Powers of State Bodies Extended in the Order of State-owned Property, but Privatization of Main State Assets held by Lukashenko

On June 4, President of Belarus Alexander Lukashenko signed Decree No 294 “On the Order of Disposal of State-Owned Property”. The decree extends the powers of state bodies on order of disposal of state-owned property. Now the government will have right to alienate state property worth more than 10 thousand basic units and personal property worth more than 30 thousand basic units. Nevertheless, Lukashenko has left himself the right to take decisions on the alienation of shares of the main state assets.

The new decree extends the government’s authority, which will help motivate state bodies in carrying out the privatization of state movable and real property. It will also speed up corresponding privatization procedures.

However, the President’s decree should not be overestimated. Firstly, the demand for state-owned property among foreign and local investors is still low. According to the State Property Committee of Belarus, in January-May 2012 no transactions for the sale of state-owned property to non-residents of Belarus had been made. In 2011, the sale of real state-owned property to foreign investors amounted to only USD 0.4 million.

Secondly, under the decree, Lukashenko has a right to decide on the privatization of shares of companies and state enterprises as property complexes. As of May 25 2012, on the list of joint stock companies with a stake of the Republic of Belarus in the authorized share capital are 787 open joint-stock companies (JSC). Please see Table 1 for the top ten enterprises with a state share.

Table 1

Rating of major Belarusian JSCs with government’s stake in the authorized share capital (excluding banks)

¹ –The calculation is based on the average weighted rate of the Belarusian ruble in 2011 – BYR 6075.94 per USD 1. (Our own estimation in view of the shadow segment of the foreign exchange market)

Thus, the main issues related to the privatization of state assets in Belarus will continue to be in the competence of the incumbent president.

However, under the agreements with the EurAsEC Anti-Crisis Fund, during 2012 Belarus has to privatize state-owned assets worth at least USD 2.5 billion; in January-September 2012, the sum is to amount to not less than USD1.2 billion.

In order to increase privatization revenues, Belarus State Property Committee will hold first auctions in the current year to sell shares of 14 companies which investors find attractive. The actions are due in August. President will take a final decision on privatization of each plant which will be sold by auction or tender.

It should be pointed out that in the current year Belarus rejected its privatization plan for 2011-2013. At present, any company can be privatized on condition that there is a particular investor and a company’s market value has been estimated.

It can be assumed that in 2012 Belarus will fulfill the plan for privatization of state assets, mainly due to sale of shares of mobile operator MTS and the transfer of 75% minus 1 share of MAZ to a newly established Belarusian-Russian holding “Rosbelavto”.

However, there is a negative point as well. Work on creating the IPO of the Belarusian Automobile Plant has been suspended due to political disagreements with the EU. Previously a German bank Deutsche Bank had been viewed as possible organiser of the IPO. In 2011 it refused to cooperate with the Belarusian authorities.