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Belarusian government provides favourable investment conditions to foreign investors.
Andrei Kobyakov, Deputy Prime Minister of the Republic of Belarus
 An increasing inflow of foreign investment in Belarus has come due to the sustainable growth of the export-oriented economy, low inflation, rapidly developing financial and insurance markets, social stability and well-developed infrastructure. The country is geographically well positioned, has highly skilled workforce and great scientific and technical potential. The corruption and crime rates are low.
Good Legal environment Belarus has advanced investment legislation. The main legal document governing investment relations is the Investment Code of the Republic of Belarus, which provides for equal business terms for domestic and foreign investors, identifies their rights, sets forth investment protection guarantees.
In accordance with the Investment Code, an investor can sign an investment contract with Belarus as represented by the Government or a body authorized by the Government. An investment contract sets forth obligations of both sides; investors can be provided additional guarantees and benefits. Such contracts have been concluded to reconstruct an administrative compound in Minsk, to construct an A-class business and entertainment centre covering the area of 100,000 square metres, to build premises in the High-Tech Park, to set up a facility to manufacture and repair freight railway cars and tank-containers. The Investment Code also establishes new investment instruments, for example, concession. Today the country offers iron ore, gypsum and aqua-gel deposits for concession.
Toward New Stage in Development
But competition in the international market necessitates dramatic improvements in innovation and investment activity based on the latest technologies. This is probably the number-one priority for Belarus.
Extensive work was done in the previous five-year period to bring about these improvements when the efforts were channeled into creating an environment conducive to innovative development, promotion of investment in the country’s essential industries and manufactures. The first stage of this work resulted in the drawing up of the national innovation development programme of the Republic of Belarus for 2007-2010. This programme has been in progress for a little more than a year, and it has already helped start 19 new companies, 27 new manufactures and upgrade 37 facilities.
As an example I can cite here the setting up of the manufacture of the 0.5-0.35 micrometer integrated circuits at the Integral Research Production Association, a facility for making landline and mobile communication equipment at Sviazinformservice, developing the software and tools for research and measurement of the xDSL parameters at Giprosvyaz company, designing and manufacturing PC-21 (the Display design bureau), setting up the production of data terminal equipment for non-cash payment systems (MPOVT company), production of automobile optics (the Optik Plant in the town of Lida), manufacture of potentiostat and constant-voltage units (Transistor Plant in Minsk), production of fluorescent fixtures with ?8 series lamps (Lida Electric Ware Plant) and so forth.
The programme has been bearing fruit, and further on will help us turn the scientific and innovative potential of Belarus into the driving force behind the national economic growth.
International organisations praise the efforts of the Belarusian government in this area and view the country as one of the best in the CIS in terms of investment potential. Two international rating agencies, Standard and Poor’s and Moody’s Investors Service, have assigned the sovereign credit rating to Belarus at B+, the Outlook is Stable. Standard and Poor’s said that “the economy of Belarus is one of the most developed among the countries in the B+ category”. The work is under way to upgrade the sovereign credit rating.
Making It to Top Thirty
In his State of the Nation Address to the Belarusian People and the National Assembly of the Republic of Belarus on April 29, 2008, the Head of State set forth a new target, namely to advance Belarus to the list of the 30 countries with the best business climate.
To achieve this goal, the Government has been working on improving the legislation on business environment, investment and innovation, budget, tax and price policies, state property management, development of the financial market and foreign trade.
Stimulating investment activity is seen as part of these efforts.
For example, Belarus has set up territories enjoying special economic preferences. These are six free economic zones, High-Technology Park, urban settlements with a population under 50,000.
They provide a special taxation regime for investors (for example they are exempt from profit tax within the first years of an investment project and from several other taxes, duties); they enjoy customs privileges (they are exempt from customs duties and VAT in import of goods), special conditions of foreign currency regulation (exempt from mandatory selling of some part of foreign currency proceeds). Some other preferences are stipulated for them in the legislation.
Favourable conditions have been created for small business. The companies employing fewer than 100 people pay one tax under simplified taxation schemes. If a company employs fewer than 15 people, it is relieved from maintenance of accounting records. Local authorities are authorized to give small businesses loan repayment guarantees if these businesses decide to apply for a bank loan, to reduce rates of the real estate, land and ecological taxes.
Cultivating Favourable Economic Conditions
Big transnational companies, however, do not care much about preferential terms. What is important is long-term prospects including stable economy, strict rules of the game and government control over the observance of these rules. But government involvement should not cause impediments to prompt corporate decision making.
Therefore the focus in the investment policy is gradually shifting from cultivation of a preferential regime to cultivation of universal favourable economic conditions conducive to investment.
In this connection, the Government has placed a renewed emphasis on easing administrative procedures in starting up (closing down) private business entities, obtaining special permits (licenses), including construction licenses (construction and installation services), allotting and withdrawing land plots, property registration, customs clearance.
The declarative principle for registering economic entities has been introduced for these purposes. The Government has reduced state registration to 15 days; the list of documents necessary for registration has been cut down too. The amount of a required minimum authorized fund has been halved. Attendance is no longer required while the documents are being filed for registration. The procedures for winding up economic entities have become much simpler. A one-stop shop principle is applied in issuing licenses for certain kinds of activity. A list of documents necessary for getting a license has been established. A license can be repeatedly prolonged, with the paperwork being reduced evener further. The timeframe is not more than 15 days. A differentiated approach is allowed in making a decision on suspending a license (it is also allowed to suspend a part of the license or separate types of licensed activity).
There have been improvements in the design and construction license procedures. For example, the list of licensed services in construction has been reduced from 23 to 15. A license is no longer required to construct two-storied buildings for agricultural purposes. The paperwork for prolonging a license has been reduced to 15 days.
Examination proceedings have been abolished for routine maintenance and repair of buildings; construction of buildings of standard and repeatedly used designs; one-family one or two-storied houses; renovation and modernisation of buildings if load-bearing elements are not subject to alteration.
A developer needs to file three documents instead of the previous 18 for a construction license. A license is to be issued within 10 days since the application is filed.
The Government seeks to establish clear and transparent regulatory framework which would allow a foreign investor to purchase a facility and do business confidently. At the end of last year the legislation on withdrawing and allotting land plots was reviewed root and branch. A scope of authority of local authorities in allotting land plots was expanded. Unified rules have been established for all regions of the Republic of Belarus, namely, by auctions. The auctioning off of state-owned real estate on the territory of the Republic of Belarus shall be accompanied by selling the right for concluding the respective lease contract which is necessary for managing the property concerned.
The answerability of government officials for red tape, unjustified refusal to allot a land plot has been increased. Thus basic measures to simplify administrative procedures have been already taken yet the work in the area will be continued. For example, the state registration of an economic entity is supposed to be cut down further to 5 days. The examination of design estimates will become a one-stop shop: a project developer will be in charge of all kinds of coordination and examination before a project is handed over to customer.
An important improvement in the investment climate was the abolishment of the ‘golden share’ rule, which used to cause complaints from international organisations, and which as foreign investors believed hampered an inflow of foreign investment in Belarus.
How are ownership issues solved?
An important step towards a more attractive investment climate is the solution of ownership issues. Starting from 2008, a plan for the privatization of state property has been developed for a medium-term perspective. Such plans are elaborated for a three year period thus giving investors an opportunity to get exhaustive information about an enterprise or a joint stock company they are interested in, while the enterprises and joint stock companies gain additional time to search for potential investors, post information and carry out an advertizing campaign.
In line with the 2008-2010 privatization plan, more than 500 national companies, including the internationally recognized ones, will be privatized. Among them are Minsk Motor Works, BelOMO, BelautoMAZ, Integral, Gomselmash, Minsk Plant of Wheeled Carries as well as companies involved in motor transportation within the country and abroad, up to 15 poultry factories and a number of other enterprises. About 150 public corporations have been created as a result of the privatization of the state property. The shares of the Republic of Belarus in these companies are to be sold.
Apart from that, in 2008-2010 a moratorium will be gradually lifted on the alienation (disposal) of JSC shares purchased by individuals from the state on preferential terms or in exchange of personalized vouchers “Imushchestvo”.
The government is working on the measures to stir up institutional changes in the country’s banking sector through the attraction of private investment in Belarusbank, Belagroprombank, BPS-Bank and Belinvestbank. The Belarusian legislation allows various forms of foreign investment; it also pertains to the cases when the state property is acquiring a different form. The enterprises can be reincorporated as joint stock companies; even more than that, they can be sold as property complexes. If an investor has an investment plan and is ready to assume the liabilities of a company they want to purchase, he/she will be able to buy it only at 20% of its assessed value and in certain instances even at one basic value (Br35000).
In order to stir up the inclusion of unused state property into the economic activity, the government is working on the procedures regulating the lease and gratuitous allocation of buildings that belong to the state.
Green light for companies involved in foreign trade
At present, the Republic of Belarus has trading partners in about 170 countries around the world. The openness of the Belarusian economy and the vigorous trade with many countries necessitate the simplification of the procedures regulating the foreign trade relations. On July 1, 2007, a new Customs Code of the Republic of Belarus came into force. Under this Code the customs clearance is to be carried out within two days.
On July 1, 2008, an electronic declaration of exported commodities has been introduced in Belarus. The customs permits are issued in the electronic form, too. These measures will reduce the time spent on the customs clearance of exported commodities.
On January 28, 2008, the Head of State signed Decree No. 40 introducing status of “bona fide participant of foreign economic activity” (similar to the Authorised Economic Operator in the EU) . Its holders will be entitled to the simplified import of commodities and easier customs clearance. At present, more than 200 companies involved in foreign economic activities have such a status.
On March 27, 2008, the President of Belarus signed Decree No. 178 “On the Procedure of Carrying Out and Overseeing Foreign Trade Transactions”. In line with this document, beginning from October 1, 2008, the banks become responsible for the registration of transaction passports. This measure will relieve the customs services of some responsibilities.
On December 31, 2007, the President of Belarus signed ordinances ? 699 to introduce on January 1, 2008 new export and import tariffs. As for customs tariffs, new rates have been harmonized with those used in Russia. As a result, import duties on 1106 commodities have been reduced. The document introduces zero rate of the import customs duty in relation to 775 ten-digit codes of commodities falling under manufacturing equipment.
To upgrade and re-equip current manufacturing facilities, from January 28, 2008 Decree No. 41 established zero import customs duty for the period of 9 months in relation to a list of commodities involving 172 ten-digit codes of manufacturing equipment. The Belarusian government remains committed to creating better conditions for carrying out foreign economic activities. It intends to further simplify customs procedures and certification and transit formalities.
Expanding the financial market
High-profile efforts to liberalize the national economy and raise investment profile of the country also include the measures to develop the financial and securities market.
In concurrence with the National Bank, the banks are entitled to issue bonds that are not backed by collateral, banker’s guarantee or mortgage. They have also been given the right to carry out securities activities of the emitting banks.
Apart from that, the banks got an access to an expanded list of sources to obtain capital stock. Measured have been taken to streamline the crediting procedures and simplify the transactions between legal entities and sole proprietors.
Yet, the key legal acts regulating the financial, securities and investment market are still in progress. These documents are expected to be adopted in a package in late 2008 -early 2009. They include the new version of the Law of the Republic of Belarus “On securities and stock exchange”, the draft changes and amendments to the Law “On custody business and depositary trust company” and draft legal acts on the development of investment funds, ventures and venture activities.
Statistics that speaks volumes
The improvement of investment legislature is aimed at creating better conditions for foreign and domestic investment activity. It results in an increasing pickup of foreign investment. Over the last years, Belarus raised about $18,200. of foreign investment. In H1 2008 alone, the foreign investment in the production sector of the Belarusian economy rose 43.6% from the same period of 2007 to reach $3,340., of which direct investment amounted to $1,232. or 2.4 times up from the same period of 2007.
In H1 2007, the share of direct foreign investment was 21.9% vs. 36.8% in H1 2008. It reveals an upward trend in the attraction of direct foreign investment and the improvement of the quality of investment.
Belarus is home to more than 4200 companies with foreign investment from 68 countries. The major investors include Russia, Great Britain, Austria, Switzerland and Germany.
An additional impetus for investing in the Belarusian economy has emerged with the improvement of the international legal regulation of the investment activity. Belarus has signed about 50 bilateral agreements view a view to making investment easier and risk-free. Over the last two years alone, the Republic of Belarus has concluded bilateral agreements with Finland, the Democratic People's Republic of Korea, the Republic of Slovenia, the Bolivarian Republic of Venezuela; other intergovernmental investment agreements, including the multilateral ones, are in progress. Belarus is bound by these agreements to provide fair and equitable terms of doing business for both national and foreign investors and secure a complete and unconditional protection of investment and profits gained by investors.
Building up a positive country image abroad
Belarus attaches a paramount importance to creating a positive country image abroad. A National Investment Site and a site of the Economy Ministry have been designed to provide potential investors with information on the investment projects of Belarusian companies.
International investment conferences are held under the auspices of the Belarusian government to introduce investors to promising investment projects and familiarize them with the economic background and legal framework of Belarus. A major investment forum is to be held in London in November 2008. Participating in the forum will be about 350 delegates representing investment, consulting, banking organizations and the companies of the productive sector of the economy. The goal of the forum is to engage in a serious economic dialogue with the financial community, to establish and expand business contacts, to find new investors and implement short and long-term investment projects.
I would like to note an active role of the Advisory Council on Foreign Investments of the Council of Ministers of Belarus in the creation of a favourable investment climate in the country and the information support of foreign investors. This body became a bridge between the government and foreign investors whose mission is to establish a direct constructive dialogue on key economic issues. In 2008, the task groups and the permanent committee of the Advisory Council focused on the fulfillment of the recommendations of the foreign participants of the Council. These recommendations include a greater information support of foreign investors (an annual collection of the relevant laws and the investment offers of the Belarusian enterprises), regular surveys of foreign investors, better tax and customs legislation and new forms of financing investment projects within the framework of the partnership between the state and business. XXX
The Belarusian government is consistently working on attracting investment in the national economy. This goal can be achieved through the creation of necessary stimuli and favorable general conditions for doing business, an efficient mechanism of the interaction between the governmental bodies and investors. It is important to note that this work is carried out by joint efforts of the government and investors.
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