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.
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.