The Knowledge-Based Economy Creation in Belarus in the Post- Crisis Period

THE KNOWLEDGE-BASED ECONOMY CREATION IN BELARUS IN THE POST- CRISIS PERIOD Mikhail Myasnikovich [email protected] National Academy of Sciences of Belarus 1. INTRODUCTION Republic of Belarus is an independent medium-size European state with no global claims. During the 19- year period of statehood (after the USSR disintegration in 1991) Belarus has paced the way which many countries of the world managed to do within several decades: the GDP at the PPP in years 1999 – 2009 increased by 2.6 times and reached USD 119.5 billion. Modern Belarus demonstrates one of the highest rates of economic growth in Europe. Within a short period in history there have been created the base market institutions, made a transition to the mixed economy functioning mostly as a market-based system. Since 1996 the country has stably positive economic growth rates being noticeably higher than those of the EU and CIS. Today Belarus doesn’t face the problems of survival (like it was after the USSR collapse), the current challenges are much more complex, implying further development, new markets and niches working up under the conditions of the globalization and world economic crisis. And after this crisis the Republic of Belarus should enter the new world as a renovated state, got firmly established with a modern effective economy. There are valid reasons to believe that it is quite possible, as today Belarus is a “small economy”, with its share in the world GDP at PPP being 0.15%, and in the world population – 0.16% [1]. It means that even under the world recession the Republic of Belarus has a potential for growth as the crisis effects primarily the large economies, and the small economies are able to expand their niches even in the shrinking markets by means of being more dynamic and flexible. Because of global crisis, the environment in which the country’s economy will have to operate in the years to come is subject to change. Prices for imported from Russia energy, raw materials and supplies will be gradually catching up with the world prices. The crisis-induced slowdown in global economic growth and slump in demand will hamper the export of Belarusian goods. Such a situation necessitates decisive and effective actions to restructure and modernize the economy. And Belarusian government has started to do that. On the economic background. The contemporary Belarusian economic history may be divided into four periods: I. 1990 – 1995 – a period of recession caused by the USSR collapse; II. 1996 – 2000 – period of stabilization and basic market institutions formation; III. 2001 – 2005 – period of extensive economic growth; IV. 2006 – up to present – period of modernization and post-crisis development. The first period lasted from the early 1990s up to 1995 when Belarus destroyed the planned economy embarked on the market institutions creation. In 1995 vs 1990 the GDP, industrial output and consumer goods production reduced by 35%, 41% and 40% respectively During the second period, due to the President A.Lukashenko’s Programme of gradual socially oriented economic reforms implementation the GDP increased by 36% and made up 88% of the pre-crisis level, the industrial output increased by 65% exceeding the 1995 level by 1% and, above all, real cash incomes of the population amounted to 106% by the beginning of the stabilization period. However, the innovation activity and modernization of production were not and indeed could not be a principal vector of the industrial policy at that time. The investment in the fixed assets increased by 28.5% vs 1995, i.e. about 2-fold less compared to the rate at which they dropped in 1990 -- 1995 – 61%. The main target of that period was to prevent an economic collapse and maintain economic security of the country. An objective set for the third period (2001-2005) was to achieve economic growth and macroeconomic stabilization, i.e. to drastically reduce the inflation level and stabilize monetary and foreign exchange policy. So, without reducing economic growth rates as a whole, a framework for investment and innovative activities was being developed not only by implementing the target state programmes and budget resources, but also by 467 attracting private and foreign investors. Yet these prerequisites were essential, but not adequate: there was a need to revise a great deal of provisions of the tax legislation and aspects of the pricing system, develop major components of an innovation infrastructure and so on. During the period of stabilization the market institutions have been formed, the pre-Soviet level of economic development exceeded the conditions for the sustainable economic development and transformation of the economic growth model created. [2]. The fourth period is the innovation development. The country has approached a new stage, a new paradigm: from the economic growth toward economic and social development when research and innovation activities turn into the major system-forming factor of social development. The modern economics considers this as a new classification of stages of development: from industrial to post-industrial and then to economy of knowledge through an information society. This fully conforms to modern trends of the global economy, primarily, to processes of forming a “new economy” and involves establishment of a self-developing system, with an intensive flow of innovations and a high degree of responsiveness of the public production to them being a condition of its safe existence. By the time of abrupt mounting of the foreign economic challenges such as the energy price rise and global financial crisis, the Belarusian economy has been performing fairly well as a whole to consistently follow the path of the socially oriented development. Over the period of 2006 -- 2008, the GDP grew by 31%, industrial output – by 33.9%, investment in the fixed assets – by 87% and real cash income of the population – by 52.7% [3]. The world crisis have affected to the country’s development. Modernization of economic mechanisms and liberalization of the economic system in Belarus have been taking place under the new economic conditions. At first sight, this gave grounds to opponents of reforms to hamper them in any possible way upon the pretext that it is necessary to wait for more enabling environment to emerge. Still all economic theories prove that crises indeed form conditions for “shocking” an economy, restructuring some of its elements and renovating a technology infrastructure and economic structure. It may be argued that by virtue of some factors specifically Belarus would be affected by the global “tectonic movements” to a lesser extent compared to other countries. This is true, but Belarus is an integral part of the global economy and it will be integrating into the global economic relations at an ever increasing scale. Therefore, this would also entail stronger interdependence. However, this does not necessarily mean that we should strictly follow the suit of other countries in managing the crisis and modernizing the economy. What is the difference between our recipes and proposals worked out by economically developed countries? Firstly, standard recommendations under crisis include labour redundancy and reduction in wages. Our strategy involves maintaining employment, industrial potential and continued income growth due to the above reasons: the new economy requires the best specialists. Secondly, the trend toward enhancing the state economic regulation is observed worldwide: banking operations and rating agencies are put under control, big companies are nationalized, etc., while Belarus has embarked on economic liberalization, as it was a strategic policy. Out of two conceptual foundations of the social and market economy – “strong market – strong state” we have only the latter in full. However, even the strongest state has no capacity to efficiently manage all economic agents and operations in the country, particularly when an initiative and creative entrepreneurship become a decisive factor of the development. The liberalization course has been embodied in the Plan of Priority Measures to Liberalize Conditions of Economic Activity in 2009. It provides for more freedom for enterprises and softer state regulation of the real sector of economy. It suggests that free pricing should be expanded. However, the prices will be regulated with respect to specific socially significant goods and monopolists’ products. It also provides for reduction in the tax burden of enterprises: allocation of taxes to the national fund for the support of agricultural producers and local special-purpose taxes paid from profit, including transport special-purpose tax for replacement and renovation of the public transport are to be abandoned. One of the most important lines of economy modernization is to promote small and medium-sized business. Further measures are to be taken to reduce administrative barriers and streamline administrative procedures, shorten the list of activities requiring licensing and provide a wider access to credit resources. Proposals to improve lease conditions provide an opportunity for small and medium-sized business entities to buy out premises to be leased for 3 and more years at a balanced cost, etc. Denationalization and privatization and other measures are to be intensified. These measures would result in increase of the share of small business in the total revenue from sale of goods and services. 468 The main goal of the economy modernization is to enhance competitiveness. Besides, by “modernization” should be meant not only implementation of advanced technologies and equipment, but also mainly modernization of economic institutions and organizational and economic mechanisms. Thirdly, a generally accepted approach to counter reduction in the economic activity is to expand access to credits by reducing interest rates. This is what specifically was done by the US Federal Reserve System and EU Central Bank in November 2008, while the National Bank of Belarus undertook a moderate increase of the credit rate.

Load more