Belarus has recently announced at the highest level that new businesses are to be welcomed with an attractive package of offers and various privileges
29.07.2015 16:24:10
Even the richest countries are keen to attract new investment. These investments work for the economy by promoting the creation of new jobs and allowing for the implementation of modern technologies. The development of new business can be both beneficial and rewarding to net investors. Belarus has recently announced at the highest level that new businesses are to be welcomed with an attractive package of offers and various privileges. This is justified by the need to awaken interest in investors and encourage them to put their money into Belarus. In today’s conversation, we focus on the advantages of investing in Belarus. The participants in a special round table meeting will have a chance to outline the favourable conditions for new entrepreneurs in the country. Representatives of the business sector will describe their personal experiences of investing in various industries. We will also consider any difficulties that are likely to affect new businesses in Belarus. The participants of our round table discussion are:
Vladimir Ulakhovich, Deputy Chairman of the Belarusian Chamber of Commerce and Industry;
Rimantas Purtulis, Head of projects at ARVI Group (Lithuania);
Alexander Shchurko, the official representative of ARVI in Belarus;
Svetlana Zaburueva, Head of the Department of Foreign Economic Activity at the Belarusian Chamber of Commerce and Industry.
The Minsk Times: Let us begin by explaining the rationale behind Belarus’ desire to attract foreign investments to the country?
Vladimir Ulakhovich: A high level of investment activity is an indicator of the level of development of the economy. Often, this relates not only to financial business, but also to the field of technology. The most advantageous investments are linked to the transfer of technology, and the development of industrial co-operation. I would primarily outline these as our peculiarities. In the early 1990s, investments were mainly in the form of privatisation, to ‘clear out’ the competitive environment. Unfortunately, we are aware of many examples in neighbouring countries (in the Russian Federation, and Ukraine, for example) when rather successful enterprises were privatised but quickly disappeared. Belarus today has a significantly different approach. It seems to me that our concept of ‘pin-point’ (selective) investment in our country is justified. We place heavy emphasis not only on the financial assets, but the reputation of a partner or investor, who will guarantee the most effective development of our enterprises. If we try to assess our experience, we must primarily consider this factor. Moreover, this unique conceptual approach has justified itself already, and is in line with the social profile of our state, which aims to preserve businesses even when this might be difficult. Essential key enterprises are retained and privatised on the basis of effective management. This brings us closer to similar implementations in the European Union.
Rimantas Purtulis: There are those who are of the opinion, incorrectly I believe, that investors will come if they are promised piles of money. For example, there’re some discounts for income tax, but first this income must be earned and only after that should you receive discounts. Why did our group come here? We are not a large, global company that would step on others on its way to the top. In Belarus, as in other countries, some technology appears before it is seen in other countries but in other cases, it’s long after. Our enterprise is leading in one sphere but may lag behind in another. We had no plans to invest in Belarus ‘at any cost’, but as we were invited, it was to our mutual benefit. Business must be beneficial for both sides. It is a question of state-private partnership. This is a real advantage of investing in Belarus and it is clear that the state supports its partners.
We have a specific manufacturing process, which was not privatised in Lithuania; our new technology was created from scratch. Our main business is the processing of animal waste.
Our second field of activity is the creation of a large complex for the cultivation and manufacture of turkey meat. Why do we come here with turkeys? Young chickens are available everywhere, this industry is already well developed in your country, and similarly in Lithuania. Poultry grows quickly, within a month, and provides for the demand for affordable meat. Of course, turkey meat does not belong to the luxury products market, but it is already developed to a higher level of industry. At first, this was also at a low level in Lithuania and we were the only enterprise to turn this into an industry. As result, the consumption of this meat increased from 300g per head a year to 2-3kg, while the average European indicator is about 8-10kg a year. In Belarus it is approximately 1kg. Turkey is more expensive than young chicken, but we believe in the purchasing capacity of the population. We have seen our niche, we have been promised good conditions, and we have met with local authorities, and signed the investment agreement. As a result: both investors and consumers are happy, as the latter have the opportunity to buy quality useful meat. This is the essence of our concept which we’re developing with the help of the state; it’s a classical example of state-private partnership.
Vladimir Ulakhovich: You have touched upon a very good theme. I want to focus attention on the fact that there are niche markets that are not obvious, but investors can discover new directions. This is a very interesting role played by investors. There are many other examples of absolutely new manufacturers in Belarus. It is not simply ready cash, when someone buys assets. It is very important to us to have the dynamics of development and new opportunities.
Alexander Shchurko: Ecological safety is of paramount importance today. We all know the situation on waste disposal, especially that of animal origin. It also concerns mortuaries, which are criticised constantly by the President. We have had discussions with the Natural Resources and Environmental Protection Ministry. We need to bring everyone’s attention to the question that all economic entities should recycle animal waste through the businesses that have been already created in the country. In the future it will be necessary to focus attention on this question. These are also questions of ecology and safety when disposing of carcasses. People receive many different illnesses from meat. Therefore, the recycling question is a very important issue of environmental safety. There is also the food safety question to which the Government of Belarus pays a great deal of attention. Poultry, beef and pork is good but are we ‘spoilt’ with turkey meat? According to the experts however, turkey is a very useful meat for our diet, good for children, and it does not contain cholesterol.
As far as recycling is concerned, we are now constructing a recycling plant, with proposals for the Mogilev district, the Minsk Region’s Soligorsk and the Grodno Region. Waste free production is a state responsibility: a recycling plant will utilise manufacturing wastes from turkey breeding facilities, including the feathers. Aside from this project, we are also building a feed mill. A recycling plant produces protein tankage which is then supplied to a feed mill to produce forage and forage additives. In turn, turkeys eat this and meat is the final product. As a result, a closed cycle is created, with no production waste.
Rimantas Purtulis: It’s important to add that if a car manufacturing plant is established, for example, it does not mean that other similar enterprises wouldn’t be allowed nearby. A group of small enterprises such as rubber and component manufacturing would enhance the development. In Lithuania we work with the regional authorities, and investigate where a feed mill can be located. It should be located not merely in areas where factories operate but in areas where farming enterprises are well developed is. We aren’t afraid of competition with the farmers, as they have small capacities, but the more turkeys we breed, the more meat people buy. We sell young turkeys to farmers (in line with agreements), providing them with forage. We are trying to build relationships with farmers to ensure they become our assistants.
Alexander Shchurko: Production employment is an important issue. However, farm construction has another aspect to consider, the provision of accommodation, usually provided for workers on the farm. Additionally, we have a large amount of fish waste produced by such enterprises as Santa-Bremor, Belryba and others. ARVI run a facility processing fish waste in Latvia, which produces cod liver oil as a result. The latter is purchased by companies, who go on make Omega-3 poly-vitamins from it. This year, we plan to increase the plant’s capacities three fold while also studying the issue of processing fish.
ARVI waste recycling plant in the Grodno Region
The Minsk Times: Certainly an investor has the right to personally choose where they inject their capital. They’ll probably turn to the areas with the most profitable returns. What features does Belarus have to attract foreign investors, from the point of view of those around the table?
Vladimir Ulakhovich: Our clear advantage is our geographical location and our country’s economic focus. We have a good base for future development. There are many opportunities to modernise businesses from currently operating facilities — such as car component production, as an example. We have enterprises that produce small parts that should be steadily expanded. It’s possible to create a separate industry entirely for the production of car spare parts and components. A German businessman told me that investors and their money love peace and that he enjoys staying in Belarus where everything is ordered and stable. Last year, we had a business forum in New York, attended by our Prime Minister. I was asked to deliver a speech. I told our partner that I would quote him when he said, “I’m happy to run a business in Belarus as I love being here. It’s calm and I employ well-trained personnel. The city is peaceful, beautiful and clean. However, I’d like to give you a piece of advice: you should be more aggressive in promoting your image, your opportunities and your potential”. There are aspects in Belarus not set in the law. This is the quality of life. If your daughter went to Minsk’s Gorky Park at 11pm, she would be safe, not something that can be said of many European capitals. The quality of life is certainly an attraction, as is the quality of our staff, working conditions and confidence in the future. We are sometimes criticised for our extensive administrative resource; however, this can be an advantage. Investors are very pragmatic and shrewd. They pay little attention to political analysts’ commentaries but study the real situation. They consider the history of business successes and real opportunities.
Rimantas Purtulis: Of course, investors read newspapers but treat political-economic analysts with a pinch of salt. An analyst can be passionately in favour of a policy one minute, then shortly afterwards, just as passionately explaining the reasons why it has failed.
Vladimir Ulakhovich: In recent decades, much investment went to China which is, in turn, a key investor. Nobody then spoke of the country’s tough public relations or serious punishments. Nobody paid attention to that. When the possibility emerged, investments were placed there. As a result, all major market players operate there and transnational companies run their own production facilities.
Rimantas Purtulis: Belarus and Lithuania are close from the point of view of geography. The countries are tied historically. Around twenty years ago, our industries were at almost the same level. At present, Belarus leads in some areas and Lithuania tops in others. If investors see that they are in need and can repeat the process they’ve already followed in their own country it will be easy for them. Investors repeat their experience in Belarus with state support. Belarus is a neighbouring and familiar country for us — a Lithuanian company, and it’s easy for us to see opportunities here. There’re no big conglomerates here which don’t let strangers. In my opinion, anyone who is needed for the industry becomes friendly.
Svetlana Zaburueva: Lithuania is a relatively small state, but occupies third place as far as volume of investments into Belarus is concerned.
The Minsk Times: Investments are focussed on the centre of the country. This is probably because any difficulties are easily solved here: agencies and ministries work in the capital and the local infrastructure is more developed than in the regions. We would like to clarify the situation for investors in other regions of the country. What is their investment competitiveness in comparison to the centre? Are there any advantages to investing in such areas?
Rimantas Purtulis: Your opinion is outdated really. Investors are often reluctant to locate in large cities — except for highly sophisticated technology. Generally speaking, the regions are characterised by greater flexibility and freedom. They have more jobs and great interest is shown in them. Minsk is already a ‘crowded bus’.
Vladimir Ulakhovich: The regions have a different atmosphere to the rest of the country but it is also a problem that needs to be solved. The Economy Ministry is now developing a strategy of direct foreign investment attraction for 2016-2020 and investment development in the regions is one of this programme’s aims. According to our statistics, regions receive 20-25 percent of all investments. Many investors have come to Minsk, which is an industrial and financial centre, but there are excellent opportunities for business in other parts of the country. The programme also outlines clusters, the so-called inner division or co-operative areas. For example, the Brest Region’s Pinsk area is a wood-processing centre. Food and textile industries are concentrated in Brest, while Mikashevichi is known for its mining industry. Alternative energy, industry and textiles are developed in the Vitebsk Region and Gomel boasts a new industrial park. Each regional centre has its own free economic zone and an investment portfolio. Grodno is a chemical base. Everything has a clear focus and we promote businesses joining these sectors. The situation should be managed in a more concentrated way to ensure balanced development.
Rimantas Purtulis: I believe Minsk is attractive for those who need a high concentration of science businesses: for science intensive rather than energy intensive facilities.
Vladimir Ulakhovich: I can describe what major investments were made last year and what spheres they covered: those were transport and logistics (the major share), trade (primarily, in the capital) and industry. The logistical cluster is now actively developing: as soon as a large barrier-free market opened, it became easier to launch a business in Belarus. It’s now possible to register a company in just one day, where this may be connected with various difficulties in some other countries. Moreover, it’s more predictable to run a business in Belarus. A Belarusian driver’s salary and a logistical service would cost less than in Europe while the quality is the same. Accordingly, we are experiencing a boom in logistics. Belarus is beginning to realise its new role.
Rimantas Purtulis: It’s clear that the regional authorities are quick to overcome any issues. They know their area and its needs well. The issues which come under the jurisdiction of governors and regional executive committees are settled rather promptly. Meanwhile, there are some problems that cannot be so easily solved, where issues are of a centralised nature. In this case, decision making might take some time. Whilst our investment is welcomed in the regions, this is not the case in Minsk itself. The capital needs projects relating to the major electricity stations; outside Minsk, areas might need just 5km of electricity cable laid but the local authority does not have the power to authorise even small projects such as this. We do not have the time to wait for numerous permissions from Minsk; the regions should be given more powers in this regard.
Vladimir Ulakhovich: We do have an administrative policy where each governor needs to be responsible for investment attraction, but this must be centrally regulated to begin with. They have indicative figures, which should be achieved and this inspires them to reach these goals.
Alexander Shchurko: You are right. A governor signs an investment agreement on behalf of the Republic. However, during the process of this investment agreement realisation, subdivisions of central management are involved and often, it’s not so easy to deal with them. There are issues that can be settled only at the highest level.
The Minsk Times: Considering the facts already mentioned, we can speak about Belarus objectively as an attractive country for foreign investors. What are its advantages compared to other countries in the post-Soviet region?
Rimantas Purtulis: We are situated close to the European Union where an industrial nucleus is located, with new technology and financial resources. We are close to the centre of European dynamic development. Although our paths of development differ, our starting point was the same. Our mutual experiences enable us to occupy our own niche and find our own place. The market is not large in Lithuania; moreover, there is no language barrier there. The industrial potential also matters. Of course, it’s easier for us to enter the markets of the Customs Union and the Eurasian Economic Union via Belarus than via the Kaliningrad Region.
Alexander Shchurko: I’d like to add some practical experience. In Belarus, it took three months to register and a year to realise an investment agreement. In some neighbouring states, this procedure takes much longer.
The Minsk Times: What does the experience of foreign investors in Belarus demonstrate? Is there a need to change our approach when dealing with them?
Vladimir Ulakhovich: It is never the case that nothing needs changing. In this case, business activity ceases. Of course, it’s always necessary to move along the path of improvement, optimisation and perfection. Speaking of the current situation, I believe it’s vital to truly fulfil investments in the strategic areas, which have been outlined, such as car manufacturing and the production of components and spare parts. The industrial base is key. We also have increased availability of markets. It’s now not a problem to sell Turkish or Chinese made products to Russia or Kazakhstan. In the meantime we can look forward to the possibility of manufacturing quality produce domestically. If this aim were realised, then our machine manufacturing would reach a new level. It’s necessary to breathe new life into our holdings and the realisation of these goals is of paramount importance at the moment. We do have a disadvantage in that the state governs a major part of the economy. However, the state is sometimes able to act as an umbrella to support enterprises and inject resources into them. Our managerial personnel have enjoyed a privileged position: they did not have to struggle to increase their market, as they were well aware that the state would not abandon them. As a result, we lack a good deal of experience of working in very competitive markets. Of course, we need to ensure a staff potential of a slightly different level: to be able to work with partners and achieve technologies and funds coming into the country and its serious, strategic branches. We need long-term investments, not companies who will leave as soon as they turn a profit. There are several governmental documents aimed at enhancing our marketing services and improving the quality of people who work on the global markets, this is necessary for us to compete effectively in the modern world.
Rimantas Purtulis: I think the state is not fully utilising its financial tools. Many companies used to receive subsidies or investments from the government. However, developed enterprises would be satisfied with more complex financial packages rather than cash, such as governmental guarantees or guarantees of sales. So far, these measures are not used to the full, in comparison with other countries even Russia and Kazakhstan. Certain flexibility in this issue would make it possible to attract more financial resources.
The Minsk Times: Investors rely on a greater share of the market than Belarus offers. Do the Customs Union, the Eurasian Economic Union and other associations offer increased possibilities for investors?
Vladimir Ulakhovich: This summer is the busiest we have ever seen. In a single week, we hosted a business forum with China’s Quinghai Province — featuring around 100 Chinese enterprises. A Japanese delegation has also visited representing the flagships of the Japanese business: Hitachi, Panasonic, Mitsubishi and JTI. A Moldovan delegation visited as part of the Moldovan President’s visit to Belarus. The majority of our guests are interested in how they could co-operate with Belarus to break into the vast market of the Eurasian Economic Union. This is our great advantage as our own market is not large; our economy is export oriented. As an example, several years ago, I read a thesis paper by a Russian author who spoke of the indices of the export-oriented economy. According to him, Belarus is second in Europe after Belgium. In some areas, especially dairy produce and machine manufacture, our small country is a global market player. We have excellent opportunities for investors who come here.
Vladimir Ulakhovich, Deputy Chairman of the Belarusian Chamber of Commerce and Industry;
Rimantas Purtulis, Head of projects at ARVI Group (Lithuania);
Alexander Shchurko, the official representative of ARVI in Belarus;
Svetlana Zaburueva, Head of the Department of Foreign Economic Activity at the Belarusian Chamber of Commerce and Industry.
Vladimir Ulakhovich
| Rimantas Purtulis
| Alexander Shchurko
| Svetlana Zaburueva
|
Vladimir Ulakhovich: A high level of investment activity is an indicator of the level of development of the economy. Often, this relates not only to financial business, but also to the field of technology. The most advantageous investments are linked to the transfer of technology, and the development of industrial co-operation. I would primarily outline these as our peculiarities. In the early 1990s, investments were mainly in the form of privatisation, to ‘clear out’ the competitive environment. Unfortunately, we are aware of many examples in neighbouring countries (in the Russian Federation, and Ukraine, for example) when rather successful enterprises were privatised but quickly disappeared. Belarus today has a significantly different approach. It seems to me that our concept of ‘pin-point’ (selective) investment in our country is justified. We place heavy emphasis not only on the financial assets, but the reputation of a partner or investor, who will guarantee the most effective development of our enterprises. If we try to assess our experience, we must primarily consider this factor. Moreover, this unique conceptual approach has justified itself already, and is in line with the social profile of our state, which aims to preserve businesses even when this might be difficult. Essential key enterprises are retained and privatised on the basis of effective management. This brings us closer to similar implementations in the European Union.
Rimantas Purtulis: There are those who are of the opinion, incorrectly I believe, that investors will come if they are promised piles of money. For example, there’re some discounts for income tax, but first this income must be earned and only after that should you receive discounts. Why did our group come here? We are not a large, global company that would step on others on its way to the top. In Belarus, as in other countries, some technology appears before it is seen in other countries but in other cases, it’s long after. Our enterprise is leading in one sphere but may lag behind in another. We had no plans to invest in Belarus ‘at any cost’, but as we were invited, it was to our mutual benefit. Business must be beneficial for both sides. It is a question of state-private partnership. This is a real advantage of investing in Belarus and it is clear that the state supports its partners.
We have a specific manufacturing process, which was not privatised in Lithuania; our new technology was created from scratch. Our main business is the processing of animal waste.
Our second field of activity is the creation of a large complex for the cultivation and manufacture of turkey meat. Why do we come here with turkeys? Young chickens are available everywhere, this industry is already well developed in your country, and similarly in Lithuania. Poultry grows quickly, within a month, and provides for the demand for affordable meat. Of course, turkey meat does not belong to the luxury products market, but it is already developed to a higher level of industry. At first, this was also at a low level in Lithuania and we were the only enterprise to turn this into an industry. As result, the consumption of this meat increased from 300g per head a year to 2-3kg, while the average European indicator is about 8-10kg a year. In Belarus it is approximately 1kg. Turkey is more expensive than young chicken, but we believe in the purchasing capacity of the population. We have seen our niche, we have been promised good conditions, and we have met with local authorities, and signed the investment agreement. As a result: both investors and consumers are happy, as the latter have the opportunity to buy quality useful meat. This is the essence of our concept which we’re developing with the help of the state; it’s a classical example of state-private partnership.
Vladimir Ulakhovich: You have touched upon a very good theme. I want to focus attention on the fact that there are niche markets that are not obvious, but investors can discover new directions. This is a very interesting role played by investors. There are many other examples of absolutely new manufacturers in Belarus. It is not simply ready cash, when someone buys assets. It is very important to us to have the dynamics of development and new opportunities.
Alexander Shchurko: Ecological safety is of paramount importance today. We all know the situation on waste disposal, especially that of animal origin. It also concerns mortuaries, which are criticised constantly by the President. We have had discussions with the Natural Resources and Environmental Protection Ministry. We need to bring everyone’s attention to the question that all economic entities should recycle animal waste through the businesses that have been already created in the country. In the future it will be necessary to focus attention on this question. These are also questions of ecology and safety when disposing of carcasses. People receive many different illnesses from meat. Therefore, the recycling question is a very important issue of environmental safety. There is also the food safety question to which the Government of Belarus pays a great deal of attention. Poultry, beef and pork is good but are we ‘spoilt’ with turkey meat? According to the experts however, turkey is a very useful meat for our diet, good for children, and it does not contain cholesterol.
As far as recycling is concerned, we are now constructing a recycling plant, with proposals for the Mogilev district, the Minsk Region’s Soligorsk and the Grodno Region. Waste free production is a state responsibility: a recycling plant will utilise manufacturing wastes from turkey breeding facilities, including the feathers. Aside from this project, we are also building a feed mill. A recycling plant produces protein tankage which is then supplied to a feed mill to produce forage and forage additives. In turn, turkeys eat this and meat is the final product. As a result, a closed cycle is created, with no production waste.
Rimantas Purtulis: It’s important to add that if a car manufacturing plant is established, for example, it does not mean that other similar enterprises wouldn’t be allowed nearby. A group of small enterprises such as rubber and component manufacturing would enhance the development. In Lithuania we work with the regional authorities, and investigate where a feed mill can be located. It should be located not merely in areas where factories operate but in areas where farming enterprises are well developed is. We aren’t afraid of competition with the farmers, as they have small capacities, but the more turkeys we breed, the more meat people buy. We sell young turkeys to farmers (in line with agreements), providing them with forage. We are trying to build relationships with farmers to ensure they become our assistants.
Alexander Shchurko: Production employment is an important issue. However, farm construction has another aspect to consider, the provision of accommodation, usually provided for workers on the farm. Additionally, we have a large amount of fish waste produced by such enterprises as Santa-Bremor, Belryba and others. ARVI run a facility processing fish waste in Latvia, which produces cod liver oil as a result. The latter is purchased by companies, who go on make Omega-3 poly-vitamins from it. This year, we plan to increase the plant’s capacities three fold while also studying the issue of processing fish.
ARVI waste recycling plant in the Grodno Region
The Minsk Times: Certainly an investor has the right to personally choose where they inject their capital. They’ll probably turn to the areas with the most profitable returns. What features does Belarus have to attract foreign investors, from the point of view of those around the table?
Vladimir Ulakhovich: Our clear advantage is our geographical location and our country’s economic focus. We have a good base for future development. There are many opportunities to modernise businesses from currently operating facilities — such as car component production, as an example. We have enterprises that produce small parts that should be steadily expanded. It’s possible to create a separate industry entirely for the production of car spare parts and components. A German businessman told me that investors and their money love peace and that he enjoys staying in Belarus where everything is ordered and stable. Last year, we had a business forum in New York, attended by our Prime Minister. I was asked to deliver a speech. I told our partner that I would quote him when he said, “I’m happy to run a business in Belarus as I love being here. It’s calm and I employ well-trained personnel. The city is peaceful, beautiful and clean. However, I’d like to give you a piece of advice: you should be more aggressive in promoting your image, your opportunities and your potential”. There are aspects in Belarus not set in the law. This is the quality of life. If your daughter went to Minsk’s Gorky Park at 11pm, she would be safe, not something that can be said of many European capitals. The quality of life is certainly an attraction, as is the quality of our staff, working conditions and confidence in the future. We are sometimes criticised for our extensive administrative resource; however, this can be an advantage. Investors are very pragmatic and shrewd. They pay little attention to political analysts’ commentaries but study the real situation. They consider the history of business successes and real opportunities.
Rimantas Purtulis: Of course, investors read newspapers but treat political-economic analysts with a pinch of salt. An analyst can be passionately in favour of a policy one minute, then shortly afterwards, just as passionately explaining the reasons why it has failed.
Vladimir Ulakhovich: In recent decades, much investment went to China which is, in turn, a key investor. Nobody then spoke of the country’s tough public relations or serious punishments. Nobody paid attention to that. When the possibility emerged, investments were placed there. As a result, all major market players operate there and transnational companies run their own production facilities.
Rimantas Purtulis: Belarus and Lithuania are close from the point of view of geography. The countries are tied historically. Around twenty years ago, our industries were at almost the same level. At present, Belarus leads in some areas and Lithuania tops in others. If investors see that they are in need and can repeat the process they’ve already followed in their own country it will be easy for them. Investors repeat their experience in Belarus with state support. Belarus is a neighbouring and familiar country for us — a Lithuanian company, and it’s easy for us to see opportunities here. There’re no big conglomerates here which don’t let strangers. In my opinion, anyone who is needed for the industry becomes friendly.
Svetlana Zaburueva: Lithuania is a relatively small state, but occupies third place as far as volume of investments into Belarus is concerned.
The Minsk Times: Investments are focussed on the centre of the country. This is probably because any difficulties are easily solved here: agencies and ministries work in the capital and the local infrastructure is more developed than in the regions. We would like to clarify the situation for investors in other regions of the country. What is their investment competitiveness in comparison to the centre? Are there any advantages to investing in such areas?
Rimantas Purtulis: Your opinion is outdated really. Investors are often reluctant to locate in large cities — except for highly sophisticated technology. Generally speaking, the regions are characterised by greater flexibility and freedom. They have more jobs and great interest is shown in them. Minsk is already a ‘crowded bus’.
Vladimir Ulakhovich: The regions have a different atmosphere to the rest of the country but it is also a problem that needs to be solved. The Economy Ministry is now developing a strategy of direct foreign investment attraction for 2016-2020 and investment development in the regions is one of this programme’s aims. According to our statistics, regions receive 20-25 percent of all investments. Many investors have come to Minsk, which is an industrial and financial centre, but there are excellent opportunities for business in other parts of the country. The programme also outlines clusters, the so-called inner division or co-operative areas. For example, the Brest Region’s Pinsk area is a wood-processing centre. Food and textile industries are concentrated in Brest, while Mikashevichi is known for its mining industry. Alternative energy, industry and textiles are developed in the Vitebsk Region and Gomel boasts a new industrial park. Each regional centre has its own free economic zone and an investment portfolio. Grodno is a chemical base. Everything has a clear focus and we promote businesses joining these sectors. The situation should be managed in a more concentrated way to ensure balanced development.
Rimantas Purtulis: I believe Minsk is attractive for those who need a high concentration of science businesses: for science intensive rather than energy intensive facilities.
Vladimir Ulakhovich: I can describe what major investments were made last year and what spheres they covered: those were transport and logistics (the major share), trade (primarily, in the capital) and industry. The logistical cluster is now actively developing: as soon as a large barrier-free market opened, it became easier to launch a business in Belarus. It’s now possible to register a company in just one day, where this may be connected with various difficulties in some other countries. Moreover, it’s more predictable to run a business in Belarus. A Belarusian driver’s salary and a logistical service would cost less than in Europe while the quality is the same. Accordingly, we are experiencing a boom in logistics. Belarus is beginning to realise its new role.
Rimantas Purtulis: It’s clear that the regional authorities are quick to overcome any issues. They know their area and its needs well. The issues which come under the jurisdiction of governors and regional executive committees are settled rather promptly. Meanwhile, there are some problems that cannot be so easily solved, where issues are of a centralised nature. In this case, decision making might take some time. Whilst our investment is welcomed in the regions, this is not the case in Minsk itself. The capital needs projects relating to the major electricity stations; outside Minsk, areas might need just 5km of electricity cable laid but the local authority does not have the power to authorise even small projects such as this. We do not have the time to wait for numerous permissions from Minsk; the regions should be given more powers in this regard.
Vladimir Ulakhovich: We do have an administrative policy where each governor needs to be responsible for investment attraction, but this must be centrally regulated to begin with. They have indicative figures, which should be achieved and this inspires them to reach these goals.
Alexander Shchurko: You are right. A governor signs an investment agreement on behalf of the Republic. However, during the process of this investment agreement realisation, subdivisions of central management are involved and often, it’s not so easy to deal with them. There are issues that can be settled only at the highest level.
The Minsk Times: Considering the facts already mentioned, we can speak about Belarus objectively as an attractive country for foreign investors. What are its advantages compared to other countries in the post-Soviet region?
Rimantas Purtulis: We are situated close to the European Union where an industrial nucleus is located, with new technology and financial resources. We are close to the centre of European dynamic development. Although our paths of development differ, our starting point was the same. Our mutual experiences enable us to occupy our own niche and find our own place. The market is not large in Lithuania; moreover, there is no language barrier there. The industrial potential also matters. Of course, it’s easier for us to enter the markets of the Customs Union and the Eurasian Economic Union via Belarus than via the Kaliningrad Region.
Alexander Shchurko: I’d like to add some practical experience. In Belarus, it took three months to register and a year to realise an investment agreement. In some neighbouring states, this procedure takes much longer.
The Minsk Times: What does the experience of foreign investors in Belarus demonstrate? Is there a need to change our approach when dealing with them?
Vladimir Ulakhovich: It is never the case that nothing needs changing. In this case, business activity ceases. Of course, it’s always necessary to move along the path of improvement, optimisation and perfection. Speaking of the current situation, I believe it’s vital to truly fulfil investments in the strategic areas, which have been outlined, such as car manufacturing and the production of components and spare parts. The industrial base is key. We also have increased availability of markets. It’s now not a problem to sell Turkish or Chinese made products to Russia or Kazakhstan. In the meantime we can look forward to the possibility of manufacturing quality produce domestically. If this aim were realised, then our machine manufacturing would reach a new level. It’s necessary to breathe new life into our holdings and the realisation of these goals is of paramount importance at the moment. We do have a disadvantage in that the state governs a major part of the economy. However, the state is sometimes able to act as an umbrella to support enterprises and inject resources into them. Our managerial personnel have enjoyed a privileged position: they did not have to struggle to increase their market, as they were well aware that the state would not abandon them. As a result, we lack a good deal of experience of working in very competitive markets. Of course, we need to ensure a staff potential of a slightly different level: to be able to work with partners and achieve technologies and funds coming into the country and its serious, strategic branches. We need long-term investments, not companies who will leave as soon as they turn a profit. There are several governmental documents aimed at enhancing our marketing services and improving the quality of people who work on the global markets, this is necessary for us to compete effectively in the modern world.
Rimantas Purtulis: I think the state is not fully utilising its financial tools. Many companies used to receive subsidies or investments from the government. However, developed enterprises would be satisfied with more complex financial packages rather than cash, such as governmental guarantees or guarantees of sales. So far, these measures are not used to the full, in comparison with other countries even Russia and Kazakhstan. Certain flexibility in this issue would make it possible to attract more financial resources.
The Minsk Times: Investors rely on a greater share of the market than Belarus offers. Do the Customs Union, the Eurasian Economic Union and other associations offer increased possibilities for investors?
Vladimir Ulakhovich: This summer is the busiest we have ever seen. In a single week, we hosted a business forum with China’s Quinghai Province — featuring around 100 Chinese enterprises. A Japanese delegation has also visited representing the flagships of the Japanese business: Hitachi, Panasonic, Mitsubishi and JTI. A Moldovan delegation visited as part of the Moldovan President’s visit to Belarus. The majority of our guests are interested in how they could co-operate with Belarus to break into the vast market of the Eurasian Economic Union. This is our great advantage as our own market is not large; our economy is export oriented. As an example, several years ago, I read a thesis paper by a Russian author who spoke of the indices of the export-oriented economy. According to him, Belarus is second in Europe after Belgium. In some areas, especially dairy produce and machine manufacture, our small country is a global market player. We have excellent opportunities for investors who come here.
Dynamics of investments
In the first six months of the year, Br92.5 trillion of investments have been used into basic capital, with major share of injections coming into processing industry (29.6 percent), agriculture (11.4 percent), transport and communications (9.3 percent), production and distribution of electrical energy, gas and water (6.2 percent). Construction and installation works amounted to Br51.2 trillion.
Remarkably, the amount of investments into construction is falling, with construction and installation works accounting for 55.4 percent of the total volume of injections into basic capital. Over this period, investments for the purchase of machines, equipment and transport vehicles stood at Br29.9 trillion (32.3 percent of the total amount).
By Victor Mikhailov, Yulia Matusevich