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. Last Updated: 07/27/2016

Belarus Wary Over Privatization

MINSK -- A long row of bureaucrats sits stony-faced on a stage, overseeing a privatization auction in the process of failing.

The auction, the third Belarussian attempt at privatization, was the worst yet, with only three of the 11 enterprises attracting buyers and competition for the ones that sold almost nonexistent.

The reasons for the lack of interest lay in the high prices set by the government at the auctions and concern among buyers about making their investments in Belarus' shaky currency, made even shakier by the possibility of imminent monetary union with Russia.

But a more difficult problem, analysts say, is the deep-seated resistance within the government and the legislature to privatization that was equally reflected in the wary faces of the bureaucrats and in the auction's poor results.

"Our government has a psychological problem with privatization," said Natalya Gaiduchenko, chief economist at Milavitsa, a joint-stock sewing firm in Minsk. "They are scared of giving property away, in case someone gets rich."

More than two years after the breakup of the Soviet Union, Belarus has privatized just over 10 percent of its state enterprises and has yet to issue privatization checks. In comparison, Russia, where 80 percent of government property is due to be privatized by summer, looks like a free-market bastion.

There are signs that the process will accelerate here with plans this spring to issue each of the 10 million citizens of Belarus privatization checks to be used for investing in state enterprises.

Unlike in Russia, where each citizen received one privatization voucher, Belarussians on April 1 will receive a sheaf of checks -- the number of which will be determined according to age, work experience and other criteria.

But many in the private sector doubt whether the government has the will to make privatization succeed and whether the plan will even work.

At the Elma sewing factory, the 2,250-strong workers' collective, which bought out half of the company last year, hopes to buy the remaining half when the privatization checks are issued in April. But because the government has not yet decided the nominal value of the checks, the collective is unsure whether it will have enough checks to buy the other half of the company, valued at 850 million Belaurussian rubles (about $141,600 at the unofficial exchange rate).

Dmitry Lysenok, Elma's deputy director, said he does not know what the collective will do if it comes up short; looking to relatives to contribute their checks is a possibility. He said the firm's recent success landing contracts with Italian, British and Dutch firms has made the workers particularly eager to get full control of the company.

But in Belarus, acquiring legal ownership of a former state enterprise is not always the end of the purchasing story.

Vladimir Taranov, president of the Bobruiskdrev furniture factory, organized the buyout of his factory from the government in 1993 for 31 million rubles.

Now, however, the government property committee in the Supreme Soviet has decided that the factory -- the first Belarussian firm to obtain a credit from a foreign bank -- was undervalued at the time of sale, and that the company must now pay another 51 billion rubles.

"This is a ridiculous policy on the part of the government," said Taranov, who is also the president of the Association of Privatized Enterprises in Belarus.

"Who is going to invest here when the government keeps changing its mind and the law?" asked Taranov.

One law that shows no sign of changing is a privatization regulation that bans new owners from firing any employees or changing the focus of the company for three years after its privatization.

"It's very ineffective," said Taranov. "The law has got to change. But there are many in the Supreme Soviet who don't understand that."

Among the privatization difficulties, there are some success stories. Gaidu-chenko and her 2,500 coworkers at the Milavitsa sewing factory have managed to gain foreign investment and contracts, despite such obstacles as new tariffs and higher costs for Russian energy supplies.

They have expanded their production of womens' underwear since they bought the factory from the state in January 1992 and are stitching together parts for the German Triumph underwear company, which now provides 35 percent of their business. They are also forging links with other foreign firms.

But according to Vasily Shlyndikov, director of the huge Amkodor road machinery factory in Minsk, the idea that private enterprise might be beneficial to Belarus is a concept that has yet to be accepted by those running the country.

"The government is still convinced that government interests are more important than those of private enterprise," said Shlyndikov.

"The laws governing state and private enterprises are exactly the same, which means they keep coming in and telling me how much money I should have in the cash till," he said.