Privatization: what and to whom
Privatization is the key issue in negotiations between the Government of Belarus and its creditors. The National Bank plans to attract USD 3.6 billion in 2011 through privatization.
Today negotiations are taking place regarding sales of stakes of Belarus in cell phone operator Mobile TeleSystems (MTS) (entire package, 51%), gas pipeline operator AAT Beltranshaz (part of 50% share), Minsk Automobile Plant MAZ (partially), potassium extraction and procession plant Belaruskali.
The National Bank negotiates sales of entire or part of share in commercial banks Paritetbank, Belinvestbank, Belagroprombank (also via the EBRD). However, so far the parties did not manage to agree on the price.
Stabilization loan will help Belarus to defend its negotiating position however the delay or refusal of the allocation makes its position considerably weaker.
The Belarusian government plans to auction shares in 180 Belarusian joint stock companies (either book value of shares or their market price). However the country has no positive experience in the auction sales of enterprises (previous privatization of all profitable companies was held by closed presidential decrees). There is a possibility that the World Bank will assist the Belarusian government in holding 5 transparent sale auctions of profitable enterprises.
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.