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Belarus: Privatization Holds Out Hope

  • Robert Lyle

Washington, 21 May 1998 (RFE/RL) -- A sign in the hall of a small apartment building near downtown Brest, Belarus reads like a leftover from Soviet days: "Citizens, Maintain Cleanliness & Order. The stairwell is part of your apartment!"

In fact, the sign is relatively new because the building of eight apartments is a condominium -- a form of real estate ownership where individuals own their own apartments and together in an association own the common parts of the building. The sign reflects the new pride of ownership displayed by residents who not only keep the hall clean, but have planted flowers around the buildings walkways and are generally sprucing the place up.

Amazingly, Belarus -- the least market-oriented nation in the region -- is the only country among former Soviet republics which allows condominiums, under a law passed in January. The building in Brest is one of 12 condominiums now registered in Belarus: five in Brest and the rest in Kobrin, Minsk, Baranovichi and Molodechno.

Allowing such a western capitalist form of ownership in a nation whose dictatorial leadership is longing for the good old Soviet days is but one example of the kinds of stark contrasts one constantly sees in looking at the process of privatization in Belarus, Ukraine and Russia -- three former Soviet republics at very different places on the transition road.

Russia has moved ahead rapidly on both large and small scale privatization as well as farm reorganization, but continues to balk at the idea of private land ownership with the right to sell.

Ukraine has moved less forthrightly, continues to wrestle with the same land sale question, and has been slowed by a sluggish economy and starts and stops on reforms.

Belarus, where President Alyaksandr Lukashenka controls most aspects of the economy with laws on business and private enterprise that can change at his personal whim, has undertaken no large scale privatization, but has allowed small scale privatization.

Each nation, however, has a strong and growing small business and entrepreneurial community and much of the credit can go to the International Finance Corporation (IFC), the World Bank affiliate organization which deals with the private sector.

The IFC was ready in 1991 when the Soviet Union broke up and each of the newly independent countries decided to make the transition from central planning to market economies.

IFC Senior Privatization Officer Dafna Tapiero says the organization realized that it would be impossible to design transition programs on such enormous national scales. Instead, it went to selected local areas, developed privatization and business programs in conjunction with the people and authorities there, then replicated those designs to other areas.

Starting with local groups was "essential" to the IFC approach, she says, because they are the ones who will ultimately be taking over. But also by starting at the grass roots level, the IFC could build tangible evidence that privatization is a good thing and could work in countries long accustomed to central planning and state ownership.

The IFC for example developed its complex model for reorganizing and privatizing farms in Nizhny Novgorod, then began spreading the refined model to other areas in Russia. A model adjusted for Ukraine was tested in Donetsk and was spread from there.

Drawing from those local tangible experiences, says Tapiero, national leaders could then see for themselves what was possible and that has been used in changing national legislation.

Tapiero, who has offices in Washington and Moscow, says one of the IFC's biggest jobs was simply helping to change long-held prejudices against all aspects of private business, from ownership to profits.

"A lot of it is just de-mystifying private business," she told our economics correspondent after a recent one-week tour of privatization sites in the three countries. "Unfortunately, private businessmen -- or just private ownership -- was for many years considered the enemy and just getting people to feel comfortable and understand it took a lot of work," she says.

Mostly, she adds, the best way to change attitudes was by demonstration -- "to show them, to show concrete examples of what it really means."

That's no easy task, says Russian President Boris Yeltsin's representative in Nizhny Novgorod, Yuri Lebedev. He relates the story of one collective farm where each member was given a cow as his or her share of the livestock. "This is yours,' we explained, but one old woman answered: 'I understand, but when should I return the cow to the collective farm? In the spring?"

No, explained Lebedev, "the cow is yours to keep. You don't have to return it in the spring. I understand, answered the old woman. But if I don't have to return it in the spring, then when? In the autumn?"

When told yet again that the cow was hers, she again said "I understand it's mine, but who is going to pay to feed it?"

The process is slow but necessary, says Lebedev.

The IFC made huge commitments in these three countries and other former soviet states, but it depended for funding of its programs by donor nations -- countries like the U.S., the United Kingdom, Japan, Norway, Sweden, Denmark, the Netherlands and Canada.

However, knowing that those donations and grants would eventually end, the IFC has organized all of its programs to be locally self sustaining.

For example, in Belarus and Ukraine, the IFC opened a series of local business development centers where entrepreneurs and potential private business people could learn the mechanics of business as well as an entrepreneurial attitude.

Each of those business centers was given funding for one year, but had to become self sufficient to continue. The center in Brest, Belarus was the most recent to turn itself into a self-supporting entity, charging for the training and assistance offered potential new entrepreneurs as well as helping those who are already in business to improve their operations.

In all of these countries, private business people and entrepreneurs complain about unjust and unbalanced laws on business, inadequate property and contract laws, and unfair and heavy taxes that do more to destroy business than create or enhance it.

Crime is a serious problem in Russia -- particularly in Moscow and other major cities -- less so in Kyiv and almost unknown in Belarus.

IFC's privatization project manager in Belarus, Kareem Ahmed, says that's one advantage of living in a virtual police state. "You don't see the levels of corruption and organized crime in Belarus that I've been told exist in Ukraine and especially in Russia," he says, which makes it somewhat easier for private business.

"But on the other hand, there's just so much state control here, it makes it difficult for private business," he says.

Difficult is a word commonly used by business people in all three countries, but so is the concept of hope. As Oleh Bohatko, a young entrepreneur in Zhytomyr, Ukraine put it after reeling off a long list of complaints against the country's business climate: "In the end, it's the only way to go."