Privatization

Under the current economic conditions, the priority of national policy regarding property relations is to ensure effective management of state property as in mixed economy a state acts as an entrepreneurial entity.

On January 1, 2011, a revised version of the Law of the Republic of Belarus N 2103-XII of 19.01.1993 “On privatization of state property and reorganization of state unitary enterprises into open joint stock companies” (hereafter referred to as the Law) comes into force. 

The Law is to improve legal and economic relations relating to privatization of state property and reorganization of state unitary enterprises into open joint stock companies aiming at creating conditions to attract investments and developing an effective socially oriented market economy.

This Law regulates relations emerging during privatization, reorganization of state unitary enterprises into open joint stock companies, it also stipulates legal status of such open joint stock companies.
The above mentioned Law only makes provisions for refundable privatization of state property through sales:
of shares (shares in charter funds) at auctions and through competitive bidding;
of enterprises as property complexes at auctions and through competitive bidding;
of shares of open joint stock company following results of trust management.

In compliance with the Decree of President of the Republic of Belarus no. 3 of March 20, 1998, “On reducing state involvement and privatization of state property of the Republic of Belarus”, reorganization and privatization plans are developed. 

These plans are prepared for a three-year period by the State committee for the management of state property following proposals of state administration authorities and other state agencies, plans concerning  municipal facilities are prepared in accordance with procedures, established by local Councils of deputies. At present the plan for 2011-2013 is being developed.

Information on state facilities prepared for privatization in the course of reorganization of state-owned enterprises into open joint stock companies and possibility of participation in this process for domestic or foreign investors is posted on the website of the State committee for the management of state property (www.gki.gov.by), and published in the “Management of state property” information and analytical bulletin and by the printed press.   

Reorganization of state enterprises allows attracting investments both during restructuring and during further operation of new business entities through:

participation of an investor in creation of an open joint stock company by financial or assets contribution to the charter fund;

acquisition of an enterprise as a property complex through auction (bidding) during privatization;

acquisition of additional shares of open joint stock companies, issued for a specific investment project;

acquisition of state shares of joint stock companies for investment projects.

One of the main tasks set by the Head of the State and by the Government of the Republic during reorganization of state unitary enterprises is to attract domestic or foreign investors into real sector of the economy, who are keen to conduct technical re-equipment of privatized enterprises and to boost their competitiveness, avoiding at the same time drastic reductions in numbers of employees at these enterprises and, subsequently, social tension in the country.

The process of reorganization of state enterprises is the basis for further search of potential investors who will be able to ensure re-equipment and innovative development of production facilities.

The emphasis is put on sales of shares. Over 150 open joint stock companies, whose shares are in the property of the Republic of Belarus, are included in the three-year privatization plan for 2008-2010.  Based on propositions of Ministries, concerns, and relevant administrative-territorial units, privatization plan for 2011-2013 is being developed.  

The Seller of shares is the State committee for the management of state property of the Republic of Belarus and the trading is organized by the Fund of state property of the State committee for the management of state property of the Republic of Belarus.

Preparation of drafts of decrees of Head of State concerning alienation of shares is carried out for joint stock companies interesting for potential investors.

When interested in acquisition of shares planned for sale, you should apply to the State committee for the management of state property of the Republic of Belarus at address: 12, Krasnozvezdny per., Minsk, 220005, or by tel.: 284-89-88 or 284-85-62.   

To create the most favorable investment and business climate in the country, conditions for entrepreneurial activities are being improved in the areas relating to lease or sale of state facilities and to introduction of mechanisms of private-public partnership.    

Development of small and middle-sized towns of the country has been  defined as one of state priorities, which requires more active involvement  of business entities in these regions, promotion of private initiative, construction of new enterprises and, as a result, creation of new jobs.   

To involve unused state assets located on the territory of small population centers and in rural areas into economic operation, the Decree of President of the Republic of Belarus no. 108 “On measures to involve unused state assets into economic operation” provides for the sale of unused state assets located in small population centers or rural areas through auctions,  with the initial selling price equal to one basic salary, transfer of such unused property for free use to sole entrepreneurs and private legal entities within the framework of specific investment projects with subsequent compensation-free transfer of these assets into their property, write-off of real estate assets following detailed examination of issues concerning the impossibility of their further use.

Necessary conditions for the auction with the price equal to one basic salary are:

The buyer carries out business activities at this facility, creates additional jobs;

The buyer may not sell the facility or perform other alienation activities till the buyer fulfills provisions of a sale-purchase agreement.

In case of sale of state-owned real estate (permanent structures (buildings, facilities)) on the territory of the Republic of Belarus simultaneously the right to conclude a land rental agreement is sold which is necessary for maintenance of such a plot of land.

In case the auction is declared void due to the fact that only one participant submitted bid (purchase requisition), the auctioned facility is sold to this participant with his agreement at the initial price increased by 5 per cents.

To study demand, the information about real estate facilities being sold through auctions is posted on the official website of the State committee for the management of state property in the Internet (www.gki.gov.by).
 

A list of main regulatory acts of the Republic of Belarus on privatization and alienation of state property
 

1. The law of the Republic of Belarus no. 172-З of July 16, 2010, “On privatization of state-owned property and reorganization of state unitary enterprises into open joint stock companies”,  which comes into force on January 1, 2011, makes provisions:
- to ensure compensation for facilities being privatized and alienated into property of the subject of privatization (through payment or through transfer into state property of shares of created open joint stock companies whose charted funds state property is added to);
- to expand privatization field and to specify ways to privatize state-owned property;
- to plan privatization processes for the middle-term period, including preparation and approval of lists of state unitary enterprises reorganized into open joint stock companies, to be sold as property complexes, and a list of open joint stock companies, created in the process of reorganization of state enterprises, whose shares are in the property of the Republic of Belarus or an administrative-territorial unit and are subject for sale;  
- possibility to sell facilities subject to privatization, if the auction or competitive bidding is declared void because only one participant submitted a bid;  
- to improve assessments of privatization facilities.

2. Provisions of the Decree of President of the Republic of Belarus no.3 of March 20, 1998, “On denationalization and privatization of state-owned property of the Republic of Belarus” taking into account additions and amendments are aimed at liberalization of privatization of state-owned property and encouragement of involvement of national and foreign investors in this process.   

In accordance with the Decree provisions, privatization of state-owned facilities is carried out in compliance with three-year plans approved by the Government and local Councils of deputies. 

Shares of open joint stock companies created as a result of restructuring are sold at auctions or through competitive bidding.

The state cancelled restrictions on alienation of shares of open joint stock companies where state share exceeds 50%, excluding stock companies maintaining operation of strategically important industries. At present restrictions are applied to shares acquired by citizens of the Republic of Belarus at reduced rates and for “Imushchestvo” cheques.  
Starting from January 1, 2011, all restrictions will be lifted.

3. The procedure for the management of state property is defined by Decree of President of the Republic of Belarus no. 575, September 14, 2006, “On state property disposal procedures”. State property management means transactions on:

compensated alienation through auctions, and in cases, defined by President of the Republic of Belarus, laws or decisions passed by local executive or regulatory authorities – through competitive bidding, without auction or competitive bidding; 
alienation without compensation;
transfer without change of the property type (transfer of property to another state-owned legal entity for or without compensation, not related to termination of right of Republican or municipal property);
mortgage;
lease;
transfer into use without compensation.

4. Decree of President of the Republic of Belarus no. 605 of November 10, 2008, “On some issues concerning privatization of republican unitary enterprises” defines a list of republican unitary enterprises whose shares owned by the Republic of Belarus shall not be sold at reduced prices or exchanged for “Imushchestvo” Personal Privatization Cheques following reorganization of these enterprises into open joint stock companies.  

The list includes economically important enterprises of the Republic of Belarus under jurisdiction of the Ministry of Industry, Ministry of Energy, State military industry committee, the Belarusian State Belneftekhim Concern, which are in republican property and included in the 2008-2010 privatization plan.   

Economic incentives for Republican unitary enterprises included in the list are preserved for open joint stock companies created through privatization of these enterprises.

Implementation of Decree provisions should encourage big investments in open joint stock companies being created. 

5. Decree of President of the Republic of Belarus no. 113 of February 25, 2008, “On procedure and conditions for sale of enterprises in the form of property complexes of loss-making state-owned organizations to legal entities” stipulates conditions for sale of enterprises as property complexes of loss-making state-owned enterprises to private  legal entities in the process of privatization through competitive bidding, on condition that they provide an investment project examined in compliance with the established legal procedure and related to development of a buyer company,  including use of enterprises acquired as a property complex. 

Essential conditions to sell an enterprise through competitive bidding as a property complex are:

implementation by a buyer of an investment project, social programs of an acquired enterprise;
preservation of jobs for the period of debts repayment of a loss-making state-owned enterprise;
creation of additional jobs in accordance with a investment project;
buyer’s assumption of non-fulfilled obligations of a loss-making-state-owned enterprise relating to repayment of taxes, duties (levies), interests levied in accordance with tax and customs legislation, loans, and other compulsory payments to Republican and local budgets (including targeted state budget funds) and payments to the state non-budgetary Fund for social security of the Ministry of Labor and Social Protection, fines and accrued penalties for violation of legislation, other non-fulfilled obligations; 
conclusion of a land rental agreement by a buyer.

The initial price of an enterprise sold as a property complex is set at 20% of its assessed value on January first of this year. If assessed value is zero or negative the sale price shall be one basic salary. 

Buyers, acquiring an enterprise as a property complex, shall be granted a three-year extension to repay debts accrued by a loss-making state-owned enterprise:

arrears in taxes and duties (levies) to the Republican budget (excluding the value added tax paid for goods imported from Russian Federation);  
custom duties in compliance with the Customs legislation;
repayment of budget loans, including interest for their use and budget credits.

Moreover, buyers are permitted to pay for an enterprise, acquired as property complex by installments for 6 years.
Implementation of the Decree’s provisions should contribute to reduction in numbers of loss-making state-owned enterprises, to investments for re-equipment of specified enterprises, to growth of additional budget revenues and to creation of new jobs. 

6. Decree of President of the Republic of Belarus no.108 of February 27, 2007, “On measures to involve unused state-owned property into economic operation”   makes it possible to sell unused state-owned republican property, located in small population centers and in rural areas through auctions with the initial price equal to one basic salary.  It is permitted to give such property for free use to sole entrepreneurs and private legal entities for specific investment projects with further free transfer of these facilities into their property.
To ensure effective use of state-owned property, directors are made responsible if unused state-owned property is not involved into economic operation. 
 

7. Decree of President of the Republic of Belarus no. 518 of October 23, 2009, “On some issues concerning lease and free use of property” aims at simplification of lease conditions in the Republic of Belarus. 
The Decree signed by President provides for complex regulation of lease issues. 

Setting approaches to determine lease rates makes it possible to significantly simplify the procedure to determine lease rates when state-owned or private property is leased.  

The applied procedure to calculate lease payments covers all types of buildings and constructions (public, production, administrative buildings and warehouse facilities), sets the basic rate of lease payment in BYR depending on the basic salary and the category of a population center.  Rental space is determined based on actually occupied area (transfer factors are canceled), comfort factor and factors of premises in-building location are also cancelled.
 

© 2019 RUE «NATIONAL CENTRE FOR MARKETING AND PRICE STUDY»
Ministry of Foreign Affairs of the Republic of Belarus