VZCZCXRO8949
RR RUEHIK
DE RUEHSK #0426/01 3651304
ZNR UUUUU ZZH
R 311304Z DEC 09
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC 0616
INFO RUEHZG/NATO EU COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHVEN/USMISSION USOSCE 0030
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHSK/AMEMBASSY MINSK 0625

UNCLAS SECTION 01 OF 03 MINSK 000426 
 
SIPDIS 
 
FOR EUR/UMB (ASHEMA) 
FOR DRL (DNADEL) 
FOR EUR/ACE (KSALINGER AND NKRYSTEL) 
EMBASSY KYIV FOR USAID (JRIORDAN AND KMONAGHAN) 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM ECON EFIN BO
SUBJECT: BELARUS BI-WEEKLY POL/ECON REPORT - DECEMBER 31, 2009 
 
MINSK 00000426  001.3 OF 003 
 
 
¶1. The following are brief items of interest compiled by Embassy 
Minsk. 
 
TABLE OF CONTENTS 
 
Civil Society, Media 
-------------------- 
 
- GOB Drafts a Bill to Regulate the Internet (para. 2) 
- Independent Polling: Belarusians Feel Economic Pinch, 
Criticize GOB Policies; Although Majority Still Trust Lukashenka 
(para. 3) 
 
Domestic Economy 
---------------- 
 
- Lukashenka Promises 10 Percent Plus Economic Growth in 2010 
(para. 4) 
- Lukashenka Promises Belarusians Increases in Salaries, 
Pensions, and Minimum Wages in the New Year (para. 5) 
- IMF Urges GOB To Use Realistic Economic Assumptions in Its 
2010 Fiscal and Monetary Policy Planning (para. 6) 
 
Foreign Investment 
------------------ 
 
- GOB Struggles to Attract Foreign Investment, a Requirement For 
Its Economic Growth (para. 7) 
 
Quote of the Week (para. 8) 
--------------------------- 
 
-------------------- 
Civil Society, Media 
-------------------- 
 
¶2.  GOB Drafts a Bill to Regulate the Internet 
 
The Council of Ministers has drafted a bill that will enforce 
rigid internet regulation.  It provides for registration of all 
internet media outlets, identification of all internet users, 
and allows authorities to block access to "extremist" and other 
web sites "at the general public's request."  The bill will also 
make internet providers accountable for the information released 
by customers.  President Lukashenka is expected to approve it 
soon, given his resolute commitment voiced at his December 30 
press conference "to establish order" in the internet, "rigidly 
regulate and hold responsible" those who use it.  Belarusian 
media experts have voiced concerns over the bill that, in their 
view, would result in the GOB establishing tight control over 
the national segment of the internet that covers internet 
service providers, internet resources, online stores, and 
regular internet users, particularly those at public internet 
cafes and other venues.  Analysts underscore that despite 
earlier statements made by senior GOB officials that there were 
no plans to adopt legislation regulating the internet, the GOB 
will likely apply "Chinese experience" in blocking the internet 
in the run-up and during the local and presidential elections. 
They called the bill a step to further establish an 
unjustifiably tough control over the distribution of information 
by the electronic media.  The bill was not subject to a public 
discussion, and pundits agreed that it was purposefully leaked 
to allow Minsk officials to gauge how imposing internet 
regulation would be received by the general public and, 
importantly, the EU.  CDA referenced USG concern with this issue 
in his end of year interview with one of the local news services. 
 
¶3.  Independent Polling: Belarusians Feel Economic Pinch, 
Criticize GOB Policies; Although Majority Still Trust Lukashenka 
 
The Vilnius-based Independent Institute of Socio-Economic and 
Political Studies (IISEPS) released the results of its December 
survey, showing that 50 percent of the population strongly 
believes the GOB's economic policies significantly contributed 
to the country's economic problems and compounded effects of the 
global economic crisis on Belarus.  Approximately 80 percent 
cited price hikes as a major problem. Other areas of concern 
included, unemployment (cited by 40% of respondents), falling 
industrial production (35%), corruption (26%), and human rights 
abuses (23%).  42 percent said the economic crisis has hit their 
families "hard," but most think the crisis will be over by late 
2010 or 2011.  50.3 percent felt they were not able "to 
influence any decisions taken by the GOB" and around 30 percent 
 
MINSK 00000426  002.3 OF 003 
 
 
said they cannot freely express political views.  In the run-up 
to the 2010 local and 2011 presidential elections, 42.5 percent 
indicated they were ready to support incumbent President 
Lukashenka (with a 51 percent rate of "trust vs. 36.8 
no-trust"). Only 4.3% registered support for "For Freedom" 
movement leader Alyaksandr Milinkevich, and 2.4% for Alyaksandr 
Kazulin, former political prisoner and opposition leader.  Among 
those who indicated they would vote for Lukashenka, 25% said his 
reelection would be "useful" for the country, while one-third 
said another term would not likely change anything. Nearly 47% 
would welcome a change in the presidency.  A majority of the 
Belarusians favor Belarus' rapprochement with the EU, with 38 
percent supporting improvements in ties as leading to 
opportunities for freer travel to work and study in Europe, 30% 
as helpful in introducing European political, economic, cultural 
standards in Belarus, and 21% as a means to eventually gain EU 
membership.  Nearly 55 percent oppose Belarus integration with 
Russia; 41% would support Belarus joining the EU in a 
referendum.  The pollsters suggested that the main reasons for 
growing pro-EU sentiments were 1) Lukashenka's decision to join 
the Eastern Partnership; 2) a drastic change in GOB's 
rhetoric/statements and state media language regarding the EU 
from negative to either neutral or favorable; 3) Lukashenka's 
meetings with senior EU officials and his trip to Vilnius in 
September.  Moreover, Lukashenka has on a number of occasions 
described Europe as a model for high living standards and 
advanced technologies.  Therefore, Lukashenka's association in 
the public's mind with positive steps toward Europe do not 
necessarily mean that pro-Europe means anti-Lukashenka. 
 
---------------- 
Domestic Economy 
---------------- 
 
¶4.  Lukashenka Promises 10 Percent Plus Economic Growth in 2010 
 
During his "frank" press conference on December 30, President 
Lukashenka acknowledged that he initially did not think the 
global financial crisis would affect Belarus, but unfortunately 
to his surprise it did.  Nevertheless, he firmly stated that the 
outlined economic objective for 2010 were "with no doubt 
ambitious but feasible" and that the GOB would achieve a GDP 
growth rate "beyond 10 percent" by producing more goods and 
services for export.  Reportedly, Lukashenka has already 
approved the 2010 budget with a deficit projection of 1.5 
percent of the GDP, with projected GDP growth of 11-13 percent 
year-on-year, and a projected annual inflation rate for 2010 of 
9 percent.  He lauded the GOB for the low rate of unemployment 
in Belarus which officially stands at 1 percent, and reiterated 
that the GOB had protected "the people from the gravest effects 
of the world crisis thanks to the iron will and discipline, 
accountability of our officials."  Lukashenka ordered the 
government to ensure that Belarus sells in 2010 high quality 
exports as it was "a matter of survival" for the country. 
 
¶5.  Lukashenka Promised Belarusians Increases in Salaries, 
Pensions, and Minimum Wages in the New Year 
 
At 8.7 percent, Belarus registered the second highest increase 
in consumer prices among the former Soviet states for 
January-November 2009.  Prices in Ukraine went up 11.3 percent 
and Russia 8.4.  The Council of Ministers increased the minimum 
monthly wage 12.6 percent from $80 to approximately $90 as of 
January 1, 2010.  The minimum wage was last raised by 10 percent 
on January 1, 2009.  As of January 2010, all types of pension 
and retirement payments will be increase by 9 percent on 
average, and monthly payment will be approximately $165. 
Lukashenka also stated on December 30 that "the inflation will 
not eat up wages," as the GOB will "systematically" raise 
salaries, and he assured Belarusians that monthly average salary 
in 2010 will reach "the sacred figure" of $500. 
 
¶6.  IMF Urges GOB To Use Realistic Economic Assumptions in Its 
2010 Fiscal and Monetary Policy Planning 
 
On December 23, the GOB received the fourth $688 million tranche 
under the IMF's $3.6 billion Stand-By Arrangement (SBA), thus 
bringing the total disbursements issued under the SBA so far to 
about $2.88 billion.  The National Bank (NB) is expecting to 
obtain the final tranche in February.  The IMF Executive Board 
concluded in its third SBA review of Belarus' performance that 
Belarus' economy "is beginning to emerge from the crisis," 
citing stabilization of export volumes, improved competitiveness 
 
MINSK 00000426  003.3 OF 003 
 
 
after the January 1, 2009 exchange rate depreciation, and 
growing confidence by households.  However, the Board called for 
"prudent macroeconomic policies," structural reforms to achieve 
"high and sustainable growth," and urged the GOB to "base 
[their] policies on realistic assumptions and agreed program 
objectives," and "limit lending under GOB programs" and 
"non-market" terms. (Embassy Note: the reference is to the GDP 
growth rates mentioned in para. 4)  In its December 21 
statement, the NB committed to continue pursue in 2010 its 
current exchange rate policy and it expects the rate of the 
national currency to fluctuate in 2010 within a "significantly" 
smaller band than in 2009.  The Belarusian ruble reportedly 
depreciated against the basket of currencies of Belarus' main 
trade partners by 19.02 percent in real terms, in particular 
against the Russian ruble 17.12 percent, the euro 22.22 and the 
USD 15.48, in January-November 2009.  Belarus' gross foreign 
liabilities rose to $19.299 billion, including $9.187 billion of 
short-term liabilities, making gold and foreign exchange 
reserves roughly half as large as the debts that Belarus may 
have to pay in the next 12 months.  Analysts suggest that it 
will be hard to refinance the entire short-term debt as the 
debt-to-GDP ratio amounts to 37.1% and is a significant increase 
from 25.1% on January 1, 2009. 
 
------------------ 
Foreign Investment 
------------------ 
 
¶7.  GOB Struggles to Attract Foreign Investment, a Requirement 
For Its Economic Growth 
 
Despite projections under the 2010 socioeconomic forecast that 
capital investments are expected to increase 23-25 percent 
year-on-year, Deputy PM Andrei Kabiakou expressed serious 
"concerns" that current calculations do not indicate that 
Belarus will be able to attract the 2010 targeted $2.7 billion 
in foreign direct investments.  According to a National Bank 
official, net inflows of foreign direct investment (FDI) 
plummeted 41.3 percent year-on-year and were at only $1.184 
billion as of September 2009.  FDI inflows as stockholder 
capital reached $787.6 million, half as much as in the Q1-3 in 
¶2008.  The majority of FDIs were from Russian companies.  PM 
Syarhey Sidorski called upon every company in Belarus to 
"actively" seek foreign investment.  The PM posited that Belarus 
needs a total of $5.6 billion in foreign investment in 2010 in 
order to "establish new enterprises, radically modernize 
operating ones, and develop innovative technologies to increase 
products' competitiveness."  Sidorski believes that foreign 
investment can help Belarus' reach a trade surplus "within the 
next three or four years."  Kabiakou also committed the 
government to further restricting imports and promoting import 
substitution. The practice of setting limits on the use of 
foreign exchange for purchasing imports will also continue. 
Moreover, at a December 28 GOB meeting, Kabiakou announced that 
Belarus' "Chinese partners" expressed their readiness to issue 
Belarus a $5.7 billion loan.  This "potential investment in 
fixed capital" will reportedly involve 14 projects in the 
transport, energy, telecommunications, and construction sectors. 
 
 
----------------- 
Quote of the Week 
----------------- 
 
¶8.  Speaking at a large press conference on December 30, 
President Lukashenka elaborated on local and presidential 
elections.  He stated the following: 
 
"If the economy develops in a good way, people will support the 
acting government, president, and constructive members [of the 
local government].  I promise there will be no pressure coming 
from me, especially during the presidential elections. There 
will be no administrative pressure.  People have to make their 
own choices." 
SCANLAN