Privatization back down

April 22, 2016 18:00

The Belarusian State Property Committee (SPC) cancelled November tenders and auctions for a few dozen public companies. Alexander Lukashenko criticized and banned the amendments to the 2012 Privatization Programme, which envisaged speeding up the SME privatization, including the sale of unprofitable businesses for a token money.

The Belarusian State Property Committee (SPC) cancelled November tenders and auctions of around 30 public companies (JSC “Bobruyskenergomontazh”, JSC “Slutsk plant material handling equipment”, JSC “Bobruysktrans”, JSC “Agropromstroymash”, JSC “Gidroselmash”, etc.

The SPC reported that in June through 19 October state-owned shares of 29 companies have been sold via competitive auctions for Br 110 billion.

President Lukashenko criticized and banned the amendments to the privatization programme for 2012 proposed by the Ministry of Economy. The main idea of the amendments, made public during a meeting of the Council of Ministers on 8 November, was to conduct preferential privatization of 2.6 thousand Belarusian companies. The Government proposed to implement a comprehensive approach to privatization, while keeping the state control over 50% of the economy. The first step implied the sale of small and medium enterprises. It was proposed to sell 619 companies for a base value (Br 35,000 or USD 4), bearing in mind their insolvency without state support. The second step implied privatization of more than 2 thousand companies at the starting price of 20% of the value of an asset.

This proposal of the Ministry of Economy has been criticized by the local authorities yet during the Council of Ministers meeting. Two days later the President also joined the criticism of the Government, “we must use what we have effectively and efficiently, multiplying, developing and strengthening our assets”.

Comment

The initial interest in the official privatization was largely due to the sharp devaluation of the Belarusian ruble resulting in the reduced cost of the state-owned assets calculated in USD (the initial selling price was set on January 1, 2011). In order to avoid the sale of assets at a low price, the government adopted a decree, which envisaged adjustment of the starting price by the inflation rate.

The cancellation of auctions indicates that the government still hopes to sell its assets at a better price, staking on borrowing and several large privatization deals.

The Government’s SME privatization programme had its obvious advantages in terms of enhancing structural reforms, increasing the share of private property, etc., that is, it met the requirements of external creditors of Belarus. However, it would imply increased unemployment in the absence of significant revenues from privatization. Moreover, Alexander Lukashenko is abhorrent of the idea of selling property, which has assets in the form of buildings, land, etc. for a pittance. Alexander Lukashenko is not prepared to privatize 50% of the economy, even though it concerns SMEs only. Small and mass-scale privatization will be postponed by the Belarusian President until the last moment.