Privatization breakthrough ended without starting
The draft amendments to the Law “On state property privatization” put an end to attempts of most investors to purchase state-owned enterprises in Belarus.
To implement the FDI plan, the Economy Ministry has compiled a list of 800 companies for a possible sale to investors. However, privatization in Belarus can be severely restricted due to the potential interventions by the state in the privatized enterprises’ operations, even after their sale to the new owner. Therefore, the range of investors will be limited to businessmen with strong connections in the government and mainly representatives of Russian large businesses, who have the opportunity to lobby their interests.
On February 13th, the Economy Ministry has compiled a list of 800 companies for a possible sale to investors. The State Property Committee has compiled a list of 103 companies, the sale of minority stakes in which can provide for USD 5 billion. The government intends to keep the controlling stake in these companies. Belaruskali, Naftan and others are on this list.
On February 21st, the draft Law “On state property privatization” was submitted to the Parliament. If adopted as is, as of April 1st, 2013 state representatives will be able to participate in open meetings of shareholders and to vote for the minority shareholders that have not registered for participation in the meeting. In addition, they will be able to intervene in all decisions concerning enterprises’ reorganization, payment of dividends, issuance of additional shares; to suspend implementation of decisions, made at open shareholders’ meetings, - even if the state does not own the controlling stake. Operations of any enterprise, which has been privatized, can be blocked.
It makes no sense for investors to buy such enterprises. Buying a minority stake is not economically feasible due to the peculiarities of the Belarusian economy. High-performance businesses annually enter certain amounts in the national development fund’s accounts. In December 2012 Naftan remitted BYR 600 billion to the fund. Before Russia bought 100% shares of Beltransgaz, it could do nothing about enterprise’s loss-making (50% of the shares were bought for USD 2.5 billion).
Thus, attitudes to privatization have not changed in Belarus. The range of investors is limited to businessmen with strong connections in the government and mainly representatives of Russian large businesses, who have the opportunity to lobby their interests and oppose the interventions in the operations. For other potential investors buying enterprises in Belarus could become a high-risk undertaking.
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.