Regional development in Belarus
The Republic of Belarus consists of six regions. The smallest in territory is the Grodno
region (25 thousand sq. km) and the largest is the Gomel region (40.4 thousand sq. km). The
difference in population is not very large. Gomel has 1,527,500 inhabitants, while the Mogilev
region, the smallest in population, has 1,191,800 people.

Figure 3. Administrative map of BelarusTable 4 . Employment by major sectors of economy in Belarusian regions in 2001, %1.

Regions Brest

Vitebsk Gomel

Grodno Minsk

MogilevSectors of economy
Industry

24.2

26.5

28.8

25.3

27.4

29.5

Agriculture

18.8

14.4

13.1

19.9

19.3

13.9

Trade and public catering

10.5

10.0

10.7

10.0

9.7

9.7

Transport

7.3

6.2

6.1

4.5

3.7

5.6

Construction

6.3

7.0

7.1

6.4

7.1

6.0

Source: Modified from Statistical Yearbook (2)The Belarusian regions are very similar in economic structure (Table 4). As

shown in thetable, the biggest part of the labor force in all regions is employed in industrial production.
Agriculture accounts for between 13 and 20 % of the employed. This more or less equal structure of
the economy in all the regions appeared during the Soviet period when the industrial production wascentrally planned. Factories were located in various regions according to strategic and geopoliticalbut not economic reasons. In the 1970s to ‘80s Belarus became the “assembly workshop” of theUSSR. Many giant factories were built in the regions to serve the needs of the whole country. The
break-up of the Soviet Union had severe consequences for the Belarusian economy because most of
the former industrial connections were broken and those giants had to work at half or even a third of
their original capacity. This was one of the motives of re-integration with the Russian Federation in
the mid-1990s (Tarasevich and Lobatch, 2001).
Unlike in Poland, the Belarusian regions have a smaller share of employment in agriculture.
The agricultural sector is almost 100% state owned and the old Soviet-style collective farms have1

To have more precise results here and later, the capital city, Minsk, is excluded from the statisticalanalysis.

been preserved. For the last ten years, the efficiency of Belarusian agriculture has been continuouslydeclining, which has led to a situation where 80% of the farms appeared to have enormous debts.
The government has been heavily subsidizing the agricultural sector, but no reforms have yet been
introduced. As a result, the costs of agricultural production—of foodstuffs in particular—haveincreased to a level higher than that in Russia, the Ukraine or Lithuania. In many cases, foodstuffs
imported from those latter countries are cheaper and of better quality than the local products. Such asituation had never happened before. During the last eight years, most of the rural population hasbeen living in poverty and, therefore, the outflow of the labor force to the urban centers has beenvery intense (Statistical Yearbook (2)).
Traditionally, the western regions of Grodno and Brest had a much more efficient
agricultural sector. The volume of agricultural production per capita has always been bigger in thewestern than in the eastern regions (Statistical Yearbook (2)).

Table 5. Main branches of industry in Belarusian regions, share in total volume of production in2001 (%)2.

Brest

Vitebsk

Gomel

Food (30.9)

Fuel (21.3)

Fuel (21.0)

Engineering,Electric power

Ferrousmachine-building(18.9)

metallurgy (16.9)

GrodnoFood(28.2)

Chemicals (23.6)

Minsk

Mogilev

Chemicals andChemicals andpetrochemicals

petrochemicals(32.2)(29.0)

Food (23.1)

Engineering,and metal working

2

Branches of industry are defined according to Belarusian statistics. The table contains only thosebranches that have more than 10% in total regional production.

machine-building
and metal working

(22.4)(16.3)

Light industryFood (15.9)(14.5)

Woodworking, pulp
and paper(10.9)

Light industry

Engineering,Engineering,Engineering,machine-building

machine-building

machine-building

and metal working

and metal working

and metal working(15.0)(13.1)(21.0)

Food (14.7)

Food (15.6)

Electric power(12.3)(10.7)

Chemicals andLight industry

petrochemicals(10.5)(12.1)

Source: Modified from Statistical Yearbook (2)Although the economic structure of the Belarusian regions is quite similar, the structure ofthe industry is somewhat different. As shown in Table 5, the fuel, chemical and petrochemical, andfood industries occupy the biggest shares of production in the regions. Although machine-building
and metal working have a relatively big share of the total production of the regions, the economic
situation in this sub-sector resembles the situation in Slaskie in Poland. Most of the companies areinefficient, the equipment is 80% worn out, and no reforms, including privatization, have beenintroduced. The longer these companies stay in the property of the state, the fewer chances there
would be to attract investors. A big share of this sub-sector of the regional economy is rather apotential burden than an advantage.
The chemical, petrochemical and fuel industries are the only ones that maintain relatively
high levels of efficiency. The companies are quite attractive for Russian investors, and the process ofprivatization in these sub-sectors has been commenced recently.

Unlike in Poland, regional disparities in Belarus, according to the official statistics, areextremely small. Average incomes and GDP per capita are almost equal in all the regions. Excessiveintervention of the state into the economy and the extremely low share of the private sector (less than
5% of the country’s GDP) distorts the real state of affairs. Many state owned companies andagricultural farms have been heavily subsidized from the state budget which has kept them awayfrom inevitable bankruptcy. One of the indicators that may show the potential disparities in theBelarusian regions is the number of the loss-making enterprises (Table 6).

Table 6. Share of loss-making companies in all sectors of the economy of the regions in 2001 (%).

BrestVitebsk

GomelGrodno

Minsk

Mogilev

28.9

45.441.5

32.3

37.1

47.1

Source: Statistical Yearbook (2)In the western regions, Grodno and Brest, the share of loss-making companies in all sectorsof the economy has been the smallest. Traditionally, most subsidies from the state budget have been
directed to the Gomel and Mogilev regions. This may indicate that the western regions arecomparatively more developed. The share of direct foreign investment in total investments in thoseregions has also been comparatively higher. It comprised 2.5% in Grodno and 2.3% in Brest, while
the share of FDI in eastern regions such as Vitebsk and Mogilev was just 0.8% and 0.2%
respectively (Statistical Yearbook (2)). In general, Belarusian officials and scholars state that theBelarusian economy suffers an investment crisis. The total flow of FDI in recent years has been
extremely small, and even the free economic zones that were created in every region did not help toattract more investment (Zaiko, 2003).

The structure of foreign trade in the Belarusian regions is also similar: 50% or more is done

with Russia. The share of the EU in total Belarusian trade in 2001 was 12%; five percent of the total
turnover was with Germany. The candidate countries embraced 11.8% of total foreign trade in 2001.
The biggest partners among the candidates were Poland (3% of total turnover), Latvia (3%) and
Lithuania (2.5%) (Statistical Yearbook (2)).

Table 7. Cross-border trade of Belarusian regions in 2001, %.

Regions Brest

Vitebsk

Gomel

Grodno Minsk

Mogilev

Neighbouring states

Russian Federationturnover

52,93

55,12

49,60

49,66

44,88

73,67

exports

72,22

47,39

39,43

51,90

39,02

75,83

imports

30,77

64,65

63,78

46,81

53,9570,94

turnover

4,25

6,26

7,81

6,00

4,17

3,57

exports

4,28

8,05

9,09

4,30

3,86

3,67

imports

4,21

4,06

6,03

8,15

4,64

3,44

turnover

6,63

1,71

5,38

9,03

3,62

1,47

exports

1,53

2,20

7,66

11,57

3,97

1,84

imports

12,50

1,11

2,20

5,80

3,08

1,01

turnover

1,48

5,76

1,14

6,98

2,25

1,37

exports

1,71

8,97

1,60

11,25

1,82

1,61

imports

1,23

1,81

0,51

1,56

2,91

1,07

turnover

0,62

9,47

2,75

2,31

0,56

0,50

exports

0,72

16,69

4,60

3,68

0,66

0,73

imports

0,510,580,170,570,400,21Ukraine

PolandLithuania

LatviaSource: Modified from Statistical Yearbook (2)The Mogilev region (Table 7) has the biggest share of trade with Russia (74%). The westernregions, Grodno in particular, have the biggest share of trade with the neighboring candidate

countries. As shown in the table, Vitebsk and Gomel have a relatively big share of exports to Poland,
Latvia and Lithuania. The major export to these countries is oil-based products (Statistical Yearbook(2)). Therefore, the volume of exports from these regions is very fragile as they depend on oil prices
fixed by Russia. If for any reason Russia raises the oil prices for Belarus, Vitebsk and Gomel exports
to the candidates would drop.
It should be noted that the western regions have unregistered (or “gray”) flows of imports
from Poland. These mainly consist of light industry products, clothing and footwear in particular.
Private traders simply carry those in bags through the border to avoid very high customs duties. This
sort of trade became a popular source of income for many inhabitants in Grodno and Brest as well asa significant part of the economy in those regions (Zaiko, 2003).