- Is large-scale privatization possible in Belarus in the near future? Will the authorities accept privatization as a way to raise much-needed foreign cash?
- If a privatization program gets under way, who may be its potential participants? Will it be a "bureaucratic" privatization, or the government will try to involve foreign companies, for instance through initial public offering?
- What companies can it sell? Will it be major or smaller companies?
Participants of the monthly expert panel:
Tatsiana Manenak, observer with the Belorusy i Rynok weekly,
Dzmitry Kruk, expert of the IPM Research Center,
Valeryja Kosciuhava, an independent expert, a member of the Nashe Mneniye analytical group.
Experts have been discussing effects of the 2007 energy price hike on Belarus. Most experts agree that the Belarusian economy has adapted to exogenous shocks in the mid term. Nevertheless, the government at the start of the year considered selling off certain enterprises. In late February, Prime Minister Syarhey Sidorski said that the government was ready to sell its stakes in major companies, noting that the Ministry of Economy was in charge of organizing the bidding process. The government specified the price of some companies, for instance Prime Minister Syarhey Sidorski said that Belshyna, a tire maker based in Babruisk, could sell for as much as $1 billion. The Ministry of Economy made a list of companies targeted for privatization. It included the Mazyr- and Navapolatsk-based refineries, polymer factory Palimir, nitrogen fertilizer manufacturer Hrodna Azot, and the fiber plants, Mahilyoukhimvalakno and Hrodnakhimvalakno. The government was advised to consider possible transformation of so-called "unitary" enterprises — the truck maker MAZ, the Beltelekam telecommunications monopoly, the Belarusian Cement Factory and the Nyoman tobacco company — into stock companies. It also considered selling 30 to 40 percent of shares in breweries.
Uladzimir Syamashka, deputy prime minister, said that Belarusian companies might file applications to have initial public offerings (IPOs) listed on international markets. He added that initial public offering "will help appraise the real market value of companies and make it easier to strike deals with strategic investors."
However, officials stopped talking about privatizations a few months later, while the country's foreign debt rose dramatically. The foreign debt increased by 38 percent in the first six months of 2007. It was rising at a 20-percent slower pace last year. If the debt keeps growing at the same rate, the debt-to-GDP ratio may surpass 25 percent. Some economists, including Leanid Zlotnikau, noted a link between the government's income targets and the foreign debt. Without foreign loans it would be impossible to ensure the projected increase in people's income.
Leanid Zaika, for his turn, said that the government began what he called "pre-sale preparations." Later, it sold its stake in Motavela, a motorcycle and bicycle plant in Minsk, and Velcom, a GSM network operator.
Zaika estimates that the government can raise $132 billion from privatization. Apart from Motavela and Velcom, the government sold its stakes in several banks, but no other big transactions were reported. Officials would not comment on possible new privatizations.
However, the silence does not mean that the privatization process has been put on hold.
Details of Velcom’s takeover have emerged recently. Velcom was collateralized and later sold to an Austrian company in return for assistance to the National Bank of Belarus (NBB) during mass withdrawals of deposits from banks amid a gas dispute with Russia in December 2005. That means that the Belarusian economy is not always able to cope with shocks on its own. The government's reliance on foreign loans may put economic sustainability at risk. For quite a long time, President Lukashenka and his government have closely monitored lending to industries and specific enterprises. The purpose of such "political control" differed depending on challenges — keeping unprofitable enterprises afloat, ensuring the prompt payment of wages etc. There is no substantial evidence that the government has changed its approach.
Thus, the rising foreign debt is a potential threat given a lack of reform in the real sector of the economy. New loans may be required as unreformed enterprises struggle to repay earlier debts. Currency depreciation is the worst-case scenario and the government is likely to do its best to avert it. It will have no option but to launch a privatization program. This would be the first serious step toward restructuring the economy. But private ownership of enterprises is a challenge to the current socioeconomic model.
- Is large-scale privatization possible in Belarus in the near future? Will the authorities accept privatization as a way to raise much-needed foreign cash?
- If a privatization program gets under way, who may be its potential participants? Will it be a "bureaucratic" privatization, or the government will try to involve foreign companies, for instance through initial public offering?
- What companies can it sell? Will it be major or smaller companies?
Full text of the panel discussion is available here: http://www.belinstitute.eu/index.php?option=com_content&task=view&id=120&Itemid=1