What's Behind "Sugar" Bosses' Arrests?

The economist gives the main reason.

On February 4, Lukashenka came out with an accusation against the directors of sugar plants, arrested the day before. The reason was fraudulent schemes, allegedly involving the heads of the enterprises. What, according to economist Siarhei Chaly, pushes plant directors to corrupt earnings and how modernization of enterprises is connected with it, Belsat writes.

The sugar factories, whose heads were arrested, were once modernized with government funds. However, despite all measures, the enterprises, with the exception of the Slutsk plant, remain unprofitable.

Siarhei Chaly sees the main reason for this in the ill-considered modernization. It happens according to a scheme, when the state comes to a private factory and offers to carry out modernization. It's out of the question that the owner of the plant doesn't refuse such an offer. The main condition of modernization is that the money allocated by the state should be taken into account as a contribution to the authorised share capital of this enterprise. In fact, the plant becomes a state-owned one.

After the modernization, the sugar factories produce more than is needed for domestic consumption, and there is no sales to Russia either. Only the state support, which they receive for several years, allows enterprises to survive. Especially for them, the prices for raw materials and gas that they work at are reduced by 15%, and the Ministry of Antimonopoly Regulation and Trade artificially limits the prices for products from below.

"The result is that you - no longer the owner of the plant - work at a loss-making enterprise. What is your motivation? There are no profits, no dividends, nothing. And such a difference in prices is the result of the state's thoughtless modernization first, and then - with the help of the state support and various mechanisms - it creates such distortions in the market, which can be used to make money," - Siarhei Chaly explains.

The conditions that encourage corruption are repeated so many times after the modernization of enterprises that they are already predictable.

According to economist Chaly, the main question is whether corruption is an unforeseen consequence of an unreasonable modernization, or just such modernization is a necessary condition for the emergence of schemes for corrupt earnings.