President’s decree can replace auctions for selling off state property

The European Radio for Belarus explores why Belarusian enterprises are sold without auctions.

Belarus has begun selling itself off. However, all the transactions take place without open auctions or tenders. In April 2007, the head of the state would talk differently: “Even if privatization does take place, it will be open and fair. There will no nomenclature, clan-style or unfair privatization in this country”.

But the president receives personally the future owners of our enterprises that are out for sale. Nobody knows exactly how the shares of MotoVelo or Velcom were sold. Possibly, the mobile phone operator Best will be sold in the same manner to Turkish businessmen. The head of the state received them personally.

Hanna Karniyevich from the State Property Fund told the European Radio for Belarus that despite there is a regulation that requires the shares to be sold at auctions, the president can sign a private agreement on the sale of an enterprise.

“Joint stock companies, founded in the process of privatization, are former unitary enterprises that were later privatized under the privatization legislation. They are sold through auctions and tenders, if the procedure is not set out by the head of the state otherwise. All the same, decisions on the sale of shares that belong to the Republic of Belarus are take by the president under the privatization law”, she said.

Is it possible to get a higher price at auctions? Mikhail Kavalyou, the dean of the economics department at the Belarus State University, explains that the state and the enterprises pursue their own interests. The state is not going to sell the shares of enterprises to the “wrong” investors.

“The state wants to find an efficient, not an accidental, owner. Auctions could make it possible for an accidental owner to win the tender and close the factory two weeks after”, he says.

Mr Kavalyou maintains there is nothing surprising in this approach.

“It is a common practice. It is applied in the all the countries of the world. The state is the same owner as a private person. The state decides what to sell and to whom”.

At the same time, Mikhail Kavalyou says that our enterprises have gradually become an attachment to the Russian business networks.

“At the tourism market, all our firms have basically become the agents of the Russian operators. The same will happen in the insurance sector. The situation with Brolli and Alvena (insurance companies) is proof to that. They have actually turned into small departments of a Russian company. The same will be with shops and restaurants…”

Economist Leanid Zlotnikau believes that Belarusian stock companies are sold to foreigners with through covert transactions, because they are loss-making. Nobody will fight for them at auctions.

“It is hard to sell those enterprises at auctions. There is a need for a strategic investor. Those enterprises are usually sold under an investment agreement. It means that the investor makes an obligation to restore production, upgrade the equipment, keep the jobs, preserve social packages, etc.”

But when the European Radio for Belarus reminded Mr Zlotnikau that Velcom was not loss-making, the economist suggested that it was a political deal.

At the moment, the State Property Fund has information about putting only two stock companies for auction. But the official of the fund does not know exactly which enterprises we are talking about.

Hanna Karnieyevich: “We have orders from the president regarding two enterprises: a printing house in Horki and something else…”