Belarus: A kind of western gate to the Eurasian Economic Union
The Belarusian Ambassador in Austria, Alena Kupchyna, talks about Belarus as a business location, what you have to keep in mind, when it comes to business relations with Belarus, the Northern Silk Road and the must-sees in her country Belarus.
What makes Belarus as an economic location special?
Belarus is a dynamically developing country and has a number of special features and qualities that can be considered as its competitive advantages.
First, our country is situated in the geographical center of Europe between the EU and Russia, at the intersection of important transport routes. Belarus plays an important role as a transit country. About 200 million tons of transit goods are transported via Belarus annually. Nowadays up to 90 % of the total transit volume accounts for trade between the EU and Russia. However in recent years, we witness a steady growth of traffic from China to Europe along the New Silk Road.
Second, in the former USSR Belarus played the role of a kind of assembly plant, where tractors, trucks, machine tools, refrigerators, television sets, etc. were produced from raw materials and semi-finished products supplied from other Soviet republics. From here they were distributed throughout the Soviet Union and exported, mostly to European states. That is the reason why today we have a well-developed infrastructure, rich industrial traditions, strong R & D sector, and highly qualified labor resources.
Third, Belarus offers very favorable conditions for business activities. In the rating of the World Bank “Doing Business 2018”, Belarus takes the 38th place, ahead of many of its neighbors, including a number of EU member states. Hopefully, we will still be able to improve our positions in future. In recent months much work has been done to improve the situation. So, in November 2017 the President of Belarus signed the Decree No. 7 “On the Development of Entrepreneurship”. This document provides for striking changes in mechanisms of interaction between the state and business, minimizes the interference of officials in the work of business entities and strengthens the self-regulation of business, its responsibility towards society.
Fourth, I would like to emphasize the human potential, which, in my opinion, is the basis of any economy. Belarus is included in the group of countries with a high human development index and occupies the 52nd position in the UN rating “Human Development Index” (2016). In the “Global Creativity Index” (2015) our country ranks 37th.
Fifth, Belarus plays a significant role in a number of industries, both in a regional and global context. Thus, our country holds a share of about 30 % of the world market of heavy-duty dump trucks, and 15 % of the world potash fertilizer market. Belarus is among the world’s top ten exporters of dairy products. About 6 % of the wheeled tractors are produced in Belarus.
On top of that, I would like to highlight such factors as political and social stability, relatively low production costs, and the lowest level of corruption in the CIS. The growth of the Belarusian economy is also an important factor. Last year, the GDP grew by 2.4 % and moved up in the first quarter of 2018 reaching 5.1 %.
Which region is currently developing best and why?
The capital city of Minsk demonstrates the highest rate of development. This is due to a number of reasons. A fifth of Belarus’ population lives here. The national airport “Minsk”, the country’s main air gate, is located in the vicinity of the capital. Minsk is a large industrial center and a major production site for trucks, tractors, optical equipment, refrigerators, television sets and radios, bicycles, motorcycles, and metal-processing equipment. Sectors of food processing, pharmaceutical industry, production of textiles, construction materials, computers, electronic and optical equipment, are also well-developed here. The free economic zone “Minsk” is located in the city and its suburbs. The capital of Belarus is also the largest scientific and educational center of the country. The National Academy of Sciences of Belarus, as well as many important educational institutions are situated here. Numerous international events are held in Minsk, and tourism is being actively developed. All these factors predetermine the attractiveness of the capital region for both domestic and foreign investors.
In this context, it should be noted that there are no major differences in the level of development of individual regions of the country. Therefore, many investors are looking not only towards Minsk, but also to other regions. Everything depends on the model and specifics of business of each particular investor.
What should investors consider? Do you have tips and tricks?
European investors interested in starting activities in Belarus should not expect anything exotic, anything much different from what they are used to at home. Belarus is a European country and Belarusians share European approaches to doing business. And Belarus is a close country: it takes only 1.5 hours to reach Minsk from Vienna by air. “Austrian Airlines” fly there twice a day 7 times a week. Moreover, since February of last year, citizens of the EU member states and several dozens of other countries arriving to Minsk through the National Airport can visit Belarus using the 5-day visa-free regime. There are plans to extend the period of the visa-free stay. Austrian businessmen in Belarus quickly discover the proximity of the mentality of Belarusians and Austrians and find a common language with their local partners.
Belarus has a developed bilateral legal framework with most European states, including Austria. My country could be attractive for European investors also as a kind of western gate to the Eurasian Economic Union, which also includes Russia, Kazakhstan, Armenia and Kyrgyzstan. The Union accounts for over 180 million consumers and has the 7th largest GDP in the world. Free movement of goods, services, capital and labor is ensured on the territory of its member states. In addition, Belarus is a participant of the free trade zone of the Commonwealth of Independent States. A number of large European companies recognized this important feature and entered the Belarusian market with projects designed not only for Belarus but for the market of the Eurasian Economic Union and further on for countries of the Eurasia.
I think that the most valuable advice on how to conduct a successful business in Belarus could be given first and foremost by foreign investors working in our country. It could be for example the Austrian wood processing concern Kronospan, which invested about $ 1 billion in its Belarusian projects, the Swiss concern Stadler, which built a large-scale enterprise for trains and trams production near Minsk, and many other companies.
Which customs should one be absolutely familiar with in business relationships?
Belarus is characterized by strong state institutions and the state plays an important role in managing the economy. About 70 % of Belarus’ GDP is generated in the public sector. At the same time I cannot say that the business environment in Belarus, the rules and regulations adopted here differ much from what defines business life in Europe today.
As I have already mentioned, Belarus is a European state. Not only in terms of mentality of the Belarusians, but also from the point of view of rules and standards of doing business. In this respect, Belarus has been able to achieve impressive results in recent years. This is recognized by many international organizations. Referring again to the World Bank rating “Doing Business 2018”, I would like to emphasize that by certain parameters Belarus ranks as high as leading European states. For example, we were able to reach the world’s top five in terms of registering property. Belarus is on the 24th place in such an important category as enforcing contracts. We hold the 22nd place in dealing with construction permits, and we rank 30th both in terms of starting a business and trading across borders. The country continues to work on further improving the framework conditions for business activities. The strategic goal is to enter the top thirty of states with the best conditions for doing business.
What is the new High Technology Park in Minsk and how is it seen by investors?
The High Technologies Park (HTP) was established in 2005 in order to create favorable conditions for the development of software and IT technologies in Belarus with a view to increasing the competitiveness of the national economy.
Over the years, the Park has made remarkable progress. Just imagine – the number of residents has increased from 4 in 2006 to 187 in 2017, while the volume of products produced by the residents of the Park increased from $ 28.2 million to $ 1 billion during this period. Such world-famous products as the messenger “Viber”, the online game “World of Tanks”, the mobile applications “MSQRD” and “Fabby” and a number of others were created by Belarusian IT engineers from HTP.
There are four main IT clusters in Belarus (Minsk, Grodno, Gomel and Brest), where local HTP companies use resources of regional universities. Most of the HTP companies (85 %) as well as HTP Administration are located in Minsk. Unlike other science and technology parks in Europe, HTP uses an exterritorial principle of resident’s registration. It means that the legal conditions adopted for HTP are valid within the whole territory of Belarus. If the company meets the criteria of the Park, then it is registered as a resident regardless of its actual location.
Let me give you a few illustrative facts about the Park. Mobile applications developed by HTP residents are used by more than 1 billion people in 193 countries of the world. Five out of ten largest world corporations (according to Forbes ratings) are customers of the Park. 91 % of the software produced here is exported, of which 49.1% is shipped to Western European states, and 43.2% to the USA. As of 1 January 2018, the Park had 32,600 employees. In 2017, the residents of the Park created more than 5,000 new jobs and attracted roughly $ 200 million of direct investments.
In general, it should be noted that the hi-tech world pays increasing attention to Belarus. Thus, two global IT giants – Google and Facebook – have recently acquired startups created in the Park. Despite the results achieved, Belarus is not going to get complacent.
At the end of 2017, the President of Belarus signed into force the Decree No. 8, “On the development of the digital economy”, which many experts call revolutionary. This document extended the special legal regime of the HTP until 2049, further simplified the conditions for business activities of its residents, legalized ICO, crypto-currencies and smart contracts, and envisioned a number of activities in the field of IT education support. The implementation of the Decree is expected to help achieve a number of strategic goals related to the development of the IT industry and digitalization of the economy. The positive attitude of the business community towards the adoption of the Decree confirmed the correctness of the chosen course. In March 2018 the Supervisory Board of the HTP registered 46 new residents at once. Thus, the number of residents has increased by almost a quarter since the beginning of the year.
Belarus is part of the Northern Silk Road and has founded the China-Belarus Industrial Park. What are Belarus’ objectives with this park? Who are the main investors?
The Belarusian-Chinese Industrial Park, the “Great Stone”, is a special economic zone and an important element of the strategic Chinese initiative Silk Road Economic Belt. The Park was established in accordance with the intergovernmental agreement between the Republic of Belarus and the People’s Republic of China. It is located 25 km from Minsk, close to the National airport. The Belarusian and Chinese sides have put forward their ambitions: to master 112.5 km2 of land, to create 120,000 jobs, and to attract up to $ 30 billion of investment. The Park is expected to be constructed in approximately 30 years. Electronics, biomedicine, fine chemicals, engineering and new materials are among its key priority areas. The CIS countries and the EU states are the main targeted markets. A Chinese-Belarusian joint venture is dealing with attracting investments in the Park, building infrastructure, managing real estate and land.
Today, 26 companies with a total volume of announced investments of $ 1 billion reside in the Park. Most of them are created with the participation of Chinese capital, including such big concerns as Huawei, ZTE, China Merchants Group. The negotiations are underway with more than 50 companies, including those from the EU states. In general, it should be noted that the Park has been attracting significant interest of the European business. For instance, last year the Austrian concern Kronospan and the German company Lanz Manufaktur became its residents. The deal of incorporating the company Duisburger Hafen, which manages the largest river port in Europe, to the founders of the Park development enterprise, was completed some weeks ago.
The Belarusian and Chinese sides are satisfied with the pace of development of the joint project. Considering the attention paid to the Park in Minsk and Beijing, including at the highest level, and the dynamics of the Belarusian-Chinese relations, we are counting on further successful development of this joint venture.
What to look out for on a trip to Belarus?
Belarus as travel destination is distinguished by its great natural beauty, uniqueness of historical and cultural heritage. Our country boasts unique corners of untouched nature, amazing castles and patrimonial estates, beautiful temples and monasteries, fascinating museums and ethnographic villages, native places of famous artists, writers and scientists. Many of the country’s natural sites are considered exclusive in Europe, for instance, Belovezhskaya Pushcha National Park, which is the oldest nature reserve forest in Europe belonging to the list of the UNESCO World Heritage Sites. It is famous for its large population of bisons, which are one of the symbols of Belarus. Belarusian peat bogs are called Europe’s lungs due to their importance for air quality in the Central European region. The Castle in Mir and the Palace in Nesvizh, which are two other UNESCO World Heritage Sites in Belarus, are very popular travel destinations. By the way, our country was called the Land of castles and palaces in the Middle Ages. Due to the historical past, adherents of various religions – Christians (mostly Orthodox and Catholics), Jews, Muslims, etc. have been living in the country for centuries. Their spiritual and cultural values are an integral part of the historical heritage of Belarus and attract tourists from around the Globe. An important element of the program of each tourist’s stay is an acquaintance with the Belarusian cuisine. It has absorbed tastes of different cultures and reflects the generosity of Belarusians.
It is worthwhile noting that people also come to Belarus from all around the world to visit memorable places. There are many such places connected with the tragic events of the First and Second World Wars. For example, during the Second World War the 4th largest (after Auschwitz, Majdanek and Treblinka) concentration camp, Maly Trostenets, was located in Belarus. More than 200,000 people were killed there – civilians, Soviet prisoners of war, Jews – citizens of Germany, Poland, Czechoslovakia, and Austria. Today, an impressive memorial has been erected on the site of the camp, which attracts a lot of foreign and local guests paying tribute to innocent victims of fascism.
In conclusion, I would like to stress that Belarus can really offer a lot. However, in order to get an impression of modern Belarus and its inhabitants I would suggest starting with Minsk. At the same time, I want to note that wherever foreign guests may be in Belarus, they will always feel the openness of the Belarusians, their hospitality and the uniqueness of this country called Belarus.