Privatization: official acknowledgment of defeat

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April 22, 2016 18:01

2011 privatization plan failed. According to preliminary data, the authorities managed to sell shares of only 38 companies, which is 4.7 times less than the plan, for the total amount of Br 170 billion, which is 7.6 times less than the expected proceeds (the sale of Beltransgaz was not a part of the plan).

The State Property Committee of Belarus canceled auctions scheduled for 7 and 16 December, and bids announced for 8 and 21 December for the sale of state-owned shares of 13 joint stock companies. The SPC press service reported that in December the government’s stakes in the following companies will not be sold: Gomelzhelezobeton, Gomel plant of building constructions, Zhlobin repair and engineering works, Concrete products plant (Baranovichi), Plant of reinforced concrete structures (Molodechno), Lelchitsy PMC-103, Mogilevzhelezobeton, Remmeh, Rogachevstroy, Rogachevzhelezobeton, Building Trust № 21 (Borisov), Stroymash, Holding management company “Zabudova”. All these enterprises were listed for privatization in the 2011 plan, approved by the government.

Overall, in 2011, according to preliminary results, the shares of 38 public companies were sold for a total of Br 170 billion.

Therefore specialists were proved right that all privatization plans of the authorities were declarative by nature. Privatization plan for 2011 provided for the sale of shares of 180 JSCs of the common book value of Br 1.3 trillion (the plan did not include the sale of Beltransgaz). So far, according to preliminary data, the authorities managed to sell shares of only 38 companies, which is 4.7 times less than the plan, for the total amount of Br 170 billion, which is 7.6 times less than the expected proceed.

It is worth to mention that in most cases buyers of Belarusian assets were mainly Belarusian investors that in one way or another have previously collaborated with them. Therefore, in fact, it was rather a formalization of the de facto ownership that had changed long before. At the same time, new investors, foreign in particular, are not interested in privatization by Belarusian rules, based on inflated asset prices and a variety of additional burdens on investors.

Summing up the results of privatization in 2010-2011, a forecast for 2012 is that privatization patterns would be similar. Namely, there will be several large non-transparent transactions in favor of the Russian capital and a couple of dozen of sales of medium-sized public companies, mainly in the favor of local investors with core business in the private sector.


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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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