2012 investment plans
Last week, issues of privatization and finding investors were in the spotlight: the Government approved an investment strategy for foreign direct investment (FDI) until 2015 and announced plans to sell the shares of five banks. Specialists are skeptical about the effectiveness of strategies and plans to attract USD 2.5 billion of FDI annually.
Resolution of the Government of Belarus No 51/2 of January 18, 2012 adopted an Action plan on attracting foreign direct investment (FDI) until 2015, envisaging annual volume of investment of $ 2.5 billion.
The Action Plan aims to improve the investment climate via the sale of state-owned banks. In particular, the shares of JSC VTB Bank (Belarus) to be sold to a private strategic investor, minority stakes in JSC “Belarusbank” and JSC “Belagroprombank”, controlling stakes in “Belinvestbank” and JSC “Paritetbank” to be sold to strategic investors.
Specialists are skeptical about the Action Plan and the ability to attract the set volumes of FDIs. Their skepticism is based on the failure to fulfill the projected goals in 2011, the weak dynamics of key indices of assessment of investment environment, inconsistency and incoherence of governmental policy with regard to foreign investors.
As of December 1, 2011 the volume of FDIs attracted to the Belarusian economy on a net basis amounted to USD 1.3 billion with the overall goal of USD 6.5 billion. The situation was partially improved by the sale of Beltransgaz, which increased the volume of attracted investment up to USD 4 billion. However, the primary objectives were not fulfilled and there are few major assets like Beltransgaz in the country. Moreover, Gazprom made public the conditions of the purchase of the shares of Beltransgaz, which envisage harsh penalties for any form of government intervention in the company’s policy, which does not improve the investment reputation of the country.
The government’s efforts to improve Belarus’ position in the international business indexes did not bring the expected results. For instance, in the “Doing Business” index Belarus is 156th in the world in terms of payment of taxes and 79th in terms of investors’ protection. As a result, in 2010 Belarus had 0.11% of all FDIs in the world.
In fact, the government, not to mention the industry lobbyists, is not always sure of the desirability of the FDI as it fears that investors could be less prone to influence in terms of implementation of social policies or meeting the envisaged targets. Therefore, the government’s plan to attract FDI should be regarded as a declaration of intent, made primarily for the Anti-Crisis Fund of the EurAsEC (one of the conditions put forward for Belarus by the ACF was to attract large-scale investment in order to receive further funding).
By 25 January the government has to submit a plan of privatization of state property for 2012. So far it was made public that the state was willing to sell the shares of the VTB Bank (there is only one possible investor in this regard due to minority shares of the government in bank), the controlling stakes of “Belinvestbank” and “Paritetbank”, as well as minority stakes of “Belarusbank” and “Belagroprombank”. The latter, perhaps, would attract interest of investors mostly due to the fact they were cleared off state support programmes, inter alia via the establishment of the Development Bank.
The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN 1,000, which would lead to an increase in the average wage in the economy as a whole to BYN 1 500. The pace of wage growth in 2017 is insufficient to ensure payroll at BYN 1000 by late 2017 without manipulating statistical indicators. In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, enterprises – to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets. In 2010, the artificial increase in wages led to a threefold devaluation in 2011, an increase in the average salary to BYN 1500 will not match the capabilities of the economy and would lead to yet another devaluation.