Officials Reluctant to Sell Off Public Assets
11.05.2012 / 17:57
The Belarusian National Statistics Committee (BNSC) said foreign companies had invested $3.9 billion in Belarus' real sector of the economy in Quarter 1.
“Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true,” said Demosthenes. The Belarusian National Statistics Committee (BNSC) said foreign companies had invested $3.9 billion in Belarus' real sector of the economy in Quarter 1. But this seems to be wishful thinking.
Loans reported as investment
Gross foreign investment in the real sector totaled as much as $18.9 in 2011, the Committee said, noting that Foreign Direct Investment (FDI) amounted to $13.2 billion. FDI rose 17-fold since 2006, according to the BNSC.
However, Belarus' official statisticians have included in FDI goods and services supplied on credit to Belarusian companies.
If the loans are not counted as investment, the FDI amounted to $3.97 billion in 2011, including $2.5 billion paid by Russia's Gazprom for a 50-percent stake in Belarus' Beltranshaz gas pipeline system. Therefore, real FDI amounted to $1.47 billion and accounted for 2.7 percent of GDP last year.
In 2012, Aliaksandr Lukashenka by his presidential edict set the target to attract at least $3.7 billion in FDI.
However, the government in its 30 December 2011 directive projected net FDI to total at least $1.2 billion this year.
The $3.7 billion target is still on the agenda. The Council of Ministers set the $1.2 billion target for enterprises accountable to governmental agencies.
In the first two months of the year, net FDI was reported $140.5 million, including $117.6 million (83.7 percent) attracted by companies that are not accountable to governmental agencies. So, in the first two months officials achieved just 1.9 percent of the target.
Agencies are failing to attract foreign investment because Belarus is not attractive to foreign investors. FDI has been decreasing in the last three years.
Officials reluctant to give up reins
Investors put their money in projects that generate a return and they would like to be in control of businesses they acquire. In Belarus it is different. Authorities are wary of investors and expect them to be grateful for allowing them to put their money in a Belarusian business.
Officials, especially at the local level, are reluctant to give up public assets under their control and resist changes in the economic system. The central government is also reluctant to give up control of major enterprises. But it wants to sell local assets to spur businesses and move along the path of liberalization required by the internal and external circumstances.
For instance, on May 7 Lukashenka issued Decree No. 7 to encourage private enterprise in rural areas and small and medium-sized cities through tax and other exemptions for local businesses.
However, the central government’s policy has not worked because of local government’s resistance to change.
Belarus. Foreign investment in 2006-2012 (from BNSC's report on Socioeconomic Situation in the Republic of Belarus in January-March 2012)
Cheap energy makes reform less urgent
In his May 8 address to the National Assembly, Lukashenka pointed out, “Investment should be direct, not a disguised form of credit”. But the government can hardly be expected to take real steps to improve the business and investment climate in the next few months. Cheap Russian oil and natural gas enable the government to build up foreign exchange reserves without reforming the economic model.
If a new crisis hits Belarus this year, the government would have to sell urgently some assets. Fast-track privatization was tested on Beltranshaz, next in the line may be the Minsk Automobile Plant, a 51-percent stake in mobile operator, MTS, and oil refineries.
Foreign cash shortages may recur, considering plans by the National Bank of Belarus (NBB) to cut the base refinance rate to 19-22 percent by the end of the year. With banks’ excessive liquidity, the planned cut may trigger inflation, prompting Belarusians to buy up foreign cash.