Belarus privatisation at odds with Lukashenko line in 2016

Belarus privatisation at odds with Lukashenko line in 2016
Belarusian President Alexander Lukashenko (centre) is resisting changes to economic policy while his government tries to lure foreign money with privatisation thaw.
By bne IntelliNews January 28, 2016

Belarus will offer state-owned stakes in 60 companies for privatisation in 2016, the State Property Committee (SPC) has said in a questionable move to convince foreign investors and creditors alike that the former Soviet republic is serious about structural reform.

Up for privatisation are shares in BATE, a producer of starters and alternators for engines; Horizont Group, a producer of household appliances; Promsvyaz, a Minsk-based producer of radio, television and networks equipment; timber processing enterprises (Ivatsevichdrev, Vitebskdrev, Mogilevdrev, FanDOK); and the Spartak Paper Factory based in the eastern Mogilev region.

However, the activity is unlikely to heavily sway potential buyers while the republic's authoritarian President Alexander Lukashenko continues to openly oppose reforms and attempts to "change course".

Posted on the SPC website and reported by BelTA news agency on January 27, the offers appeared against a background of stalled privatisation of Belarusian state-controlled companies, which account for over 50% of the country's output and two-thirds of employment.

For years, Belarus has avoided privatising its major companies, the only significant exception being the sale of its gas pipeline system under Russian political pressures to Gazprom for $5bn in 2007-2011.

Belarusian authorities have typically been unable to agree on the price of assets offered to potential investors. The social and production conditions set by the authorities are another sticking point, as they have often made acquisitions uneconomical for investors.

"Nothing can be broken"

Minsk's slightly bolder stance now reflects mounting pressure on the government to implement structural economic reform to qualify for new loans from the International Monetary Fund (IMF) and the bailout fund of the Russian-led Eurasian Economic Community (EFSD).

The IMF has repeatedly urged Belarus to demonstrate "strong commitment at the highest level" to a comprehensive package of deep structural reforms and consistent macroeconomic policies. But the calls are hitting up against some of the core policies of Lukashenko, who has held the presidency since 1994.

"I do not think it is possible and necessary to change course in this situation," Lukashenko told a government meeting on January 26, according to his media office. "This is the course that helped us acquire independence and create our state. Today I still cannot allow anything to be broken and put excessive pressure on people without results, I am absolutely against it."

Such statement are unlikely to sit well with the IMF as it discusses terms of a possible loan with the government. Minsk seemed likely to secure a new loan of up to $3.5bn with the Fund instead of a bail-out package with the Russia-led EFSD, which can potentially allocate a $2bn support package to Belarus.

The Belarusian government is simultaneously discussing credits with both lenders as its international reserves hit their lowest level since 2011, standing at $4.17bn as of the beginning of 2016.

Lukashenko, re-elected for a fifth term in October 2015, added in his latest comments that he would like the government to remain committed to the policy "we promised our people during the election campaign".

Under former state farm director Lukashenko Belarus has maintained strong social protection at the cost of free market principles, including subsidies to keep state enterprises operating with large work forces. The day before the SPC announced the privatisation plans, he still referred scathingly to "so-called reforms".

"We cannot lie to people, otherwise we will carry out the so-called reforms for ourselves, and they will be rejected by the people," the president said. "It will upset people's thinking and destabilise the situation, and if we then lose control [...] and money, we will have to do even more than we have to now to repay the external debt," he said, according to his media office.

On January 11, First Deputy Prime Minister Vasily Matyushevsky told Lukashenko that the government expects to secure a new support programme with the IMF in either January or early February.