Bright light on the Dniepe

Little-known and often misreported, Belarus under Alexander Lukashenko is a well-kept secret — a boo

A woman sits bolt upright in the middle of the night. She jumps out of bed and rushes to the bathroom to look in the medicine cabinet. Then, she runs into the kitchen and opens the refrigerator. Finally, she dashes to the window and looks out into the street.

Relieved, she returns to the bedroom. Her husband asks, "What's wrong with you?"

“I had a terrible nightmare," she says. "I dreamed we could still afford to buy medicine, that the refrigerator was absolutely full, and that the streets were safe and clean. I also dreamed that you had a job, that we could afford to pay our gas and electricity bills."

“How is that a nightmare?" asks her husband.

The woman shakes her head. "I thought the communists were back in power."

This Bulgarian joke, as told by Maria Todorova in the Guardian and now doing the rounds across eastern Europe, doesn't work here in Minsk. This is a capital city where the streets are safe and clean, where ordinary people can still afford to buy medicine and basic foodstuffs and where the unemployment rate is less than 1 per cent. It's the side of Belarus you won't read much about. After last month's presidential elections - in which Alexander Lukashenko was re-elected to serve a fourth term with almost 80 per cent of the vote - the arrest of opposition candidates and hundreds of their supporters led to the reappearance of the old "last dictatorship in Europe" headlines. But shocking as the scenes of police beating protesters were, it would be a mistake to equate Belarus with Burma, or Lukashenko with Joseph Stalin.

Lukashenko's rule is unquestionably authoritarian, as he has conceded, but his policies, which combine aspects of the old communist system - social security and full employment - with a mixed economy and greater personal freedoms than existed in the days of the Soviet Union, have proved hugely popular with the majority of ordinary Belarusians, as his election results testify.

While other former Soviet republics rushed to embrace capitalism following the fall of the Berlin Wall, privatising their state-owned enterprises and removing subsidies to industry and agriculture, Belarus kept the old collectivist flame alive. My guidebook describes it as a country "so unspoilt by the trappings of western materialism that it's very easy to feel a sense of having slipped into another time and dimension". Yet even here - a country where roughly 80 per cent of the economy is nationalised and statues of Lenin still line the streets - times are changing. Pressure from the IMF and Russia and a desire to court the European Union, among other reasons, have led Belarus to embark on a major privatisation programme of its own. Ninety per cent of state-owned businesses have been earmarked for sale. Does the move mark the de facto end of Europe's last socialist planned economy?

During a press conference at Belarus's wonderfully retro ministry of economy, where the BBC could quite happily have filmed the Life on Mars series, Nikolai Snopkov, the minister in charge of the department, denies that his country is changing course. "All the successful economic systems in the world are mixed systems. We are committed to combining the principle of the free market with social justice. The economy is not for itself: it has a human purpose." Asked if Belarus will roll back the state, he answers with a resounding "nyet".

Ukrainian rhapsody

Afterwards, we are taken to see one of the country's industrial gems - the enormous Belarusian Autoworks (BelAZ) factory in Zhodino. BelAZ, which launched in 1948, employs 12,000 people, and is the biggest producer of mining dump trucks in the world.

Our guide Natalia proudly escorts us round the factory museum, with its scale models of BelAZ vehicles. There is a photograph of a beaming Hugo Chávez, a strong ally of Luka­shenko (he recently said that Venezuela would supply Belarus with oil for the next 200 years), driving a BelAZ truck. This is more than just a company - it's an extended family. There is a sanatorium for the workers, two sports and fitness centres, and a cultural centre where a theatre collective plays. Such enterprises used to be common in eastern Europe before 1989 - but economic reform put a stop to all that.

On our return to Minsk, we find the bars and cafés full of well-dressed young people. Aggression and public displays of drunkenness are refreshingly absent from the streets. Outside the state opera (cheapest tickets US$2), we meet an Irish restaurant owner who has emigrated to Belarus. "This is the place," he says. "The economy is booming and there's a real vibe. My son and I went to Ukraine recently and everyone was saying to us: 'Can we have the Belarus president in charge here for a year?'"

It's not difficult to see why. Unlike Ukraine and Russia, Belarus's economy is not dominated by billionaire oligarchs. There is no underclass: according to UN figures, Belarus has one of the lowest levels of social inequality in the world. Lukashenko wins elections not through fear, but because he has delivered social protection and rising standards of living. Growth now stands at 7 per cent.

The danger, some feel, is that a move towards a more market-oriented economy will destroy these achievements, and leave Belarusians sharing the same bitter-sweet jokes as their fellow eastern Europeans.