Oleg Andreyev, EnterInvest, comments on the "resuscitation" of the golden share rule in Belarus for Naviny.by

The process of state property denationalization in Belarus is being frozen thus coming to nothing. The draft law, which actually breathes life into the golden share rule, has been endorsed by the President so far. According to experts, the mechanism of state participation in the activities of joint stock companies (JSCs) will deter potential investors, who, under a different set of conditions, might consider investing in acquisition (development) of government enterprises.

In December by order of the President state agencies drafted a bill providing for the appointment of state representatives even in those JSCs without government stake. The information about this draft law caused a stir on the Internet and state agencies seemed to give up on the adaption of the bill.

Not a bit of it! The idea is far from being dead and has already been agreed upon everybody in the state machine.

“The President has already endorsed the draft law; the document is back to the Council of Ministers. In the nearest future it’ll be submitted to the Parliament, where it is to be debated in April” said the Chairman of the State Property Committee Georgy Kuznetsov to the journalists last Tuesday.

He also mentioned that according to this bill even in those JSCs without government stake, but established in privatization process or onthe basis of leased enterprises, “our citizens have their shares”. “In order to protect the rights of such citizen, the governors will appoint state representatives in stock companies” told Kuznetsov.  

It is reported -- in justification of the draft law mentioned -- that the state representatives will get the “right to appear and vote on the general meeting of the shareholders by minor shareholders’ votes and  put a veto upon  decisions of the Shareholders’ General Meeting (the text of the draft law is available on Naviny.by).

In business community the rule of state representatives’ participation in JSCs without government stake is compared to “golden share rule”.

 “Now due to this rule almost any stock company can be managed by the state. It means in fact the return of the “golden share rule” emphasized in the interview with Naviny.by a top-manager of a large private company which used to be a leased enterprise in the 90s.

The interlocutor of the online-paper also mentioned that the suggested mechanism does not give an answer to many questions, precisely on the basis of what resolutions state representatives will be appointed in governing bodies of private businesses.

It was the second half of the 90s when the rule of “golden share” was introduced. It was a special right of the state to manage even those enterprises without government stake. In 2008 “golden share” was abolished. However now after the adoption of the law it might be redrawn and revived.

Belarusian experts are opposed to the draft law which introduces the appointment of state representatives in stock companies without government stake.

“It is literally the renewal of the “golden share”. If the real goal of the decision is to prevent uncontrolled property redistribution there are other possibilities to do that” says Oleg Andreyev, the Managing Director of Investment Banking Department, EnterInvest.

Besides the experts doubt whether state representatives appointed in stock companies will be able to pay enough attention to their new responsibilities.

“Officers will have to be distracted from their primary employment and go deep into the activities of the company. The question is whether they will be able to understand the organization and its work”- says Andreyev.

According to the expert, appropriate changes in legislation would have sufficed to protect the rights of the minority shareholders while the mechanism of appointment of state representatives in stock companies will have a negative impact on the investment attractiveness of the country.

“We should expect the change for the worse in the investment climate, but what is more the deterioration of the Belarusian state-owned enterprises that foreign investors will not buy just because of the mechanism of assignment of representatives in joint-stock companies” suggests the head of the Mises Research Establishment Yaroslav Romanchuk.

The economist believes that the state representatives’ assignment draft law might be beneficial for large private business, affiliated with the state. Against the background of investment climate deterioration such companies will get free access to the purchase of attractive state assets.

Experts consider that most foreign investors would prefer projects that are not related to privatization. "Potential foreign investors are likely to pay attention to greenfields and cooperation development with private sector rather than investment in state assets acquisition” believes the economist of Belarusian Economic Research and Education Center (BEROC) Maria Akulova.

Other observers seem to be of the same opinion.

“In 2012 $3.2 million came from the sale of state-owned shares though the total amount of foreign investment was much higher. This points to the fact that the investors are not interested in the acquisition of state assets. The proposed rule of the appointment of state representatives is another reason to invest in projects that are not related to state property” says Oleg Andreyev.

However, according to the experts interviewed by Naviny.by, there is a possibility of increase in privatization revenues in 2013. In observers’ view, some big privatization deals can be made in order to find the money to pay off debts and finance payments deficit.

“The economy model does not change, the possibilities of raising debt financing are restricted, that is why there will be some privatization processes” concluded Andreyev.