Visiting Belarus visa-free

Presentation by Mr. Alyaksandr Sychov, Deputy Minister of the Foreign Affairs of the Republic of Belarus THE REPUBLIC OF BELARUS AS THE BUSINESS PARTNER. PROSPECTS FOR ECONOMIC COOPERATION

(March 3, 2004, Dusseldorf, Germany, seminar Business in Belarus for European Representatives of Japanese companies)

Dear ladies and gentlemen!

I would like to welcome all of you as the participants of this seminar and to express my gratitude to JETRO for promotion of Belarus-Japan economic co-operation.

Our understanding is that Japanese companies, which are developing business in Western Europe and Russia, have also attractive opportunities to expand their beneficial activities into the territory of Belarus. Such an idea could be considered especially vital, having in mind direct approach of the European Union to the Belarusian border after the 1st of May this year.

The matter of priority for Belarus is to establish long-lasting and mutually advantageous economic ties with your country. I believe that the present seminar can provide a good impetus for Japanese businessmen to consider Belarus as a perspective partner.

My presentation will be focused on several important aspects, including bilateral relations, country’s economic potential, investment and business climate in Belarus, governmental policy and legislature in this sphere.

The Republic of Belarus attaches particular importance to the development of comprehensive relations with Japan which is a member of the G–8 and one of the most powerful economies in the world.

We are interested in bringing further and raising the level of bilateral political contacts. In this respect the Belàrusian side highly assesses the scope of co-operation achieved between the ministries of foreign affairs as well as between the parliaments of the two countries.

Besides, our governments are doing its best to facilitate closer contacts between the people of the two countries. In this respect mutual steps undertaken to simplify visa procedures will contribute to further development of exchange on the level of business and public circles of Belarus and Japan.

Our countries are developing trade and economic co-operation, which, unfortunately, we can’t be estimated as satisfactory. The Belarusian side is interested in increasing the volumes of such co-operation, including the expansion of high-tech exports from Belarus to Japan, attraction of Japanese investments and joint activities on the third markets, using Belarusian products and financial resources of the Government of Japan.

Traditionally, the main part of Belarusian export to Japan is presented by glass fiber, optical and measuring instruments and equipment, lasers for scientific and industrial purposes, lenses, prisms, electronics, food products, like thickened and dried milk.

Belarus imports from Japan machine-tools, manufacturing and laboratory equipment, cars and accessories, optical instruments, computers and road-constructing equipment.

In the year 2003 Belarusian export to Japan was equal to 2,4 millions US dollars (61% growth), import from Japan – 39,2 millions (44% growth). Total turnover of 41,6 mln. USD is really not an encouraging figure.

As a successful example of investments, made by Japanese companies in Belarus, for the moment only two joint ventures with “Tokyo Instruments” are worth mentioning. These industrial-scientific enterprises have annual trade turnover of only one million US dollars and are doing first but very successful steps in high-tech business.

General investment co-operation between our countries is still very week, and we should together do something about it.

The Government of Belarus highly estimates the development of interaction with Japanese authorities, including JETRO and ROTOBO (Association for trade with Russia and Eastern European countries), which possess unique resources, opportunities and experience to promote both international and bilateral economic and trade co-operation in various areas.

I believe that we can expand further the scale of our contacts. The Belarusian side is interested in arranging regular exchanges between representatives of businesses of the two countries and in establishing direct channels for the dissemination of information on promising areas of bilateral economic relations, including those by means of national exhibitions of commodity producers.

In my opinion it’s important to continue the practice of visits to Belarus by experts of JETRO, interested Japanese organizations and companies to study the perspective branches for co-operation.

Talking about Belarus-Japan ties, I would like to express my heartfelt gratitude for the comprehensive assistance, rendered by your country to Belarus to minimize the consequences of the Chernobyl disaster. I am really glad to mention that a number of Japanese businesses are participating in this noble activity, too.

The leadership of Belarus also welcomes the decision by the Government of Japan to grant assistance to Belarus within the framework of the “Kusa-no Ne” (grassroots) program. To start its practical realization we need only to co-ordinate some technical details. I do hope that in the nearest future both governments will manage to develop the most effective mechanism of co-operation in the humanitarian area.

This information was to show to you present level of co-operation between our two countries.

Ladies and gentlemen,

Belarus is one of the most economically developed CIS member-states. In 2003 GDP growth in Belarus came to 108,2 percent. And we are proud that due to almost 6-years period of stable growth the Belarusian economy has managed to overcome negative consequences of the crises in early ninetieth.

About one third of the national product is created by industry. Industrial output last year reached 111,3 percent, comparing to the year 2002.

Among the leading branches we have automobile, tractor and agricultural machine-building, production of machine-tools and ball-bearings, electrical engineering industry, oil extraction and processing, production of synthetic fibers and mineral fertilizers, pharmaceutical industry, production of construction materials, light and food industries. A specific feature of the national industry of Belarus is the manufacturing of finished goods, most of them are being exported. Thus the export comprises more than 60 percent of GDP.

Machine-building and metal processing are the leading industries of the Republic of Belarus. The branch structure of machine-building is manifold and consist of electrical engineering industry, machine-tool building, production of devices and instruments, automobile industries, manufacturing of tractors, agricultural, road and communal machinery, machines for light and food industries and production of consumer goods.

Belarus specializes in trucks manufacturing. In the recent years a breakthrough has been made in this field, related to the production of trucks, buses and special machinery. The enterprises of this industry can manufacture special machines with up to 220 tons load-carrying capacity. Our “BELAZ” company is a world-known competitor of “Kamatsu”.

The volume of production has increased; the product quality is constantly improving. The “Minsk Automobile Plant” itself manufactures over one hundred modifications of trucks. This is the only enterprise in the CIS, which produces long-distance articulated trucks meeting EURO-2 and EURO-3 requirements.

The radio and electronics industry of Belarus is concentrated on production of computers, mobile automatic control systems, optical devices, communication means and systems, aviation equipment, telemetric equipment, other electronic articles, elements of armaments and military machinery. It is mainly due to that reason that most enterprises of radio engineering and electronic branches of industry possess a well-developed production potential, highly qualified labor force and staff of engineers and technicians. The “INTEGRAL” production amalgamation supplies its semiconductors and integrated circuits to most destinations of the world, where the electronic industry is functioning. Due to the joint efforts of Belarusian and Russian scientists one of the most powerful supercomputers was created last year.

The optical-mechanical industry in the past was, in fact, part of the defense complex. This industry continues to manufacture products designed for military or dual purposes, but mostly is oriented towards civil applications. The industry includes 10 high-tech enterprises manufacturing science-intensive products, including those for aerospace exploration purposes, day and night sightseeing devices, laser medical equipment, etc.

The electrical engineering industry includes 16 enterprises manufacturing different products: cable and conductor products, asynchronous motors, power and low-power transformers, low-voltage equipment and devices, lighting products, elevators and lifting equipment, electronic start-regulating equipment, contact-free switches, power semiconductor devices and rectifying units on their basis, and motor control systems. Elevators of “Mogilevliftmash Plant”, for example, are used in 12 countries around the world, including the spaceship launching complex Baikonur.

The leading enterprises of Belarusian petrochemical complex were commissioned in seventieth with the participation of specialists from England, Germany, Japan, Russia, USA and other countries. During later periods the operating production facilities were reconstructed more than once, and equipped with the newest national and up-to-date foreign equipment. All this allows us to produce high-quality chemical products in permanent demand in many countries of the world. Such Belarusian products as chemical fibers and threads, glass fabrics and polymer materials, chemical fertilizers, tires, lacquers and paints are of great demand and exported to many countries of Europe, America and Asia.

In recent years the light industry of Belarus saw great development. The leading role here belongs to textile, clothing and footwear industries. They are oriented to production of a rather wide range of products: various types of threads, yarn and fabrics of flax, cotton, wool and synthetic materials; carpets and carpet articles, non-woven materials, knitwear, socks and stockings, ready-made garments, corset articles, products from natural and artificial leather, artificial and natural fur, footwear, etc. Most of industrial enterprises of light industry are trading actively with foreign countries on the basis of technology and production co-operation.

Almost half of the territory of Belarus is agricultural land. State-run farms are the main producers of agricultural goods. The natural conditions of the Republic of Belarus make it possible to produce such highly profitable types of food products as milk, beef, pork, eggs, grain, potato, flax, etc. Great attention is paid to the technical retooling of the industry in order to expand the export opportunities of the agrarian sector.

The recent growth of food production has allowed increasing of its export. Products are supplied mostly to the CIS countries (over 80%) and about 17% to other foreign states. Belarus exports milk, meat and confectionery, canned fruits and vegetables, alcoholic and soft drinks, brewery malt, endocrine raw materials, salt, etc.

At the same time we import food products from more than 30 countries of the world. Imported products mostly include fruits and vegetables from southern regions, sugar, vegetable oil, wine, cognac, fish and fish products, tea, coffee, spices as well technological equipment for food industry sectors.

The transport complex of the Republic of Belarus is exclusively important for the economy of the country. Belarus is the main transit route from Europe to Russia, form West to East. Transportation of cargo and passengers in the Republic of Belarus is made by six types of transport: motor, railway, air, water, urban electrical (trolley-buses, trams and metro) and pipeline transport.

The forestry complex of the Republic of Belarus unites the sectors and production facilities, connected to the reproduction and protection of forest resources as well as to stockpiling, mechanical, chemical-mechanical and chemical processing of raw timber and waste (forest, woodworking and wood-pulp and paper industry). It includes about 5 thousand enterprises and production facilities with different forms of property (including over 470 large and medium-scale enterprises) with over 146 thousand employees.

Belarus possesses a highly developed scientific potential. At the Academy of Sciences of the Republic of Belarus, at the Belarusian State University, at scientific and research institutes applied and fundamental research work is conducted in the fields of quantum electronics, solid-state physics, genetics, chemistry, powder metallurgy and other leading-edge areas. Our research organizations are interested in fulfilling joint science-intensive projects using Belarusian technologies, in licensing of the works of Belarusian scientists and conducting research on a contract basis. Of special interest can be application research projects in chemistry, information and laser technologies, genetic engineering, advanced methods of animal breeding, improvement of machine reliability and durability, powder metallurgy and others. Certain progress has already been made in co-operation with foreign partners in some of these areas.

The above mentioned spheres of national economy is a good potential, which could be used by foreign investors for mutually beneficial co-operation with Belarus. This is not a secret that we need investments and new technologies to provide economic development and growth.

Structural transformations in the economy.

The Republic of Belarus stands on the road of building a democratic society with market economy. Lately in Belarus entrepreneurial structures have been consequently developing; denationalization of financial and banking spheres have been completed; the market is being saturated with goods and resources of local production by enterprises of all property forms, and with imported goods.

Reformation of the economy of the Republic of Belarus goes along several directions, including reorganization of state-owned enterprises, denationalization and privatization of the objects of state property, establishment of equal conditions for operation of enterprises and organizations of various property forms, step-by-step liberalization of economic activities, provision of freedom of entrepreneurship in combination with application of some state regulation, as well as the establishment of favorable, corresponding to the world practice, conditions to attract foreign investments.

Reformation of the state property is an important part of the structural reform of the economy in the Republic of Belarus. By the year 2003 the number of the staff in the state-owned sector of the economy comprised about

57 percent of the total employment. The share of private sector in the total industrial output stood for 40 percent, in retail business this share was up to

78 percent, in the overall GDP – 25 percent.

According to the EBRD estimates, Belarus last year has entered the group of the countries, which completed the major part of privatization. That means privatization of two thirds of the communal property.

In future, the privatization of small state-owned facilities will prevail. The reformation of middle-size entities will be conducted by transforming them into open joint-stock companies followed by sale of state shares to investors, including foreign ones. The process of privatization of large enterprises will be carried out on a case-by-case basis by their incorporation according to the availability of investment projects (including those, which involve foreign long-term investments).

Market reforms.

The policy of privatization and transformation of public property in Belarus is based on two main principles: growth of production efficiency through gradual and balanced reforms, consideration of the social factors. In the public property reforming the Government of Belarus is strictly following the fact that accelerated transformation of public enterprises into non-governmental economic entities may result in a sharp reduction of personnel and social tension in the country. The Government of the country sticks to this approach and does not force processes of reformation of public property. This careful approach makes it possible to check one’s actions against the changes taking place and prevent social shocks in the country.

During the period up to the year 2005 it is planed to complete, for the most part, privatization of unprofitable enterprises and enterprises with the number of staff up to 200 persons, to conduct destatization of large industrial enterprises and, above all, enterprises of the petrochemical complex involving foreign investors, which will serve as a transition stage to a large-scale privatization in the future. Facilities of priority privatization in the country include also services and trade sectors, small enterprises and significant part of medium-size enterprises of the agribusiness and the construction complex.

Discussing the guarantees of investors’ rights and investment protection in Belarus, I would like to outline the following.

In May 2002 the Belarusian government has approved the National Program on Investment Attraction along with the Investment Code to prepare a set of measures towards improving the investment climate. Thus, implementing the Plan, the Government has decreased the number of licensed businesses, introduced application-based order of registration, improved the system of privatization, further develop the stock exchange market, higher responsibility of officials for taking decisions, harmful for foreign investors. The Investment Code has outlined priority rights, obligations and stable conditions for foreign investor’s activities in Belarus.

National treatment.

Foreign investors in Belarus really enjoy equal treatment with local entities under the Investment Code of the Republic of Belarus, which was adopted in 2001 and replaced the Foreign Investment Law of 1991. The Government guarantees equal rights to all investors engaged in investment activity regardless of the form of ownership, as well as equal, discrimination-free protection of the rights and lawful interests of investors.

Stable legislature.

The state guarantees stability of the rights of the subjects of investment activities. According to the Investment Code in case Belarusian legislation, adopted after the creation of a commercial entity with the share of foreign investor, impairs the situation and business conditions for foreign investors and commercial organizations with foreign investment, i.e. in case additional or increased obligations are imposed thereupon or in case of a limitation or suppression of investor’s rights, for a period of five years the legislation in effect at the date of registration of the commercial organization with foreign investment shall be applied to the foreign investor, commercial organization with foreign investment, and/or foreign investments.

Investments Protection.

Investments in Belarus are immune from nationalization without consideration, requisition, and measures equivalent to nationalization and requisition in terms of their consequences. Nationalization and requisitioning shall only be possible subject to the timely and full compensation of the cost of the nationalized or requisitioned investment assets and other damages caused as a result of nationalization or requisition.

Compensation payments with regard to nationalized or requisitioned investment assets shall be equivalent to the real value of the said assets at the moment immediately preceding the nationalization or requisition, or the date of the public announcement of the nationalization or requisition. Moreover, compensation payments to domestic investors shall include interest calculated on the basis of the appropriate currency as quoted by the National Bank of the Republic of Belarus, and compensation payments to foreign investors shall include interest payments calculated on the basis of the LIBOR rate, with respect to the period between the date of nationalization or requisition or the date of the public announcement to that effect, and the date of remittance of the compensation amount.

As of February 2004 Belarus has concluded 48 bilateral investment agreements with foreign countries.

In February 1994 and March 1996 Belarusian side has transferred for consideration of Japanese side drafts bilateral agreements on trade and economic co-operation as well as on encouragement and mutual protection of investments. But the understanding of the Japanese government is that we should first do some practical co-operation and then to create legal basis for that on bilateral basis.

Guarantees against unlawful actions (inaction)

of government bodies and their officials.

Investors in Belarus enjoy the right to appeal to the court against actions (inaction) of governmental bodies or their officials and local self-governance bodies or their officials, as well as regulations issued by the government bodies of the Republic of Belarus or local self-governance bodies, in the event that the said actions or regulations infringe upon the investors' rights or cause them losses or other damages. Damages, including losses incurred as a result of actions by government bodies or their officials and local self-governance bodies or their officials, or as a result of regulations issued by government bodies of the Republic of Belarus or local self-governance bodies, shall be compensated for from the appropriate treasury according to a court order.

Guarantees on the utilization of the results of investment activity

Foreign investors are guaranteed the right (following the payment of all taxes and other mandatory charges as established by the legislation of the Republic of Belarus) to repatriate to locations outside the Republic of Belarus any profits (earnings) received as a result of investment activity in Belarus, as well as any proceeds from the full or partial sale of invested assets upon the termination of investment activity.

Activities of foreign companies and joint stock ventures in Belarus

According to Ministry of Statistics of Belarus, the number of commercial entities with foreign investments, reregistered by the year 2003, constituted more than 2600 enterprises. During the last three years Belarus has attracted more then 4 billions of direct foreign investments.

Mentioning this figures, I would like to give some specific examples of foreign businesses investing successfully in Belarus. These are truly success stories of international co-operation.

"MAZ-MAN" Joint Venture - After ten years of successful co-operation the enterprises "MAN Nutzfahrzuege AG" and "BelavtoMAZ" has decided to create a joint venture for the production of a range of modern, technically competitive, high-quality trucks. "MAN Nutzfahrzuege AG" has percent of shares, Belarusian partners– 49 percent.

From the beginning the charter capital was formed in amount of 7 mln. USD. "MAN Nutzfahrzuege AG" quota today is 2.8 mln. USD.

Assembly shops with modern equipment, storage places and an administrative building are situated in the productive area (the contribution of MAZ to the charter capital). Currently 103 people work at the enterprise

(62 workers, 41 - operating staff).

Today you can say that the administration of "MAZ-MAN" JV did manage to realize new organizational technologies, using Western conceptions in local economic conditions. German partners have taken an active part in the realization of this project, sharing business experience, "know-how", supporting technical development of the enterprise, introducing new ideas into the production management sphere. German specialists are sharing their experience in the creation of flexible production and administration technologies.

"MAZ-MAN" JV became the first enterprise in the Republic of Belarus producing truck tractors of European class, which meet all the technical rules and ecological regulations, including UN norms on the levels of exhaust fumes and noise.

The Coca-Cola company. “Coca-Cola HBC S.A.” is principally engaged in the bottling and distribution of soft drinks and alcohol-free beverages under franchise from The Coca-Cola Company. “Coca-Cola HBC S.A.” is incorporated in Greece and is listed on the Athens Stock Exchange, with secondary listing on the London and Sydney Stock Exchanges.

“Coca-Cola HBC S.A.” is Europe's biggest alcohol-free beverage company and the world's second largest bottler in the global Coca-Cola system. More than 400 million people live in the 23 countries and territories covered by the “Coca-Cola HBC S.A.” operations, and about 30,000 employees produce and deliver more than a billion cases of alcohol-free beverages each year.

“Coca-Cola Beverages Belorussiya” is a part of “Coca-Cola HBC S.A.” and covers the territory of the Republic of Belarus with operations started in 1994. “Coca-Cola Beverages Belorussiya” has the right to produce, pack, distribute and sell specified beverages of The Coca-Cola Company, principally Coca-Cola, Fanta, Sprite and Bonaqua within the territory of the Republic of Belarus. “Coca-Cola Beverages Belorussiya” also continues to make available the non-premium carbonated brand Fruktime. The business infrastructure is substantial due to about 60 million US dollars invested in the business, making it for the moment one of the largest foreign investment in Belarus. “Coca-Cola Beverages Belorussiya” operates a modern plant, has a fleet of 200 vehicles and utilizes in excess of 7,000 pieces of cold drink equipment. The organization is firmly focused on delivering superior service and quality products to customers and consumers wherever they are and on further developing the local market in close partnership with The Coca-Cola Company. The “Coca-Cola HBC S.A.” mission is clear - to refresh local consumers, partner with customers, reward shareholders and enrich the lives of the local community.

“Coca-Cola HBC S.A.” plays an important role in the Foreign Investment Co-ordination Council newly established in Belarus, and similar bodies in both Russia and Ukraine.

With the established business infrastructure and 7 years of experience of operating in the local environment, “Coca-Cola HBC S.A.” has a considerable opportunity to further develop their business in Belarus.

‘Golden Share’ rule.

Some foreign investor going to Belarus are afraid of “golden share rule”. But on practice this rule is applicable only to the state-own enterprises being privatized with the participation of private investor, including the foreign one.

On January 16, 2004 the President of the Republic of Belarus Alexander Lukashenko held a meeting to discuss the issues of applying a state's special right, the so–called `golden share,' for participating in the management of economic entities.

The `golden share' right was first applied to save the Komunarka Confectionery whose workers repeatedly appealed to the Head of the State asking to help get rid of the disastrous situation that enterprise found itself in after having been turned into a joint stock company.

The Belarusian leader recalled that the `golden share' right is used only as a mechanism for protecting interests of the state, the society and social rights of the workers, and in very rare cases — only 22 such cases have been dealt with since 1997.

The draft decree caused a lively discussion at the meeting held by the Head of State. Different opinions were expressed, including suggestions to restrict the `golden share' right and to declare a moratorium on its application. Some people believed that it prevents foreign investments.

The President recalled that almost USD 4 billion of our own funds were invested into the Belarusian economy. “I am confident that we can make even greater investments of our own funds for the development and modernization of our economy and enterprises, and they will be ours, they will be protecting interests of our state and our people,” said Alexander Lukashenko.

In this connection the President demanded forcible arguments, which could demonstrate the need to cancel the `golden share' right. “Can we guarantee that as soon as it is done there will be no negative consequences at the enterprises, like wage arrears and humiliation of workers? Do you indeed believe that if we do it, investments will flood us?” asked the President.

The Head of the State gave specific directions for finalizing the Draft Decree with a view to exclude eventual abuses both from authorities and from dishonest managers of economic entities who deliberately plunge their enterprises into a deplorable state.

Procedure of registration of enterprises with foreign investments.

When an investor is going to set up some business in a country he has to follow a certain procedure. As regards Belarus, the following rules and regulations are currently in force.

Enterprises with foreign investments may be organized as joint ventures (with participation of a Belarusian participant) or a foreign enterprise (totally owned by foreign investors). In conformity with the provisions of the Civil Code legal entities (commercial organizations) may be set up as economic partnerships and companies, production co-operatives and unitary enterprises.

The state registration of an enterprise with foreign capital should be made within 15 days from the day when the application and all other documents required was submitted. If additional data is needed, the registration body has the right to extend the term of the state registration to two months by informing of this the property owners (the founders, the participants) of commercial organizations.

The state registration of enterprises for the performance of predominantly production activities is performed in the manner of priority.

Denial of the state registration of an enterprise with foreign investments on the motives of inexpediency of its formation is not allowed.

The authorized capital of the enterprise with foreign investments as declared in the foundation documents must be formed by at least 50 per cent during the first half year as from the day of state registration of the enterprise by transferring to it, by each participant, at least 50 per cent of its share, and in the full amount - before two years expires after the day of registration.

In exclusive cases the established time for formation of the authorized capital may be changed by decision of the Ministry of Foreign Affairs.

More detailed information on the legislation of the Republic of Belarus can be obtained from the Internet site of the National Center of Legal Information (http://www.ncpi.gov.by)

The procedure for opening and activity of the representative

offices of foreign firms and organizations.

The procedure for opening and activity of the representative offices of foreign firms and organizations is defined by the decision of the Council of Ministers of the Republic of Belarus.

The opening of the representative offices of foreign firms (organizations) is supervised by the Ministry of Foreign Affairs of the Republic of Belarus. The representative office of a foreign firm is not considered to be a juridical person and does not have a right to perform independent economic activities in the Republic of Belarus.

A permission for the representative office opening is given for 3 years with the possibility of prolongation of the term.

Acquisition of real estate by foreign citizens.

In the conditions of the developing real estate market the National Real Estate Center has been set up in Belarus. The main tasks of this Center include: organizing of the single technological system and preparation of the legislative framework for assessment and registration of real estate in the Republic of Belarus, the right to real estate and transactions with such property, as well as organizing the single real estate cadastre. The agency market in this field has been developing rapidly. In 1994, the Belarusian Guild of Real Estate Experts was set up. At present, over 200 officially registered enterprises and organizations dealing with real estate have been formed.

The legislation of the Republic of Belarus provides for organization of contests and auctions for selling state owned facilities (enterprises, structural units of enterprises, equipment, buildings, installations, etc.). Foreign investors are allowed to take part in such contests and auctions (foreign states, associations, international organizations, foreign legal and natural entities, as well as citizens of the Republic of Belarus who have their permanent residence abroad) provided they submitted in time an application for participation in contests and auctions, paid according to the established procedure pledge money, the special fee for submission of the application, paid for registration and submitted other required documents.

The land legislation of the Republic of Belarus does not provide a possibility for acquiring lots of land by foreign citizens as their property. At the same time, legal and natural entities may become leasers of land for up to 99 years.

Peculiarities of taxation of free economic zones

residents of the Republic of Belarus.

At present there are six free economic zones (FEZ) in Belarus:

FEZ "Brest", FEZ "Minsk", FEZ "Vitebsk", FEZ "Mogilev", FEZ "Gomel-Raton", FEZ "Grodnoinvest".

A free economic zone - is a specified territory of Belarus with precisely fixed borders and a specific law order, establishing more favorable conditions for economic activity for FEZ residents.

FEZ residents' registration is performed by FEZ administration on competition basis taking into the account the amount of investments, the necessity to create industrial and social infrastructure on the condition that FEZ residents are accommodated on the FEZ territory.

FEZ resident is a legal entity or an entrepreneur registered by FEZ administration and liable to a special FEZ law order that includes specific taxation order; currency, customs and other regulations.

The specific law order has restrictions. Thus, in FEZ "Brest" gambling business, in FEZ "Minsk", "Vitebsk" and "Gomel" public catering are not liable to it. In FEZ "Mogilev" and "Grodnoinvest" the production and realization of exported goods and services as well as replaceable import goods and services experience specific law order according to the list approved by the Government of Belarus.

The tax system of the Republic of Belarus is rather dynamic and constantly evolving towards optimization of relationship between the taxpayers and the state.

The contemporary tax system of the Republic of Belarus provides for payment of taxes by persons and economic entities.

Legal entities in the Republic of Belarus pay the excise tax, the value-added tax, the extraordinary tax for liquidation of the consequences of the catastrophe at the Chernobyl NPP, the tax for the use of natural resources (ecological tax), payments for land, the state duty, the fee for the use of general-use motor roads, the tax for transit across the territory of national parks and reserves, the tax on real estate, the income tax, the tax on dividends, and make other deductions to funds.

Enterprises with the share of a foreign investor over 30 percent have a number of privileges on taxation.

Individual entrepreneurs pay the income tax, the value-added tax, the excise tax, the ecological tax, deductions into the social protection fund for the population and the fund on assistance to employment as well as other taxes in conformity with the current legislation.

Natural persons in the Republic of Belarus pay the income tax, deduction to the social protection fund for the population, the tax on real estate, the land tax and other payments.

Within the framework of economic relations liberalization the Government of Belarus has been taking measures in order to strengthen the stimulating role of taxes, to ensure a step-by-step reduction of their number, and to simplify collection mechanism. To lower the tax burden on the economy, the rate of profit tax was reduced from 30 to 24% as from 1st of January, 2002.

On 19 December 2002, the House of Representatives of the National Assembly of the Republic of Belarus passed the first (general) part of the Tax Code of the Republic of Belarus (in the first reading). It is planned that the second and third parts of the Tax Code of the Republic of Belarus will be considered by deputies at the coming spring session of the House of Representatives of the National Assembly of the Republic of Belarus.

Tax privileges.

The profit tax shall not be collected during three years from the time, when the profit is declared, including the first profitable year, from profits of enterprises with foreign investment when the share of the foreign investor in the authorized capital is over 30 percent, when such profits is received from sale of products (work or services) of their own manufacture, except for trade and trade and purchase activities.

The right to this privilege may be exercised by the enterprise when it received from the Chamber of Commerce and Industry of the Republic of Belarus the document confirming that these products (work or services) are products (work or services) of their own manufacture and if each participant has formed, during the year from the day of registration of the authorized capital, at least 50% of the amount stipulated by the documents of foundation and 100% before two years expire from the time of registration.

If enterprises with foreign investment manufacture products that are very important for the Republic, then the Government of the Republic of Belarus has the right, according to the list set by it, to reduce the tax rate on profits up to 50% for another period up to three years. However, if an enterprise with foreign investment is liquidated during the period of tax holidays or during three years after the completion of the period of tax holiday, then the enterprise is to pay the tax on profits for this period when it had tax holiday.

An enterprise with foreign investment has the right to form its reserve fund by reducing the balance profits by the amount of deductions into the reserve (insurance) fund in the amounts established in its foundation documents, but by not more than 25% of the actual formed authorized capital.

Taxable profits of joint and foreign enterprises is to be reduced by the amount of the profit used for financing capital investments for production purpose and housing construction as well as for repay of banks' credits received and used to these purposes.

Customs regulation and duties.

Legislation of the Republic of Belarus on customs consists of the Customs Code, Law on Customs Tariff, and other legislative acts of the Republic of Belarus.

Any goods transferred across the customs border of the Republic of Belarus are liable to duty in accordance with the Law on Customs Tariff. Rates of customs tariffs for goods imported to the customs territory of the Republic of Belarus have been approved by the Council of Ministers. The legislation provides for granting tariff preferences within the General System of Preferences for any goods imported from developing countries (a reduced rate of 75%) and from the least-developed countries (not dutiable).

VAT (value-added tax) and excise duties are applied to any goods imported to/exported from the customs territory of the Republic of Belarus in compliance with the Customs Code and tax legislation of the Republic of Belarus. Rates of VAT and excise duties applied to goods subject to excise have been established respectively by the Law on the value-added Tax of 1991 and the Decision of the Council of Ministers of 1998 with the appropriate amendments and additions.

On 6th January 1995 the Republic of Belarus signed an Agreement on the Customs Alliance between the Republic of Belarus and the Russian Federation, which the Republic of Kazakhstan and the Kyrgyz Republic joined later. The contracting parties have agreed to treat the Customs Alliance as an economic association of states based on the following principles:

- a common customs territory for Customs Alliance members;

- unified mechanism of regulating the economy based on the market concepts of management and harmonized legislation.

Close co-operation has been maintained within the Alliance between Belarus and Russia. In particular, customs duties and quota restrictions have been cancelled, there is no customs inspection on the Belarus/Russia border and work is underway on harmonizing national legislatures, regulating foreign economic activity.

Main objectives and current state of accession

of the Republic of Belarus to the World Trade

Organization (WTO).

The Republic of Belarus began to negotiate its accession to the World Trade Organization in 1993 when the GATT has established a Working group on Belarus’ accession. Since then a considerable amount of work has been done by over 30 ministries, committees and other government agencies involved in the process of adjusting the country’s foreign trade regime to the GATT/WTO standards.

In the negotiation process the Belarusian side is guided by the principle of providing an adequate protection of the economic interests of the country after accession to the WTO.

The co-ordination of the accession process falls within the responsibility of the Intergovernmental Commission on the Accession of the Republic of Belarus to the WTO. Deputy Prime-Minister, is the Head of the Commission.

From 1997 through 2004 five working rounds of multilateral negotiations were held with the WTO Member-States, in the course of which the basic elements of the foreign trade regime of Belarus were brought under discussion. Furthermore, position of Belarus during negotiations on market access was drafted and subsequently reviewed in the WTO format of the revised offers on goods and services. Finally, an intergovernmental framework for broad-ranging consultations within the Customs Union, as well as with the Russian Federation on a bilateral basis, has been developed in order to co-ordinate economic integration with the WTO accession.

Belarus has carried out a number of bilateral negotiations on goods and services with over 20 WTO Members in 2000-2003. The results of these negotiations will determine the terms of market access conditions for goods and services in the form of commitments of Belarus, including on the level of domestic support and export subsidies in the agricultural sector.

Taking into consideration the opening of the new WTO round of multilateral trade negotiations, the Belarusian side also expresses hope for further cooperation with the WTO Members within the framework of the Doha Development Round, including on issues pertaining to Belarus’ accession to the WTO, with a view to obtain full-fledged WTO membership before the formal closure of the Round.

The main objective of the current work in the framework of negotiations is to bring the foreign trade regime of the Republic of Belarus into conformity with the WTO requirements.

To this effect, the Legislative Plan of Action “On Bringing the Legislation of the Republic of Belarus in Compliance With the WTO Rules” was adopted by the Government and National Bank of the Republic of Belarus on 21 August 2002. The Plan provides for elaboration of new legislative acts and introduction of amendments to the legislation in force in the light of WTO rules with respect to the following spheres: non-tariff regulations including alcohol and tobacco products; customs duties and valuation; currency regulations; technical regulations and standards; safeguard measures; sanitary and phytosanitary measures; tax system, subsidies and privileges; state agricultural support; protection of intellectual property, etc.

In 2001 an Inter-agency Working group on legislative issues was established with the purpose to ensure transparency in the process of Belarus accession to the WTO and full participation of the business community, academic circles and relevant commissions of the National Assembly of the Republic of Belarus in the elaboration of legislative proposals.

In 2002 the Ministry of Foreign Affairs and the National Academy of Science of the Republic of Belarus signed the Agreement on scientific co-operation that provides for the preparation of the complex research of the social and economic implications of Belarus accession to the WTO.

In 2002 - 2003, the Ministry of Foreign Affairs has carried out over

30 meetings with different unions and producers' associations to discuss the position of the Republic of Belarus at the negotiations. Regularly, advisory meetings are held with the Belarusian Research and Industrial Association, the Belarusian Chamber of Commerce, the Belarusian Union of Entrepreneurs and Employers and other professional associations.

The co-operation with the International Trade Center (ITC WTO/UNCTAD) has lead to conclusion of the Agreement on participation of Belarus in the "World Trade Net" program.

Thus, I’ve presented most important issues of the business climate of the Republic of Belarus, trying to convince you that my country is doing its utmost to expand comprehensive co-operation with foreign partners.

I consider the potential of Belarus and its favorable conditions for developing businesses, along with strategic geographical location, are the major factors to expand mutually beneficial co-operation between our friendly countries.

To conclude, I would like to emphasize that the Republic of Belarus will continue pursuing the consistent investment policy by implementing the relevant measures for raising investments in the economy and ensuring the protection of the investors’ rights.

You can find additional information about Belarus, including the list of perspective investment projects and general legislative regulations, in the materials available.

Thank you for your attention!

Welcome for co-operation with Belarus. I do hope to meet most of your companies in Belarus during practical negotiations.

I am ready to answer any questions that you may have, regarding this report.

My colleagues, I am sure, will add some useful information for your consideration with respect to co-operation with Belarus.