Bottom Line: Belarus reinstates an investor-unfriendly rule in order to subdue Russian power in its business.
Analysis: In 2008, the Belarusian government revoked its “golden share” rule that had kept out foreign investment by letting the state overrule decisions made by the managers of private companies. Now it’s bringing this rule back—but the real target is Russia. This is how it worked: Between 1997 and 2008, the golden share rule gave veto power to state representatives sitting on the boards of directors for private companies. So any decision made by the management team of a private company could be vetoed if the state deemed it not in its interest. Needless to say this did nothing to attract foreign investment. For which reason, it was overturned in 2008. Now it’s been reinstated but in a slightly different form.
This time around it applies only to businesses that are partially owned by the state or that used to be owned by the state. This is a bit better, but not much when you consider that this accounts for almost 80% of businesses. What happened since 2008 is the problem: Russian oligarchs. Particularly in the area of mineral fertilizers, Russia is expanding its reach into the Belarusian market through its oligarchs and they are taking over too much control of the country’s economy. The only way to rein them in right now is through the golden share rule.
Recommendation: Stay out of Belarus. Russia has always viewed Belarus as its puppet and its backyard economy, and what the golden share will do most vividly is suppress other foreign investment when Belarus needs it most—it is not likely to translate into control over the Russian tycoons eating up Belarus’ market.