2010年-世界发展银行全球_Belarus_-_Industrial_Performance_before_and_During_the_Global_Crisis___Belarus_Economic_Policy_Notes_-_Note_No_1_47页_1mb

Summary of Document: Belarus Industrial Performance Before and During the Global Crisis

Core Content

This document analyzes the performance of Belarus's industrial sector before and during the global financial crisis, highlighting both achievements and underlying challenges. It outlines key trends in growth, productivity, investment, and the role of government policies, as well as the impact of the crisis on the sector.

Main Messages

Overall Industrial Performance

• Industrial performance in Belarus remained strong from 2005 to 2008.
• Growth was driven by within-firm improvements rather than new entrants.
• There are warning signs regarding the sustainability of growth, including wage growth outpacing productivity gains, which negatively affects competitiveness.
• The industrial structure remains largely unchanged, relying on a few large enterprises and underpriced Russian energy and subsidized agriculture.
• Belarus is entering a phase where growth will increasingly depend on product and process innovations, requiring new investments and access to technologies and human capital.

Impact of the Crisis on Industry

• Belarus weathered the crisis better than many neighbors due to government policies boosting domestic demand.
• The crisis exposed risks from the government's reliance on administratively set targets for enterprises, especially output and wage growth.

Growth Prospects and Structural Reforms

• Short-term and medium-term growth prospects are uncertain due to reduced demand for exports and economic constraints.
• Sustained growth will require increased productivity, investment in skills, development of services, and attracting FDI.
• Structural reforms are essential to improve competitiveness and reallocate support from less competitive to more competitive sectors.

Role of Policy in Industrial Performance

• The government has made efforts to improve enterprise performance through administrative interventions, but results have been mixed.
• Traditional state support programs are costly and unsustainable.
• Directed credit programs blur the line between public and commercial finance, increasing risks.
• The government needs to support the industrial sector's upgrading and competitiveness while exiting distortions and promoting private sector growth.

Key Trends in Industrial Growth (2004-08)

• Industrial output more than doubled between 2000 and 2008.
• Average annual growth in industrial output was 10.5% from 2005 to 2008, compared to 8.3% from 2001 to 2004.
• Average labor productivity growth declined from 10.6% to 9.3%.
• Real wage growth outpaced productivity growth, widening the wage-productivity gap.
• Industrial profitability increased, reaching 14.8% in 2005-08.
• Growth was broad-based, with all sub-sectors (except power and light industry) growing at over 5% annually.

Industrial Sub-sector Contributions

• Machinery, fuel, food, and wood processing sub-sectors accounted for over 70% of total industrial growth in 2005-08.
• These sub-sectors employed about 60% of total industrial labor.
• The machinery sector contributed a third of total growth, with a 36% employment share.
• The light industry (textiles, garments, and leather) saw a significant decline in employment, losing about 20% of all jobs between 2000 and 2004.
• The food processing industry's contribution to growth declined from 21.5% in 1996-2000 to 14% in 2005-08.

Business Environment and Enterprise Restructuring

• Improvements in the business environment were important but not comprehensive.
• Key obstacles for enterprise growth included shortages of equipment and skilled labor, which became more binding in the years before the crisis.
• Price controls in the retail sector were stricter than in the producer sector, benefiting industrial producers by allowing them to capture more value added.
• The system of state support to enterprises was extensive, with government support accounting for a significant portion of GDP.
• Enterprise restructuring was hindered by the scope and instruments of state support, which limited resource allocation efficiency.

Financial Performance and Investment Growth

• Investment growth increased significantly, from 12.3% in 2001-2004 to 21.0% in 2005-2008.
• The government's energy efficiency program was a notable success, with energy intensity decreasing by almost 50% between 1996 and 2008.
• Financial resources allocated to energy efficiency measures rose from $47.7 million in 1996 to $1,213.9 million in 2008, with total investments reaching about $4.2 billion.
• The program included institutional reforms, increased funding, and continuous political commitment.

Challenges and Policy Implications

• The current economic model is unlikely to support the necessary productivity and innovation gains.
• Structural reforms are critical to address three main challenges:
  1. Expanding the private sector by liberalizing business entry and developing the service economy.
  2. Attracting FDI to bring in new technologies and access to export markets.
  3. Reforming the system of state support and the state-owned sector to manage resource reallocation and reduce social impact.
• Policy complacency must be avoided as the global economy recovers and industrial growth resumes.

Conclusion

• Belarus's industrial performance was strong before the crisis but faces sustainability challenges.
• Structural reforms are necessary to improve competitiveness, support private sector growth, and ensure long-term economic stability.