Belarus's Privatization Plan Reveals Change In Thinking

By Jan Maksymiuk

Should Belarus's ambitious privatization plan come to fruition, the country's state-dominated economy could be in store for a breakthrough.

The sheer numbers contained in the two-year plan are impressive -- more than 500 state-run enterprises and some 150 businesses partly owned by the government would be up for sale.

But since the program was announced in July, it has attracted its share of skeptics who question its true objectives.

"The purpose of the privatization is to keep state control over the economy, attract investments, and thus support this unworkable system," says Belarusian economist Leanid Zlotnikau.

Few family jewels of the national economy are included on the list of Belarusian businesses slated for privatization. The Belarusian Automotive Plant in Zhodzina, the Minsk Engine Plant, Homselmash (a producer of agricultural machinery) in Homel, and two operators of the Belarusian section of the Druzhba oil pipeline are the exceptions.

Prime Minister Syarhey Sikorski said in early August that the government expects the program to inject $80 billion in investment into the economy over the next five years, compared to a reported total of just $20 billion over the past five years.

This leads to the question of just who is in line to become the new owners of Belarus's state-run enterprises.

Who Profits?

While there is broad consensus that potential Belarusian investors -- be they businesspeople or representatives of the ruling elite -- possess significant amounts of cash, they don't come close to the billions the government is anticipating.

As for Western investors, they have so far shown little interest in Belarus's industrial enterprises, and there is no apparent reason to expect that dozens of them will come to Belarus in the near future.

To the east stands Russia -- and its ample supply of billionaires. Is the Belarusian economy doomed to find itself in their hands, as the Belarusian opposition has predicted almost since the very start of Alyaksandr Lukashenka's presidency?

Such apprehensions are apparently shared by managers of Belarusian state-run companies. Iryna Barkouskaya of the State Property Committee, while outlining the 2009-10 privatization plan last month, sought to dispel such anxiety by saying that the government will take an "individual approach" to each privatization.

"Some of our managers are worried that Russian capital will buy up everything. We won't allow that," Barkouskaya told journalists. She also suggested that in the first stage of the plan, the government would offer no more than a 25 percent stake in each business to be privatized.

The opposition remains unconvinced, however.

Former Deputy Foreign Minister Andrey Sannikau, who went over to the opposition in 1996, believes that the announced privatizations will enrich only representatives of the authorities and the businessmen associated with them -- while the people of Belarus will gain nothing.

Economist Zlotnikau agrees. "The danger is not in Russian capital but in domestic bureaucracy," he says. "If this bureaucracy is going to sneakily sell out Belarus for bribes, nothing will help us -- neither Western nor Russian capital. If there is no competitive political system, no strong opposition, no independent press, it is impossible to curb bureaucracy and corruption."

No Transparency

There is little hope that Belarus's political system will become more competitive or that the Belarusian opposition much stronger in the next two years. And this means that President Lukashenka, if he really intends to implement the privatization plan, can do whatever he likes.

But since privatization unavoidably means transfer of control over some part of the economy -- either to Russian or newly created domestic oligarchs -- Lukashenka may in the longer term face new political problems and potential social unrest.

The most serious of these potential problems are connected with his primary supporters -- poor collective farmers and industrial workers; have-nots who are not in line to become beneficiaries of the current privatization drive. This power base, courted by Lukashenka for the past 14 years with visions and promises of Belarus's thriving "market-oriented socialism" in the sea of capitalism, may dislike this sudden leap into capitalism.

But it seems that in the face of fiscal expediency, Lukashenka has no other choice than to allow wider privatization if he hopes to replenish state coffers.

Belarus paid $119 per 1,000 cubic meters for Russian gas in the first quarter of 2008. In April, Gazprom increased this price to $128. Russian Ambassador to Belarus Aleksandr Surikov recently predicted that, in 2009, the price of Russian gas destined for Belarus could reach 80 percent of that paid by Poland (Poland currently pays $320).

It is also indicative that Minsk is putting its section of the Druzhba oil pipeline up for sale. This appears to be a move intended to persuade Moscow not to build oil pipelines circumventing Belarus. Lukashenka may have realized that efforts to cut out the middleman could someday become a reality, and Belarus could lose its influence as an important transit country.

Therefore, even if the privatization plan is never implemented in its entirety, its publication indicates that Lukashenka's regime has started to take into account challenges and problems that it previously ignored or underestimated.