. Seven people from a village in the Haradok district of Vitsiebsk region near the Russian border sold their cattle to a Russian businessman instead of selling to the closest state agricultural enterprise. The latter would have offered much less and involved significant delays.

As a result, the local authorities initiated an investigation and tried to bring these people to court, as well trying to confiscate money already paid.

High price and dubious results

Many viewed Belarusian agriculture as an apparent success on the Russian market. The country has become one of the world's top dairy producers, as well as the main supplier of agricultural products to Russia. Russian sanctions against Western agricultural products facilitated this success significantly, making Belarusian products a real substitute for the banned supplies.

However, this success comes at a high cost inside the country. Authorities allocate many resources to supporting this level of export. Extremely high domestic prices compensate for dumping in Russia.

Poor economic conditions in the countryside, restrictions, unfair competition, and inefficiency of state-owned agricultural enterprises also contribute to this ‘success story’.


Originally published at BelarusDigest

Other news section «Economy»

Leanid Zaika: Minsk decided to beat the Kremlin by Iranian oil
Leanid Zaika: Minsk decided to beat the Kremlin by Iranian oil
There are no strategic goals behind the purchase of Iranian oil, believes economist Leanid Zaika.
Stanislau Bagdankevich: The living standard will continue to fall in 2017, and possibly in 2018
Stanislau Bagdankevich: The living standard will continue to fall in 2017, and possibly in 2018
In 2017, Belarus will have to pay about $ 5 billion debts, which may affect the level of welfare negatively.
Leu Margolin: Industry cannot rise from its knees
Leu Margolin: Industry cannot rise from its knees
Although 30 percent of Belarusian enterprises can still be revived through urgent structural reforms.
Stanislau Bagdankevich: Next year will be harsh
Stanislau Bagdankevich: Next year will be harsh
Stagnation will continue in 2017, the standard of living will not rise, and the banking system may experience a crisis.
Andrei Yeliseyeu: Russia cannot impose quotas on the Belarusian dairy products supply
Andrei Yeliseyeu: Russia cannot impose quotas on the Belarusian dairy products supply
Belarus has already agreed to reduce the level of state support to agricultural producers in the framework of the Eurasian agreements.  
Leu Margolin: It is impossible to bring back the 500 dollars salary
Leu Margolin: It is impossible to bring back the 500 dollars salary
The authorities will start pressuring businesses to make them raise salaries.
Uladzimir Kavalkin: Drop in income? Salaries are finally becoming adequate to the economy state
Uladzimir Kavalkin: Drop in income? Salaries are finally becoming adequate to the economy state
Income may drop even a little bit more, but it will not be anything dramatic - within a few percent, expert believes.
Leu Marholin: In 2017, the probability of economic growth is close to zero
Leu Marholin: In 2017, the probability of economic growth is close to zero
In 2016, Belarusian authorities were expecting growth, too. However, the economy is going down.
EBRD will prepare five state companies for privatization
EBRD will prepare five state companies for privatization
The Belarusian government has invited the European Bank for Reconstruction and Development (EBRD) to prepare five large state-owned companies for privatization.
 Leu Marholin: We are heading full speed to the new nineties
 Leu Marholin: We are heading full speed to the new nineties
Regression of the Belarusian economy combined with the inertness of the government will make us recall the worst years.  
Uladzimir Kavalkin: Statistics on unemployment and real unemployment are poles apart in Belarus
Uladzimir Kavalkin: Statistics on unemployment and real unemployment are poles apart in Belarus
Officially, the unemployment in our country is reducing – if judging by the number of registrations at the labor exchange; however, the number of jobs doesn’t increase in the economy.
Leanid Zaika: Decline in prices on gas should lead to the reduction in utility costs
Leanid Zaika: Decline in prices on gas should lead to the reduction in utility costs
In the situation of cheaper prices on gas Lukashenka's decree on non-cash housing subsidies looks weird.
Point of view: Defence industry in Belarus evolved from helpless to a weighty branch of economy
Point of view: Defence industry in Belarus evolved from helpless to a weighty branch of economy
Recently Belarus State Military Industrial Committee announced that in the first half of 2016 its enterprises earned a net profit of $80m, thus over-fulfilling the assigned export plans by a quarter.
Leu Marholin: It looks like the Belarusian PM has got a fortuneteller
Leu Marholin: It looks like the Belarusian PM has got a fortuneteller
The fall of the economy will continue in 2016; we should hardly expect growth in 2017.
Why with the success abroad, Belarus’ agriculture keeps failing at home?
Why with the success abroad, Belarus’ agriculture keeps failing at home?
Poor economic conditions in the countryside, restrictions, unfair competition, inefficiency of state-owned agricultural enterprises also contribute to this ‘success story’, writes Aliaksandr Filipau.
Viktar Marhelau: We killed consumer demand inside the country
Viktar Marhelau: We killed consumer demand inside the country
In the situation of everyone’s impoverishment administrative procedures are now being perceived painfully.
Opinion: The question of what role China can play in Belarusian development remains open
Opinion: The question of what role China can play in Belarusian development remains open
On 20 June Lukashenka met with vice-chair and president of the Chinese CITIC Group Corporation Wang Jiong; it seems especially important in light of Lukashenka’s planned visit to China in September.
Lukashenka: Only lazy people don
Lukashenka: Only lazy people don't earn well in Belarus
All the conditions for everyone to be able to earn a decent salary have been enabled in Belarus, however, it is necessary to make some effort to get the money, assumes the president.
Leanid Zlotnikau: The government knows what to do with the economy, but will do nothing
Leanid Zlotnikau: The government knows what to do with the economy, but will do nothing
Belarus is losing currency earnings – in the 6 months of 2016 the country earned 3 billion less than in the same period in 2015. Instead of removing the causes of the flop the state relies on magic.
Russia
Russia's Rosatom agreed to replace reactor vessel at Belarus NPP
State Corporation Rosatom has agreed to replace reactor vessel at the Astravets NPP in Belarus.
Gintautas Mažeikis: The relation of political field and arena in the framework of information war

In his report, philosopher Gintautas Mažeikis discusses several concepts that have been a part of the European social and philosophical thought for quite a time.

"Vilnius Consultations": Key points and recommendations on the future of EU Eastern Partnership

On September 11, the inaugural „Vilnius Consultations“ conference was organized by Vilnius Institute for Policy Analysis and Lithuanian Ministry of Foreign Affairs.

Belarus's Lukashenko alleges “fifth column” plot as unrest continues

Belarusan President Lukashenko said on Tuesday a “fifth column” was plotting to overthrow him with the help of foreign-backed fighters, days before a planned street protest in Minsk against a new tax.

The real work of the Convention depends on all interested communities and organizations

What results has the campaign "Agenda 50" given, what helps to implement the Convention on the Rights of Persons with Disabilities in the regions?