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.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.