You are welcome, Mr. Investor

Belarus is now actively privatising small and medium-sized businesses

In July, the State Property Committee conducted several auctions and contests offering state property for sale to private investors. This year, 180 state shares in open joint stock companies (not strategic for the Belarusian economy) are to be privatised, with the Government hoping to generate Br1.2tr (around $240m). However, the major goal is not immediate revenue; rather, the state seeks to enhance efficiency at these enterprises.

Much interest expected
The Head of the Economy Ministry’s Main Directorate for Investments, Kirill Koroteev, notes that it’s difficult to guess who might buy Belarusian shares — foreign or national investors — as they enjoy equal opportunities.
The list of enterprises offered for sale, with information on their financial state, is now available through Belarusian diplomatic missions worldwide. “This information allows investors to assess a company, gaining a closer look. In September, the most interesting assets will be offered for sale, so we expect to see foreign buyers demonstrating interest,” Mr. Koroteev tells us.
As the State Property Committee’s www.gki.gov.by portal informs us, in September, several dozen enterprises will go on sale, covering various branches — from light industry, wood processing and machine building to radio-technical sphere, transport and construction. Baranovichi Sewing Factory, Slutsk’s Emalposuda and Bobruiskselmash (the oldest agricultural machinery producing company in the country) are expected to enjoy great interest.
Doctor of Economic Sciences, Professor Boris Panshin, who heads the Belarusian State University’s Management Department, believes Belarusian milk and meat processing companies will see the most interest from foreigners. “Investors will be injecting funds into the production and sale of eco-friendly food, which has huge national prospects. We cannot miss out on this chance.”
He also believes that strategic investors will be keen to invest in housing construction, in addition to construction material manufacturing and light industry. “Belarus needs to create conditions for fair and transparent privatisation,” Mr. Panshin stresses, adding that each privatisation-related decision must be well-grounded and seriously thought-out. “The Government aims not just to sell enterprises, to ‘fill in’ gaps in the economy, but to look to the medium and long-term prospects for Belarus. It is vital that we choose our buyers carefully, while selecting production facilities which will prove attractive.”

Positive signals
International experts are to participate in the privatisation of 10 out of 180 Belarusian companies. Among them are Baranovichi Reinforced Concrete Products Plant (with a state share of 99 percent), Brest Construction Trust #8 (85.3 percent), Brest Electromechanical Plant (83.8 percent), Minsk’s Belsantekhmontazh-2 (77.4 percent), Avtomagistral (83.5 percent), Belgazstroy (50.6 percent), Minsk Margarine Plant (93.8 percent), Gomel Medplast (99.9 percent), Baranovichi’s Barhim (99.6 percent) and Molodechno’s Konfa (25 percent).
The Director of the National Investment and Privatisation Agency, Dmitry Klevzhits, tells us that the sale of these state owned assets will be conducted with support from the World Bank and the Austrian Government — which will render consultative assistance and finances. The World Bank already has positive experience of working with private investors in Eastern Europe. “These countries have witnessed privatisation on a competent expert level. The WB can attract these specialists into the privatisation process in Belarus,” notes Mr. Klevzhits.
He is convinced that investors will be attracted by Belarus’ plans to become a fully-fledged member of the Multilateral Investment Guarantee Agency (MIGA) — part of the WB. It deals with insurance of political and non-commercial risks and Belarus has been its member since 1992 but, in recent years, only one deal has been conducted with MIGA participation. For our country to enjoy full membership, it needs to sign a basic agreement on local currency and another guaranteeing foreign investments. The Belarusian President has signed a decree regarding these talks, while the Parliament has ratified amendments to the Convention Establishing the Multilateral Investment Guarantee Agency. All legal issues are soon to be settled.
According to Mr. Klevzhits, Belarus’ full-scale co-operation with MIGA will show investors that our country is using a globally acknowledged mechanism of investment protection and is eager to ensure this protection.

Blue chips
In addition to privatising small and medium-sized enterprises, Belarus also plans to sell some of its large, high- liquidity assets this year. Blue chip firms such as MTS (mobile communications) and Beltransgas (gas-transport) are likely to go on sale. According to the Chairman of the State Property Committee, Georgy Kuznetsov, the latter is to be sold to Russian Gazprom this autumn. Belarus has already sold 50 percent of its shares to the Russian monopoly and, as Mr. Kuznetsov notes, ‘this year, the remaining 50 percent are to be sold’. “Talks are underway, with documents almost ready,” he adds.
Mr. Kuznetsov admits that the negotiation process has not been easy, telling us, “There would be no problem if this were a straightforward purchase, with sale contracts to be signed. However, the agreement is accompanied by other issues — such as tariffs and volumes. Settlement of these issues is essential. The sale will go smoothly once these issues are solved by Belarus and Russia at a high level.”
As regards MTS, Belarus assesses the value of 51 percent of its shares at $960-970m. According to Mr. Kuznetsov, documents are ready and now undergoing agreement with state bodies. “We’ve offered Russia to buy the controlling stock at $1bn,” says Mr. Kuznetsov. Russia has officially refused the offer, so it now seems likely that the shares will go to auction, with a starting price of $1bn. Mr. Kuznetsov adds that some investors are already showing interest in the company.

Human factor
International experts have their own views on the Belarusian Government’s privatisation initiatives. Martin Raiser, the World Bank Country Director for Ukraine, Belarus and Moldova, noted during his recent visit to Minsk that the WB ‘welcomes the authorities’ privatisation plans’. “It’s evident that many countries conduct privatisation to raise budget revenue. However, we recommend that they don’t exclusively rely on funds from privatisation, but simultaneously toughen their macroeconomic policy. These two factors — privatisation and a strict macroeconomic policy — should result in a stable economic situation,” he explains.
The Government shares this approach to privatisation. Selling state property is just one of the important measures necessary to improve the general economic situation. The Government stresses the importance of fairness and transparency, in addition to investors’ social responsibility. “We aim to see each new owner fulfil their obligations of social partnership,” Prime Minister Mikhail Myasnikovich told journalists in July. “At present, we cannot afford to see human needs take a back seat to profit. A balance must be struck.”

By Vitaly Volyanyuk