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Belarusian Style of Privatization Scares Away Investors

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Belarusian Style of Privatization Scares Away Investors

The new resolution of the Council of Ministers obliges a buyer to preserve jobs.

Resolution № 639 of August 16 of the Council of Ministers amends resolution № 1929 dated December 31, 2010 regulating the privatization procedure of state property, Zautra Tvaye Krainy writes.

The new resolution provides for amendments to Regulations on auctions and competitions aimed at the sale of privatization targets. Among other things, the new document implies additional obligations to customers, for them to fulfill terms of competitions in purchase and sale contracts that relate to privatization targets in state ownership.

Now purchase and sale contracts of privatization targets owned by the Republic of Belarus set out obligations involving preservation of jobs and productive activities of business entities and public enterprises with the possibility to switch production with the consent of republican bodies of state administration, other state organizations controlled by the Government and exercising (performing) possessory supervision in business entities.

A similar rule (to preserve jobs and production activities of business entities) is set for the sale of objects owned by the administrative-territorial entities. To switch production is possible with the consent of local executive and administrative bodies.

Kavalkin: Additional requirements for each enterprise must be differ

- The world practice shows that during the privatization the owner can put some additional terms. As a rule, such terms are of individual nature. And they are agreed upon in an additional investment agreement, the head of Kosht Urada project Uladzimir Kavalkin says.

This agreement, according to the expert, specifies the amount of payments and the period of receipt of the enterprise value, as well as additional requirements to an investor, including the requirement to preserve certain number of jobs.

According to the economist, a new regulation makes the market less flexible:

- For example, if there is a company that can be successfully sold with 70% of jobs, then it is impossible to implement with 100% of jobs. The economy loses 100% of jobs and an enterprise is not sold.

I believe that is much more effective to specify all of these things in the contract.

In general, it is better to hold open privatization, for example, by auctions. Either to hold open tenders, the source summed up.

Zlotnikau: If to take proper modernization, half of employees will not be required

Economist Leanid Zlotnikau believes that new rules do not benefit potential investors. According to him, if local authorities decide on how the privatized enterprise should work, number of employees, then serious investors are unlikely to dare invest money here:

- Why should a person ask for permission how to run his own business? Why then should he spend his money here, if it is easier to do somewhere else?

According to the source, such terms bind the potential of investors:

- If an investor intends to have a proper modernization, to install better equipment or to carry out reconstruction, then majority of the labour force is not required.

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