A recent report in the well-known British Financial Times on business conditions in Belarus outlines four promising areas for investments. The edition’s recommendations — as made by FT Editor Courtney Fingar and reporter-analyst Michal Kaczmarski — are highly respected in the business world.
Interestingly, at the same time as the article was being written, Dr. Reda arrived here from Vienna, to lecture in IT at the Academy of Public Administration. Within a few months, he realised that Belarus has many promising business opportunities, so he combined his lectures with practical work. He plans to establish a Smart City in Belarus, in which private individuals and state bodies can use contemporary Cloud Computing Technology.
Our country is usually called a ‘land under white wings’ — stressing purity and harmony between man and nature. Cloud Computing indicates ‘calculations in the clouds’ and brings to mind a beautiful image of contemporary Belarus, with ‘business under white clouds’. Belarus is certainly developing its IT field.
Four promising directions
London recently hosted a presentation of fDi Magazine’s special supplement: Belarus Beckons. Europe’s Final FDI Frontier Opens Up. From the Belarusian side, the event was organised by the National Investment and Privatisation Agency and the Belarusian Embassy to the UK, while the editorial office of the leading newspaper in the business world, The Financial Times, organised everything on the British side.
fDi Magazine is aimed at investors and is part of the Financial Times group. The 16 page supplement to the latest issue of fDi Magazine is completely dedicated to Belarus’ investment opportunities. After internships in Minsk, employees of fDi Magazine presented their independent and objective vision of the business environment in our country.
Privatisation. The fDi analysts note that privatisation will be of most interest to foreign investors, as competition in Belarus is currently at a minimum. Moreover, the fDi report notes that, in March 2011, the Council of Ministers published a list of enterprises which could be offered as open joint stock companies. In fact, 134 more companies as planned to be launched in this fashion by the end of 2013, offering many opportunities to investors. Naturally, those who gain the first foot in the door will be at an advantage.
It should not be forgotten that Belarus has membership of the Single Economic Space (with Russia and Kazakhstan) — boasting access to a market of 150m people.
Meanwhile, the fDi edition notes that Belarus still has far to go in offering adequate information on enterprises offered for privatisation — including audits by independent foreign experts.
Biotechnologies. The fDi report lists biotechnologies as the second most promising area for investment in Belarus, with the state enterprises Belbiopharm and Borimed as the major attractions, being most profitable. Borimed receives 58 percent of its revenue from exporting abroad and became a joint stock company in 2009. Back in 2006, the state owned around 90 percent of pharmacies; by 2011, half of all pharmacies were being independently run, showing that private business can work successfully.
Another successful example of foreign investments into Belarus is the Bulgarian Sopharma pharmaceutical company, which has purchased two Belarusian pharmacy chains and now owns 33 pharmacies.
Business Monitor International (BMI) — a leading research organisation in this sector — added Belarus to its portfolio of accounting in 2009, showing recognition of the Belarusian pharmaceutical industry’s achievements. Initially, Belarus was ranked 59 out of 71 countries analysed. The Belarus Pharmaceuticals and Healthcare Report Q4 2011, by BMI, notes that the Belarusian pharmaceutical industry increased its turnover from $720m in 2010 to $752 in 2011 — showing 4.4 percent annual growth.
However, despite the successes of state-run enterprises, the private pharmaceutical sector is, as yet, weakly developed, making it ripe for foreign investors. In particular, the fDi report remarks on privately owned Academpharm. Successfully launched in 2009 (at the National Academy of Sciences) it now manufactures 1.5m pills per month and could raise this to 100m at full production capacity.
From 2013, medicines manufactured in Belarus won’t require certification for sale within the SES. Despite market competition from Russia and Kazakhstan, foreign investors could play a part in raising production volumes and profits.
Information and communication technologies. Michal Kaczmarski notes that the Belarusian High-Tech Park is a growing IT-cluster at regional and international level. It offers its registered resident companies (currently over 100) a range of economic stimuli — including significant tax preferences. This favourable environment for HTP residents working in the software sphere will continue until 2020.
The fDi report views the HTP as one of Belarus’ most successful examples of a highly qualified labour force of engineers, technicians and programmers. It has attracted the attention of such international companies as Microsoft and NEC, while EPAM Systems is an example of a strong ‘local’ IT company. Its shares have been quoted on the Nasdaq Stock Exchange since early 2012 and it could attract around $1bn in 2012 via the New York Stock Exchange (through IPO companies).
Moreover, according to fDi Markets — monitoring investments into new projects — since 2003, 37 foreign investment projects have been implemented in Belarus in the sphere of IT and software development (information and communication technologies). The fDi report notes that, since 2010, the number of similar projects registered in the Republic has grown in volume (by 50 percent and 115 percent respectively).
Meanwhile, in 2011, the International Telecommunication Union and the UN ranked Belarus 52nd out of 152 states for its information and communication technology development index. These indisputable achievements make our country very attractive for investments directly into this sphere. The authors of the fDi report note that such a choice has already been taken by Microsoft and NEC, SAP and Nokia, in addition to HTC and Telekom Austria. Belarus is now expecting the arrival of other major investors and the Belarusian Government has set the ambitious task of entering the top 30 most attractive countries for doing business — not only in the sphere of information and communication technologies
Nano-technologies. In line with the Nano-materials and Nano-technologies (Nano-tech) state programme, Belarus is researching new applications for nano-technologies and materials, including new systems of low dimensional structuring.
The fDi report notes that Belarusian scientists are studying the mechanical and thermal features of micro- and nano-metric structures and are developing computation models for molecular dynamics. In addition, new methods are being found for thermal probe microscopy and new types of small-sized modules are being developed to store hydrogen atoms in nano-metal film. Instruments and systems are also being created for the formation of molecularly thin films.
In fact, Belarus’ experience in the sphere of nano-technologies is recognised by the global scientific community — especially the work of the National Academy of Sciences of Belarus. However, results have failed to attract the attention of private businesses either domestically or abroad, so it’s hoped that foreign investors will be able to bridge this gap. Already, the NAS is working to commercialise its scientific research.
Our Belarusian scientists have, to date, signed contracts with international partners from 44 countries, generating $26m for the economy in 2010 (against $17.1m in 2009). However, the private sector is still reluctant to take the plunge. Belarus aims to encourage ties to bring about mass industrial production of composite nano-materials — with the assistance or direct participation of foreign investors.
At the end of the report, fDi makes an optimistic forecast regarding prospects for the arrival of investors into Belarus. To inform the report, Michal Kaczmarski interviewed Belarus’ Economy Minister, Nikolai Snopkov. He tells us that, according to the UN Conference on Trade and Development (UNCTAD), direct foreign investments into Belarus rose 4.5-fold in 2010 (compared to 2005) and, as of December 1st, 2011, 6,430 enterprises were registered in Belarus as having foreign investments — double that of December 1st, 2004.
Knowledge is money
Now, let me tell you a history of a definite person which, probably, will once become an episode from the credit history of our country.
Dr. Reda, who teaches at the Vienna University of Technology, has been lecturing in IT at the Academy of Public Administration (under the aegis of the President of Belarus) for the past month. He admits that, within these weeks, he has come to realise that Minsk is an ideal place for IT related business. He plans to share his experience while also taking advantage of the situation.
“Eight years ago, I was heading the marketing department of an international IT company, which had branches in 102 countries. I handed in my resignation to open my own company, which some said was crazy, as I was leaving such a well-paid job. However, I knew what I was doing then and I know what I’m doing now. The head office of my company is in Austria but I plan to open a branch in Belarus, developing IT business in the Republic. The sphere of my interests encompasses innovations which target business: anything which generates money. It’s management in the widest sense,” he explains.
My company promoted the most developed Smart City in the world: Masdar City in Dubai. It supports interaction between the economy, the environment, society and technologies and is one of the largest projects at global level. My dream is to promote the creation of a similar Smart City in Belarus, with the Government and state authorities using contemporary Cloud Computing Technology.
“When do you hope to see results?” I ask, meaning only a short term business strategy. However, his answer shocks me in its preciseness.
Within two years at the most.
Will it generate a lot of money?
In fact, I don’t think Dr. Reda is motivated by great wealth. He is a ‘path-finder’, seeking out opportunities for investment. On what is his confidence in Belarus based? He tells us, “Since February 8th, I’ve been working as an invited professor here. In this time, I’ve met many people and discussed many prospects. However, my conversations with my students have been most interesting. It’s incredible how Belarusian students talk about business, as they are so original in their thinking. Europe lacks such creativity, so this in itself indicates great potential. Moreover, the state has evident advantages in the form of its geopolitical location, its proximity to Russia and the future establishment of the Eurasian Economic Union… I’m simply confident that, if international companies want to conquer the Russian market and those of Russia’s neighbours, they should initially set up in Belarus, liaising with Belarusian companies.”
As he begins to tell me about Cloud Computing, it’s hard not to feel inspired. These ‘calculations in the clouds’ sound beautifully poetic, although they are strictly technological. The promise of tomorrow has captured his imagination.
LEADER ON CORPORATE SOLUTION MARKETS ALREADY IN MINSK
That a conference was held in Minsk dedicated to the enhancement of investment attractiveness of Belarusian enterprises is evidence in itself of the fact that foreign high-tech companies are ready to inject funds into enhancing the quality of corporate management in Belarusian enterprises.
The organisers of the event — SAP Company and Infopark Scientific and Technological Association — attracted experts from leading consulting companies (working in Belarus and the CIS) as speakers, alongside heads of enterprises which have successfully implemented integrated information systems. One conference participant, the Director General of the SAP Office in Belarus, Ilya Yuriev, is keen to see innovations applied. He notes, “Our message to heads of enterprises is to take three simple steps: launch the use of IT; attract investments; and enhance capitalisation. We’ve invited acknowledged business ‘gurus’, such as experts from the Boston Consulting Group, to explain these steps.”
Founded in 1972, SAP (Systems, Applications, and Products in Data Processing) boasts rich experience in developing innovations and implementing growth strategies; it is an absolute leader in its sphere. Today, SAP branches operate in 50 countries worldwide, developing and selling software. Clearly, its arrival in Belarus is significant.
According to Mr. Yuriev, Belarusian directors already understand the importance of IT for enterprises and are ready to realise comprehensive automation projects.
Meanwhile, the Belarusian market is strategically important for SAP. Its first project was with a Belarusian industry giant — the Belarusian Steel Works. Implemented in the 1990s, it was one of the first within the CIS. Belarusian resources are used in SAP projects around the globe and, from the point of view of SAP software sales revenue, Belarus was among the top three CIS states in 2010.
SAP’s key clients in Belarus include Belaruskali, Belarusian Railways, Belorusneft, Mozyr Refinery, the Belarusian Steel Works, Velcom, Atlant-M, BelAZ and the Customs Committee. There are 29 in total, which form the basis of the country’s economy.
“This is illustrative of the aspiration of Belarusian companies to use world practices, while modernising their management and decision making systems. They aim to make themselves more competitive and efficient,” Mr. Yuriev asserts.
By Nina Romanova
[b]The Post-Soviet space remains mostly ‘terra incognita’ for international businesses. Of course, it takes years to build a reputation and business ties, so reliable information needs to be made available, promoting investment opportunities in our country.Unfortunately, an investor can feel like a warrior standing at the crossroads — as in the famous Russian fairy-tale. They ponder: ‘If you go left, you’ll lose your horse; if you go right, you’ll become lost’. However, nothing could be further from the truth in Belarus[/b]