The government fails to elaborate an effective privatization strategy
The government proposes to reduce the statue of limitations for privatization deals, which is an important achievement of the bureaucracy at the current development stage.
The auditing company Ernst & Young, which assessed the Minsk Automobile Plant (MAZ) in the framework of creation of a joint venture with Russia’s largest truck manufacturer Kamaz, has estimated the costs of MAZ assets to $ 800 million. The Belarusian government is unhappy with the results and intends to hire another appraiser.
The Ministry of Economy of Belarus proposes reduce significantly the statute of limitations for privatization deals. The bill is currently pending in the Council of Ministers and will provide for the reduction of the limitation period to challenge privatization deals from 10 to 3 years. The Ministry of Economy believes that three years should be enough for the state authorities to discover the grounds for nullification of a transaction.
From the investor’s perspective and for the business climate the reduction of statute of limitation is a definite benefit, as it increases guarantees for investors, i.e. that after three years, no one will seize the company, that the privatization results will not be reviewed, etc.
Last week, only 2 out of 17 auctions concerning the sale of state-owned assets have been validated. At the two auctions were sold: 52.7% of the capital shares of the enterprise “Spetsmontazhstroy” to Minsk LLC “Deyland” and 99% of the “Pukhovichi food plant” to JV “Morozprodukt”.
According to the State Property Committee the auctions scheduled for 11 November 2011 have been invalidated due to the absence of bidders to buy the shares of: Belenergosvyaz (Minsk),Grodnogazstroyizolyatsiya (Gomel), Belpromkultura (Vitebsk), Grodnoteamontazh (Grodno), Tekhnopribor (Mogilev), Polotskles (Polotsk).
On 15 November the deadline for potential investors to bid for the purchase of the 51% of the government’s stakes in a mobile operator MTS expired, the auction was announced following the refusal of the Russian co-owner - OJSC “MTS” – to buy shares at the proposed price of USD 1 billion. The auction is scheduled to take place on 1st December with a starting price of $ 1 billion, however today it is already clear that the auction will not take place because the State Property Committee of Belarus received no bids from potential investors.
The government is trying to maximize the selling price of the Belarusian assets, but these attempts always fail.
From the investor’s perspective and for the business climate the reduction of statute of limitation is a definite benefit, as it increases guarantees for investors, i.e. that after three years, no one will seize the company, that the privatization results will not be reviewed, etc. However, this will significantly increase the risk of corruption and shady transactions. Therefore the reduction of the limitation period is an important achievement of the bureaucracy at the current development stage.
The disagreement with the assessment of MAZ and the lack of bids for 51% of shares in MTS with the starting price of 1 billion are links in one chain. The government is trying to maximize the selling price of the Belarusian assets, but these attempts always fail.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.