Promising Potential for Investment

The United Nations Conference on Trade and Development (UNCTAD) follows the investment tendencies in the world in its annual reports. Minsk hosted a presentation of the World Investment Report 2006 in mid-October
The decision to present the World Investment Report in Belarus is a very important indicator itself. While presenting the report UN Resident Coordinator/UNDP Resident Representative in Belarus Cihan Sultanoglu said Belarus has a huge potential for foreign investment.

Belarus has quite an ambitious plan to attract $1.8 billion of foreign investment in 2006-2010. The report demonstrates that inward investment flows play a crucial role in economic expansion of the country.

The report shows that foreign direct investment in 2005 grew for the second consecutive year, a worldwide phenomenon. It reached $916 billion, a rise of 29% over 2004, and grew in 126 countries. Developed countries accounted for $542 billion, and developing countries for $334 billion.

Foreign direct investment flows to South-East Europe and the Commonwealth of Independent States remained at a relatively high level, at $40 billion (about 4% of overall FDI), and their inflows were fairly concentrated: three countries — the Russian Federation, Ukraine and Romania — accounted for close to three quarters of the total.

Last year, Belarus ranked 10th for foreign direct investment, or FDI, inflows among 19 economies of the South-East Europe and the CIS, with $305 million in 2005.

The ocean of investment depends a lot on transnational corporations from the three richest regions of the world — the EU, the U.S. and Japan. But globalization has encouraged emerging markets to invest, and several large transnational corporations from China and other Southeast Asian countries found themselves amongst the leading investment players. These investors are most interested in natural resources, especially in Latin America. Merger and incorporation account for a lion’s share of all investment flows with record high of $716 billion last year, about 78% of all direct foreign investment flows.

Belarus is not yet among the leaders in terms of FDI, according to the UNCTAD report, however, the index of investment potential places Belarus among the region’s most promising nations. Investment climate was in the limelight during the presentation of the report, and the golden share right, which enables the government to intervene in operation of any company that used to be state-owned even if it has no state stake at all, was called a barrier to efficient investment in Belarus. However, most of the participants in the conference were certain the golden share rule could not hush away serious investors.

— The golden share influence on the investment climate is just a cooked-up “reason” for investors to be alarmed, said Deputy Minister of Foreign Affairs of Belarus Victor Gaisenok. — When foreign investors address their questions to the offices of our Foreign Ministry, we provide detailed explanations, and all their fears are allayed.

— There are no problems whatsoever with foreign investors caused by the golden share rule, said Deputy Economy Minister Leonid Demidov.

In most of the developed countries of the world the state has retained the right to interfere in the operation of companies. The UK, U.S. and France all have some legislative measures analogous to the Belarusian golden share.
The same applies to administrative barriers to access of foreign investors to the Belarusian market. It takes almost the same time to prepare registration documents and have them approved as in Europe, but Belarus will continue doing its best to enhance the investment attractiveness of the country. One should be very careful when lifting barriers, though. Excess liberalism became a trap that many countries found themselves in back in the 90s.

Some of them have started to restore these barriers, according to the UNCTAD report. An “unchecked” and “unrated” foreign investment may affect many social, economic and political aspects of national security.
Specialists believe Belarus has managed to improve its investment climate and lift some barriers. According to Leonid Demidov, it is planned to simplify the procedure of approval of projects in the Architecture Ministry.

Anyways, there are many efficient investment projects that were carried out very fast: the construction materials plant built by “Henkel” near Zaslavl, “Syabar” brewery, etc. Sometimes investors take less than one year to establish infrastructure and produce the first batch of goods. It all depends on the willingness and efficiency of the investor.

Alexander Sokolovsky
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