Alexander Lukashenko urges to set up a large state holdings in the dairy industry

During a meeting on February 24 Alexander Lukashenko instructed officials to settle all issues regarding setting up of a large dairy companies by May 2012. He emphasized that all newly created holding companies should be controlled by the state.

“We need to enlarge diary and meat companies and establish state owned companies in each region. You should purchase shares in plants at the face value from their owners. All the issues need to be resolved by May”, Lukashenko said and appointed the Chairman of the SCC in charge controlling all the issues in this area.

According to Alexander Lukashenko, all attempts to attract private capital (domestic and foreign) to the milk processing industry have failed (including cooperation with the French “Danone”). All investors “want to buy milk the cheapest from the farms and to produce the most significant products, at a minimal cost and sell as expensive as possible. … Who benefits? Milk processing businesses coming from outside. Do we really want this?”

Alexander Lukashenko does not understand the fundamentals of market economy and does not believe that a private manufacturer may be more effective than the state. He believes it is not a big deal to “make the state-owned enterprise to work as private one and make it more profitable”.

In his opinion, it is necessary to continue modernization of the milk processing industry and to enlarge milk processing enterprises (currently there are 43). In his view, milk processing enterprises should be sold as a matter of exception only and/or for big money.

Therefore all attempts to force Lukashenko to enter a dialogue on economic modernization (new initiative of the EU), are most likely doomed to failure.

The majority of the Belarusian enterprises and economic sectors remain state-owned. Privatization is stalled / frozen, not only in the agriculture and food industries, but also in other industries / sectors. The outcome of the meeting once again confirms that all economic reforms under Lukashenka will be forced, imposed, and that the slightest change in the economic situation / macroeconomics implies state’s expansion rather than shrinking. Moreover, if there are no restrictions imposed by creditors, the country’s economic authorities are likely to increase repression and introduce tighter economic policies, rather than exercise liberalization.

At the same time, the lack of structural reforms in Belarus is in the interest of Russia, i.e. preservation / creation of large state-owned enterprises / holdings makes them easier to take over.