Leanid Zaika: Our voucher privatization is a suitcase with a handle :: Charter'97 :: News

The Belarusian government has extended until June 30, 2007 the period during which private individuals can exchange their "Property" privatization vouchers for shares in stock corporations. The previous deadline was set for December 31, 2005

Independent experts think that the authorities are just trying to postpone an unpleasant moment when they will have to admit that large-scale public privatization of state enterprises has effectively failed.

The decision to start this "popular privatization" was taken back in May 1991, when Belarus was still part of the Soviet Union. However, the process actually started three years later, in 1994, when Belarusian citizens started to be given by the government "Property" privatization vouchers, and was completed in July 1997, when a total of 427.652 million vouchers ended up in the hands of the country`s population.

Of that amount, just about a half, or 240.384 million, has been actually used by their holders, including 107.167 million exchanged for privatized stock. People were offered to buy shares of 892 public companies. Incidentally, shares acquired for privatization vouchers cannot be transferred to other owners within three years after the exchange transaction.
Since many voucher owners failed to use them for intended purposes, the government extended the period of voucher privatization several times, setting deadlines for the end of 2003, 2004 and 2005. According to the Belarusian Ministry of Economy, 2.429 million people still hold unused vouchers.

Taking into account the fact that the process of voucher privatization had been effectively inactive for a long time, the Council of Ministers submitted to the House of Representatives of the Belarusian National Assembly a bill of amendments to the Privatization Vouchers Law. The draft legislation envisages the annulment of privatization vouchers in 2006 and abolition of monetary compensation for privatization vouchers that would not have been used.

Government experts say that the present-day voucher privatization process obstructs the development of securities market. (Privatization vouchers have, by law, the status of government securities.) The economy ministry estimates that more than 800 billion rubles, or about $372 million, would be required to cover the unused vouchers with compensations. (One "Property" voucher costs 4,200 rubels.) The government is very reluctant so much.
However, legislators showed a rather cautious approach to the proposed legislation. Most of them said that the state should not turn back on its earlier promises and that vouchers should be compensated financially. Some also proposed, by way of compromise, "freezing" the circulation of privatization vouchers until the improvement of the economic situation in the country, or paying the compensation by installments.

Then the respective parliamentary committee asked the authors of the bill to give information about the quantity of the unused vouchers, and about the amount necessary for paying compensation. It decided to return to the subject and make a decision on the bill after it receives this information. However, judging by the recent decision to extend the deadline again, the cabinet decided not to tempt fate and postpone the issue.

According to the economy ministry, the government`s public offering currently covers 98 percent of all vouchers held by the population. Still, many people are reluctant to use their right to take part in privatization. Why?

It is because "this right very much looks like a suitcase without a handle: there is a suitcase but you can`t actually use it," comments economist Leanid Zaika in an interview with The Viewer. "About eight years ago, Syarhey Linh, the country`s prime minister at that time, asked cabinet members what should be done with privatization vouchers. The government should have recollected courage already at that time to admit that voucher privatization was a relic from the Soviet era and did not have any economic sense. But the authorities prefer to keep extending this dead process `for the sake of the people.`"

In general, it should not be so difficult to engage people into the process of privatization, adds Zaika. "What is needed is that large and profitable companies, such as petrochemical and potash fertilizer enterprises, go public. However, it is the state that holds controlling interest in those enterprises. The nomenklatura is waiting for another favorable historical moment to make use the situation and privatize them."

Meanwhile, Alena Rakava, economist with the Institute of Privatization and Management, believes that voucher privatization should not be called privatization at all.

"It is in fact corporatization. And this process is very slow due to a special economic and political situation in Belarus," she says to The Viewer. "The government certainly needs to somehow finalize this sluggish process. But it has to make a decision first: to compensate or not to compensate. With the first option, popular discontent can trigger negative political fallout. With the second option, a lot of financial resources are needed. Some mechanism could be found in the latter case to make the compensation process less painful for the state. However, this would require certain efforts and political will."

According to her, "the authorities have chosen the worst option. No one can benefit from such half-dead privatization. Enterprises cannot attract people`s resources. The state still has to carry those enterprises on its back. And of course, people do not need shares of unprofitable companies. But the state does not want to release control of profitable enterprises. The president has said that many times. This makes voucher privatization senseless."

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Leanid ZAIKA

Born in Hrodna in 1948...Graduated from Belarusian State University in 1970...Holds a foctoral candidate`s degree in economics...Served as a lecturer with Belarusian State University...Was dean of the Economics Faculty of European Humanities University before it was closed down by the Belarusian authorities in 2004...Has been president of the Stratehiya think tank since 1999.

Alena RAKAVA

Born in 1973...Graduated from St. Petersburg University of Economics and Finance... Senior researcher with the Research Center of the Institute of Privatization and Management in Minsk...Holds a doctoral candidate`s degree in economics.