Inflated asset prices are the main reason behind the privatization auctions’ failure
To fulfill the ACF requirements Belarus has to raise USD 2.5 billion in foreign direct investment by selling state assets. As a rule, only enterprises in a bad financial condition or with numerous restrictions or those overpriced are auctioned. In these circumstances, it is difficult to count on massive inflows of direct investment.
On November 2nd, 2012 state-owned shares in MTS (mobile operator) were presented for sale.
The government has been trying to sell its stake in MTS for over a year. Out of forty-five invitations, only two counterparts replied. Moreover, one of the potential investors already has experience in Belarusian, but its financial performance could have been better. MTS’s parent company is interested in buying the stakes however it considers the announced asset’s price inflated (at least by two times in the primary potential buyer’s view).
An auction, scheduled for mid-December 2012 to sell “Negorely wax processing and hive plant”, demonstrates another extreme side of the Belarusian privatization policy. This venture, with poor performance and depreciated fixed assets is put on sale on terms of preservation of its structure and the number of staff in the following 5 years. This is an attempt to burden an investor with enterprises that the state is unable to cope with on its own.
As a logical consequence of such a privatization policy, the state privatization auctions are all the time either cancelled, or postponed. At the same time, mergers and acquisitions take place in Belarus. As a rule, assets are purchased by private companies interested in expanding their activities. Some private businesses enjoy favourable sales terms for some state assets.
Thus, the Belarusian authorities continue demonstrating a negative attitude to any capital other than from business circles close the government.
According to Belstat, in August 7,600 people were dismissed, including 4,800 civil servants. Dismissals of civil servants were due to the optimisation in the public administration by up to 30%. Some civil servants would retain their job however would lose the status of a civil servant. Vacancies on the labour market are likely to reduce in number, thanks to the optimisation, the state administration would increase wages for public servants. The payroll fund for retained employees is likely to increase and some former state employees are likely to get jobs in affiliated organizations. The optimisation of the state apparatus should complete by January 1st, 2018, and some former civil servants are likely to join the ranks of the unemployed.