Strategic values of capital

Minsk recently hosted two large forums devoted to capital markets, bringing together high ranking representatives of the London Stock Exchange, Deutsche Bank, White and Сase law firm, PricewaterhouseCoopers consulting company, Capital Times investment company and Sberbank of Russia

Leading international financial experts, investors and bankers advised Belarusian enterprises on modern financial instruments. The Government is convinced that it is high time that Belarusian business used these instruments and joined the global capital markets.

Alternative to credit
“The traditional methods of making loans, to which we’re accustomed, are a thing of the past,” stressed the Economy Minister, Nikolai Snopkov, delivering a speech at the Belarusian Capital Markets Summit. “There are many other interes-ting, less expensive and more flexible instruments for attracting capital to developing companies.”
The Government is now looking at such popular global financial instruments as corporate bonds and IPOs (Initial Public Offering) for attracting direct investment to businesses. Finance Minister Andrei Kharkovets believes Belarus’ large state enterprises should be more dynamic and move away from old financial practices towards an independent search for cheaper (in compa-rison to credits) sources of finance.
There was a plan three of four years ago for large Belarusian businesses, particularly oil processing companies, to join the global capital market. An Initial Public Offering of 10-15 percent of shares was to be floated on the international market to finance the modernisation of those companies (as well as to gauge their market value). However, the IPO was reconsidered when the global crisis seriously affected the financial markets and many companies lost value. The time for stepping into the market was acknowledged to be unfavourable.
Most analysts agree that the crisis is over and that now may be the time to join the global financial market. The Government itself has made a start, placing $1bn of Eurobonds last year. According to the Economy Ministry, this is a signal to the corporate sector. “Clearly, access to foreign capital requires a certain level of experience,” says Deputy Economy Minister, Dmitry Golukhov. “However, those companies which have a strategy for joining the international market will gain a competitive advantage.”
Experts note that working with foreign sources of finance will require that Belarusian companies meet international standards in accounting. Transparency and openness will also be needed. A new economic culture will develop and, eventually, Belarusian business will be integrated into the global economy.

Investment interest
Belarus is becoming ever more attractive to global capital. The recent changes in legislation aimed at the protection of investors’ interests have created a favourable environment for the injection of capital into Belarusian businesses. Mr. Snopkov stresses that, during the crisis, the Belarusian economy was stable. GDP maintained positive growth and the predictable economic environment enabled investors to realize free repatriation of capital.
Investors might see it as advantageous that Belarus lags behind neighbouring Russia, Poland and Ukraine in the use of modern flexible and cheaper financial instruments. This potential is attractive. Financial analysts predict that investors will be more interested in purchasing shares in Belarusian companies than in Russian or Polish companies, since a developing market usually equates to good growth potential and a good return on the money invested.
Western investors have their own view of the situation. The Head of Moscow’s Deutsche Bank Office, Joerg Bongartz, sees good prospects for the Belarusian market. He notes the high rate of growth in our GDP, our successful recovery from the global crisis and Belarus’ advantageous geographical location. He says that the world has been impressed by the Government’s successful debut on the Eurobond market in 2010. He explains, “Investors were unanimously interes-ted in investing money in Belarusian Eurobonds.” The German banker adds that it is primarily western banks, insurance companies and investment funds that are buying these bonds, displaying faith in the economy. While developing its co-operation with the Government, Deutsche Bank is eager to act as an organiser and consultant for our companies on the international capital markets (regarding the issue of corporate bonds and placement of securities). Deutsche Bank is a member of the working group involved in the IPO (Initial Public Offering) of Belarusian Automobile Works.
According to experts, the largest state banks including Belarusbank and Belagroprombank are likely to become IPO pioneers. They are better prepared to take that step and well understand what an IPO is and what its advantages are. Experts also note that an IPO is an instrument which best suits large, stable companies such as Belarusbank, Belagroprombank and BelAZ.
Mr. Bongartz notes that western partners are interested in participating in the orderly privatisation of our companies, while increasing their efficiency. Judging by the recent announcements of the Economy Ministry, this interest is reciprocal.

By Vitaly Volyanyuk