Privatization: a strategic fight for terms and conditions

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April 22, 2016 17:56

Head of the State Property Committee of Belarus Georgy Kuznetsov announced at a press-conference that Belarus will sell to Gazprom the remaining 50% of the stake in JSC “Beltransgaz” for USD 2.5 billion before the end of 2011.

According to Kuznetsov, Belarus has imposed a lot of additional conditions regarding prices, tariffs and other issues that hampered negotiations. However in the autumn the parties will agree on all terms and the transaction will be completed.

Russian JSC “MTS” offers to pay USD 400-500 million for the state-owned shares of the Belarusian subsidiary, said Kuznetsov, noting that Belarus would like to receive USD 1 billion for the asset. According to the State Property Committee, it has been tasked to assess Belarusian assets’ maximum value in order to negotiate it in the future to reach the acceptable compromise.

Comment

It is likely that Belarus will have to cede to “Gazprom” on the issue of privatization of “Beltransgaz”, creating a precedent that would anticipate further concessions to Russian investors in the course of imminent privatization. 

Belarus has to sell “Beltransgaz”, it is the only asset that has been prepared for the privatization, and is able to enrich the gold and currency reserves with USD 2.5 billion.

Russia understands this. It proposed to postpone talks until September. On 19 July in an interview with BelaPAN Russian Ambassador to Belarus Alexander Surikov said, Russia was considering the purchase of “Beltransgaz” “largely as a remedy for Belarus because of the rising gas prices that took place during the transition to mutually beneficial market relations”.

Russia was considering the purchase of “Beltransgaz” “largely as a remedy for Belarus because of the rising gas prices that took place during the transition to mutually beneficial market relations”.

The majority of Russian investors are not satisfied with the prices for Belarusian assets. They believe the market assessment made by Belarus is overly exaggerated and it is impossible to reach an acceptable compromise. Consequently, Russia will work to change this approach, while supporting the Belarusian economy at the cost of sale of the “Beltransgaz”

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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