Privatization gathers strength

The Republic of Belarus becomes more and more attractive to investors. In 2007 pure foreign investments to a national economy has increased on 52,2% to the record 2,599 billion dollars. Including the increasing of the volume of direct foreign investments in 5 times to 1,769 billion dollars. That is especially important, considerable investment flows in the form of the share capital — 1,439 billion dollars (59% of total amount of direct investments) is observed. It testifies not only about macroeconomic stability in the country, but also about growing attractiveness of its assets for major international investors.

First of all so considerable growth has been connected with investments of foreign investors to large projects, such as foundation together with Russian Join Stock Company “Gazprom” the Belarus-Russian enterprise on the basis of Public Joint Stock Company “Beltransgaz” and sale of Belarus government share in authorized fund of JV “Mobile Digital Communication” to the Austrian investor. 86.7 million dollars has been involved in authorized funds of Byelorussian banks in 2007. And credits relating to the direct investments and the loans of the foreign parent companies given to the subsidiary companies in Belarus have amounted 812.7million dollars. At last, reinvested profits have amounted 185.2 million dollars. The greatest total volumes of the foreign capital in the form of direct foreign investments have earned from Russia (33.5%), Cyprus (32.5%) and Switzerland (23.8%).

To a considerable degree the growth of investment activity in the country is connected with measures which are undertaken by the Government of Belarus on formation of a favorable investment climate. In 2008 the Government has made one more step towards economy liberalization. On April, 14th the President of Belarus has signed the Decree №7 which added changes and additions to the Decree from 20.03.1998 № 3 «About denationalization and privatization of state ownership in Belarus». After the cancellation of the right of «gold share», exemption from taxes on incomes from operations with bonds of legal bodies and other measures for development of the equity market, the Decree №7 gave a fresh impetus to privatization in Belarus.

This document provides gradual, depending on the size of a share of the state and the status of the enterprises, cancellation of restrictions on circulation of shares of open joint-stock companies which were set up during denationalization and privatization whose alienation has been limited till now and contained the process of funding and privatization. Since June, 1st, 2008 restriction on alienation of shares of the enterprises which authorized capitals doesn’t have the state share or it amounts 75% and more is cancelled in Belarus. As well as the alienation of shares of the agricultural organizations and bakery enterprises was permitted. Since January, 1st, 2009 the restrictions on alienation of shares of Open Joint Stock Company with state share over 50% will be canceled, except for shares of the enterprises providing functioning of strategically significant branches of economy. And since January, 1st, 2011 all restrictions will be canceled.

To estimate the importance of legislative innovations, it is enough to estimate the quantity of the enterprises which shares are issued in free circulation this year. According to some estimates it amounts about 70% of actives. In particular today 360 joint-stock companies of a republican pattern of ownership have the state share more than 75%. This is equivalent to 70% of all joint-stock companies. Approximately the same share of the state is in joint-stock companies of bublic property.

Now it is available for investors and has considerably recovered the share market and the market of pooling and intake. According to the Ministry of Economy 149 investment projects with attraction of foreign investments will be implemented in 2008 in Belarus. The total cost will amount 1.6 billion dollars. However the Decree of the President №168 from March, 21st, 2008 defines additional measures of the state support for the legal bodies which are realizing especially important investment projects with attraction of external loans. It is expected that the growth rate of investments into a fixed capital at the rate of about 123-125% can be reached at the year end in Belarus.

According to the approved government plan of privatization of objects of the republican property for 2008-2010 in Belarus it is planned to privatize 519 enterprises. 176 in 2008, 213 in 2009 and 130 in 2010. The corresponding decree is contained in the Council of Ministers resolution № 1021 from July, 14th, 2008.

Among the enterprises, whose privatization is planned for the current year — Minsk Motor Plant, «Optoelectronic systems», «Minskagroprommash», Minsk Engineering Plant named after Vavilov, enterprise “Belgaztekhnika”, «Gomeltextiltorg» an others. In 2009 it is planned to privatize such enterprises as «Gomselmash», Belaz, “Minsk Wheel Tractor Plant”, enterprise “Vitiaz”, “Agat-System”, «Inkotekh», institute “Belgosproekt”, enterprise “Electronica”, “Gomeltransneft “Druzhba» and others. At last in 2010 — the Minsky Zavod Avtomaticheskikh Liney named after Masherov, Minsk Scientific Research Institute of Radio Materials, Orshansky Flax Mill and others. However these plans can be corrected as the list of strategically significant enterprises which cannot be sold till 2011 is still specifying. Today 148 organizations including — 48 joint-stock companies are mentioned there.

Foreign investors today in Belarus are interested in financial sector — banks and the insurance companies, the enterprises of food processing — breweries, dairy plants, canning factories, building companies and manufacturers of building materials, cellular service providers, trading networks first of all. Potentially these businesses are the most profitable and frequently underestimated on the European measures.

It is no coincidence that in these spheres the greatest transactions are observed. For example purchasing of Byelorussian breweries by the company Heineken, by Russian group RESO — insurance companies “Brolli” and «Alvena», by Turkish Turkcell — the cellular service provider «BеST». But, of course, all records are beaten by bank sector.About rates of privatization in bank sphere it is possible to judge by that on September, 1st, 2008 the share of the foreign capital in the total authorized capital of the Byelorussian banks has amounted 22.2% against 9.8% on the beginning of year. Only for the first half of the year the volume of the total foreign investments directed on acquisition of shares of the Byelorussian banks on the primary market has amounted 88 million dollars and 31 million Euro. For comparison: for all 2007 — 65.8 million dollars and 15.3 million Euro.

The Vice-premier of the Byelorussian government Andrey Kobjakov, acting at the 5th session of the Advisory Council on foreign investments, has confirmed, that in 2008 will be incorporated not less than 30% of the Byelorussian enterprises. As he saying the government is interested in maximum open dialogue on issues of further improvement investment climate in the country and the further attraction of investments into the Byelorussian economy.

Dmitry Lupach.