Privatization: first deals

On 14 June private Belarusian companies “Laguna” and “Ostamebel” bought state shares of the three furniture factories at an auction within the frameworks of the first auction of state-owned shares that were included in the privatization plan for 2011-2013.

There were nine companies at the auction however investors showed no interest in “Belkofe”, “Zhitkovichles”, “Factory of catering “Borisovles”, “Kostiukovichi LPH”, “Pleschenitsles”, “Polotskles”.

Comment

Privatization is the most painful issue for the Belarusian President. Open tenders offer businesses unattractive to investors, often at inflated prices (their book value, which ignores the real value of an enterprise). As a result, some companies are bought by Belarusian investors who can use the new facilities for their business. However, this kind of privatization brings neither foreign currency to the country, nor does it create a feeling of implementation of a full-scale transparent privatization of interesting assets in the country.

With regard to strategic assets, the Belarusian authorities have decided to procrastinate and to bargain until the end. Belarus did not agree to sell state-owned shares of the mobile operator MTS at a price proposed by investor (the difference between the desired and the offered price was 200-300 million). Negotiations concerning the sale of 50% of “Beltransgaz” are delaying and the authorities have decided to link the sale conditions of the company at initially inflated price of USD 2.5 billion to favourable domestic gas prices in 2012-2014. That means getting additional subsidies from Russia amounting to USD 5 billion.

On the one hand, the authorities are trying to play hard, hiding their weakness. On the other hand, their actions confirm the image of the country as of a partner difficult to negotiate with.

Information about negotiations concerning “Belaruskaliy” is quite controversial: it is unclear who, how, through what companies and for how much is ready to buy these assets.