News & Analysis

Belarus business sector sounds alarm over devastating economic effects of state repression

State repression in Belarus against peaceful protesters calling for a recount of a rigged presidential election is already taking a severe toll on the country’s economy, a number of company bosses and representatives have told Emerging Europe. Many firms have begun to send talent abroad in order to continue operations.

Communication with and within Belarus had been made difficult for the past three days, and at times impossible, by the throttling of the country’s internet connections. On August 11 the country’s largest mobile phone network, state-owned Beltelecom, cut off mobile data services entirely for a time in what appeared to be an attempt by the authorities to make it harder for protesters to coordinate their efforts and for people to find out what has happened around the country. The number of photos and videos of the protests coming out of the country was noticeably reduced.

“The president tells people that the reasons [for the internet throttling] are external, that our country suffers from pressure in each area. I will leave this statement without comment as we here are tech professionals and have at least a basic understanding of how internet protocols work,” the boss of one company, who asked to remain anonymous, tells us.

Protests against August 9’s rigged election and the regime of Alexander Lukashenko continued throughout the country on the evening of August 11, although they were generally smaller and more widely dispersed than on previous evenings. The heavy presence of security forces, both police and specialist army units, made gatherings very difficult, and there were more mass arrests.

Journalists in particular were targeted: a photographer from the Poland-based Belsat independent news channel was hit by a rubber bullet.

For the first time since the protests began on August 9, police also began stopping cars, used by demonstrators to sound their horns in solidarity and to prevent the security forces deploying in city centres, dragging people out and beating them before placing them under arrest. There were even reports of police breaking into apartments where it was believed protesters had taken refuge.

The European Union toughened its stance towards the Belarusian dictator on August 11, issuing a statement that made clear new economic sanctions would be imposed against those responsible for “violence, unjustified arrests, and falsification of election results” unless the Belarusian political leadership initiated “a genuine and inclusive dialogue with broader society to avoid further violence”.

“Since the 2015 release of political prisoners, the relationship between the EU and Belarus had improved. But without progress on human rights and the rule of law, the EU-Belarus relationship can only get worse. It is against this background that we will be assessing the Belarusian authorities’ actions to address the current situation and conducting an in-depth review of the EU’s relations with Belarus,” read the EU’s statement.

The change in tone from the EU, which until now had limited its rhetoric to messages of “deep concern” came after the leader of the Belarusian opposition, Svetlana Tikhanovskaya, was forced into exile in Lithuania. She had reportedly been told that the lives of her husband – who is in prison in Belarus – and her children would be in danger should she remain. Independent sources claim that Tikhanovskaya won the presidential election, although official results declared Mr Lukashenko as the winner, with more than 80 per cent of the vote.

The EU’s statement, however, left one IT start-up entrepreneur we spoke to unimpressed.

“We are struggling here,” he says. “I mean not only the situation with the internet but in general. One man is killed in the US and there are protests all over the world. One is killed and hundreds of others are injured by police here and all we get is ‘we should think about sanctions against Lukashenko’. Fuck the sanctions, he has never been in Europe except to Austria. He travels to – and keeps his family’s money in – Dubai and Qatar.”

The internet restrictions have already had an effect on the Belarusian economy. With most manufacturing enterprises still in state hands, the private sector is heavily tilted towards services, IT especially. Large numbers of private Belarusian companies supply outsourcing solutions to clients across the world have had to scramble to find innovative solutions in order to provide anything approaching a regular service to their customers. Although regular internet access appears to have been restored this morning, they are aware it can be cut again without notice.

“Most companies are finding a way for business continuity with a combination of technical measures (VPNs, dedicated channels) or relocating their key talent abroad,” one company – which again asked not to be named – tells Emerging Europe. “Most difficulties were with mobile internet during the evening in cities, landlines are more stable. Today [August 12] it seems like internet is back on, so we’ll see. But the problem is there is a state monopoly on external channels to connect the country with the world, so it’s much easier to control the connectivity here than in most other countries.”

One CEO tells Emerging Europe that: “Most customers are understanding, but we have lost two opportunities because we couldn’t deliver quotes in time. We can’t record direct losses yet, but indirect losses will be high.”

While some firms were able to address their problems directly to internet service providers who restored services, there were even problems at the country’s Hi-Tech Park, an extra-territorial haven for tech start-ups whose founder and former boss, Valery Tsepkalo, a former ambassador of Belarus to the US, had planned to run in the presidential election before being threatened and eventually forced to flee the country.

“Companies at the Hi-Tech Park have been pushing its administration hard,” says a source who once again asked for anonymity. “They understand that the current situation is ruining the idea of Belarus as an ‘IT country’. But the director of the park Vsevolod Yanchevsky was ‘Chief Ideology Officer’ in the Lukashenko administration and he understands that any power changes are a risk to his position. If the people will lose their battle for basic rights, the IT industry here is over. Professionals will relocate, companies will freeze hiring and gradually shut down offices. Some will stay but entrepreneurs will go away and that means death for the future.”

Another CEO told us that the business community will take legal and technical measures to prevent losses from the internet lockdown in the future.

“The community of IT entrepreneurs is preparing a collective letter on the inadmissibility of such blocking at the Hi-Tech Park. Companies bound by service level agreements with foreign clients are delegating the fulfillment of their obligations to foreign representations, preparing for the departure of specialists outside of the country during the lockdown.”

It’s a similar message from every company we speak to.

“I run a product company in Minsk, we are 100 per cent owned by an American firm. We also have offices in Mexico, UK, Ukraine. So a lot of meetings, remote work. Monday and Tuesday were like a disaster,” says another CEO. “I had to cancel more than half of my calendar events. One was with a potential investor. I’m sure outsourcing companies with a lot of sales departments, call centre companies and customs services suffer even more. Their losses are impossible to calculate and the reputation risks are also huge and irreparable.”

On August 11 there were sporadic strikes at a number of major state-run businesses, including the country’s flagship Minsk Tractor Factory (MTZ). Nikolay Zimin, the former president of the mining and chemical workers’ union BNP, is one of many trade unionists to have been arrested.

According to Alexander Yarashuk, leader of the Belarusian Independent Trade Union, workers downing tools signals the end of Lukashenko.

“Nothing ended on election day, and everything is just beginning – I am convinced that this story will end with the inglorious departure of the current political regime,” he says.

Sharan Burrow, the general secretary of the International Trade Union Confederation (ITUC), believes that the Belarusian authorities must ensure that the fundamental rights of freedom of association, freedom of speech, peaceful assembly and media freedom are recognised.

“They must listen to the voice of people and respect their choices rather than respond with violence and repression,” she says.

According to the ITUC, workers in Belarus have “no guarantee of rights. It is effectively impossible to hold a legal strike and there is very strict legislation on illegal strikes.”

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