Government drafted a list of enterprises for privatization worth USD 2.5 billion
Without changing the fundamental approaches to privatization, its results in 2012 will not much differ from 2011. In 2012 there will be one or two major deals in favour of the Russian capital, and a couple of dozens in favour of domestic investors.
The Belarusian Government has drafted a list of companies worth at least $ 2.5 billion to be sold this year in order to fulfill its commitments vis-?-vis the ACF of the EurAsEC. In the near future the list will be submitted to Alexander Lukashenko. The Belarusian authorities plan to put on sale in 2012 state shares in 133 enterprises including 83, which were not sold in 2011. In 2013 22 companies will be put on sale: the list of 13 included in a three-year privatization plan was amended with nine new companies.
During an enlarged meeting of the collegium of the Ministry of Industry on 2 February Deputy Prime Minister Sergey Rumas criticized the work of the State Property Committee and other government agencies, both regarding the pace of privatization and its management by the governmental agencies. Rumas said, the results of the sales of state owned stakes in 2011 (state owned shares of 34 enterprises were sold) were “disappointing, and even disastrous”. Criticism of the Deputy Prime Minister is both legitimate and routine, designed for external consumption: Lukashenko has the full authority in terms of decision making regarding large property privatization.
Foreign investors will be put off by the image of the country’s authorities, poor business climate, as well as by significantly inflated prices of assets.
The companies not sold in 2011 will face similar fate in 2012 by the virtue of their general unattractiveness to investors and inflated prices for their assets. At the same time, under the requirement of compulsory privatization worth USD 2.5 billion, Russia will once again buy the best assets. Most likely, the pool of shares to be sold will include shares in oil refineries and petrochemicals, banks and telecommunication enterprises. Chances of a sale of shares of MAZ or Belaruskali seem low.
Since USD 2.5 billion is not enough to pay the debts while maintaining internal macroeconomic balance, and the new loans in 2012 are hardly probable, internal privatization will prevail. Large enterprises and chains will buy small business in the real and retail sectors. Either Russian or nomenclature capital will be behind these investors. In any case, with the redistribution of property internal tensions within the elites, in particular in the regions where the executive branch “fights” against the security forces, will increase.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.