Whether foreign investments will flow into Belarus

The head of the country and government has set a task to improve the investment climate and to become one of the 30 countries in the world that should have the most attractive business conditions. About 40 legislative acts were adopted in 2008 and they improved the business climate. For instance, one of the most important changes in the business climate improvement became the abolishment of a “golden share” institute which has been permanently heavily criticized by the international organizations and foreign companies. In the opinion of such organizations and companies this institute was on the way of the attraction of the inflow of the foreign capital.

The country has moved up by 30 positions according to the Direct Foreign Investment Efficiency index: from the 125th place in 2006 to the 95th in 2007. The improvement of the business climate was reflected in the World Bank report “Doing Business - 2009”. Belarus has reached the 85th place in the 181 countries’ rating in relation to the conditions for doing business and occupied the 4th place among other countries in the rating of business reforms. A Belarusian Advisory Committee on Foreign Direct Investment headed by the Prime Minister Sidorsky has been established.

Territories in Belarus with preferable investment conditions, the so called “Free economical zones”, and a High Technology Park have been created. A number of preferences and benefits were given to enterprises in small and medium towns. Business community has an intention to attract foreign investors to take part in business development of Belarusian towns where there are the most favourable conditions for doing business. Two towns, Lida and Krichev, won an active PR right as a result of a competition.

Why Belarus is attractive for foreign investors?

Official data of the Ministry of Foreign Affairs shows that the “annual investment growth” doubles the growth of the GDP. The overall investment into the main capital has tripled in the past ten years.

The investment climate in Belarus becomes more liberal, which is confirmed by the fact that foreign investors came to the country. For instance in 2006 the Austria Telecom started operating in Belarus. Other Austrian and German companies expressed desire to take part in tenders on buying Belarusian enterprises. Their names have not been disclosed yet.

Potential investors may be attracted by the relatively cheap manpower, almost lacking in Europe. Moreover Belarus has very strong intellectual potential, i.e. highly educated experts. Among other advantages are comparatively low crude expenses, developed infrastructure, beneficial geographical position and large growth potential.

Often one may ask a question: why has the country that is called “the last dictatorship in Europe” stopped being an “outsider”, why do the foreign companies’ representatives often fail to see the absence real democratic changes in the country? A representative of a consulting company “Attorney-at-law Sorainen” Pekka Puolakka is convinced: “I wouldn’t say that democracy of a country is an important condition”. As an example he recalled China, where all world producers are doing business.

Figures only…

In 2008 the income from foreign investments into the real economy sector of the Republic of Belarus was 6.5 billion dollars (compared with 2007 there was an increase by 1.2 times ). Among the largest countries-investors are: Russia (2,167 mln US Dollars, 33.2%), Switzerland (1,225.4 mln US Dollars, 18.8%), Austria (739.8 mln US Dollars, 14.5%), the Great Britain (713.9 mln US Dollars, 10.9% ), Cyprus (555.7 mln US Dollars, 8.5%).

According to the Deputy Minister of Foreign Affairs of Belarus Andrei Eudachenko, out of the foreign investments input in 2008, the EU share was 2.8 billion US Dollars which made 46% of the total amount of the foreign investments.

In 2008 there were 4218 organizations with foreign investments operating in Belarus. The most successful are: “KK Beverage Holdings IIB.V” (the Netherlands); “Henkel Gmbh”, “ATEK Holding Gmbh”, “Mobilcom Austria Group”, “Ascending Holding Limited”, “Internationale Investitions und Servaltung” (all Austrian); “Giviesse”, AO “Ilona Group C.p.a” (Itally).

London Investment Forum: a lot of noise, but nothing in reality

In order to attract attention of foreign investors to Belarus in November 2008 a numerous governmental delegation headed by the Prime Minister Sergey Sidorsky (about 180 persons in all) held the First Belarusian Investment Forum in London, its purpose was to promote investment opportunities of Belarus to the world business representatives. During the Forum presentations of 70 Belarusian investment projects were made, that were interested in attracting foreign investment. Back then Sergey Sidorsky said that  “the Forum overcame all our expectations”.

Three intention protocols with European investors and prominent energy equipment producers were signed. One  of them with a company “ALSTOM” ( Switzerland ), concerning taking part in the production of high technology modern heating and power generation station in Zelva, Belazersk and in building hydro-power plants on West Dvina, Dnepr and wind mills’ park; second – with the company CTY GROUP (Czech Republic). Third – with a Polish company “Kulczik Holding” concerning building of coal power station in Belarus. The estimated cost of this project was 1 billion US Dollars. There were talks about this project for about four years however without definite results. It was considered to be a station working on Polish coal. However now coal production in Poland is decreasing and the country might become an importer of this fuel material. As of today all three projects in the energy area still remain as “good intentions”.

Sergey Sidorsky held negotiations with the management of an American corporation Caterpillar. The conversation concerned a possibility of a joint production of engines for auto-tractor vehicles and super-sized automobiles. Talks with the company “Philips” (the Netherlands) regarding the creation of a joint company for production of light-emitting diodes in Belarus continued. However negotiations has not head towards real business.

This year plan is 5 billion of US dollars of direct investment

According to UNCTAD data (UN Conference on Trade and Development) the foreign investment capacity in Belarus per one person of population equals to about 460 US Dollars. For comparison, in the neighbouring Lithuania this index equals to 4,300 US Dollars.

In the times of crisis Belarus has become more active. In the first quarter of 2009 there were 400.3 mln US Dollars of foreign investments attracted to finance investment projects (27.2% increase compared with the 1^st quarter of the last year). The official data of the Belarusian governmental institutions provides that by the 1^st of May 2009 55 investment projects were financed at the expense of foreign investments (including establishment of flat glass production at AAT “Gomelshklo”, aircraft park renewal at “Belavia”, reconstruction of the heating and power generation plant No 5 in Minsk).

This year the country is planning to attract more than 5 bln US Dollars of direct investment. However experts consider this plan as not very realistic. An economist Yaroslav Romanchuk, the Head of the Mizes Centre, believes that investors cannot put aside anxieties in relation to the “existence of 25 investment conditions established by the authorities which are definitely and officially registered nowhere. Investors are not satisfied with the conditions concerning property protection and with an archaic privatization law. The rules of the game are fuzzy and change very often”.

Liudmila Korsak