Investments in Belarus: Why not?

Nowadays Belarus is one of the most attractive places for industry. This is precisely the reason why many businesspeople from all over the world are looking for opportunities in Belarus. The European Union is the second most important market for Belarusian exports, and it accounts for more than half of all foreign investments in the Belarusian economy. Recently, international rating agency Fitch Ratings has assigned Belarus a long-term sovereign credit rating at B- and a short-term rating at B with a stable outlook.

One of the recent successful reforms in Belarus is Decree 84 designed to attract foreign investors. This law provides legal framework for securitization of Belarussian companies on stock exchanges around the world. Thus, foreign investors can buy shares of Belarussian companies on their own stock exchanges in their currency.

Belarus offers opportunities to develop production in the center of Europe in exclusive economic zones (EEZs) that have access to a very large potential market. Thanks to low production costs, an educated workforce and developed infrastructure, there is an opportunity to quickly organize manufacture of high-quality production.

Belarus offers foreign companies unique opportunities linked to acceleration of privatization process. 70% of manufacturing is under government control. Unlike Russia and other countries of former Soviet Union and Eastern Europe, Belarus kept the largest industrial enterprises in state ownership that provided them with government support and, as a result, significantly increased their production potential and international competiveness.

Belarus has a number of preferential arrangements that can be used by foreign companies for tax optimization. They include favorable economic conditions in the six free economic zones (0% — income tax for 5 years; after 5 years the rate reduced by 50% from the rate set by the tax legislation, but no more than 12%; 10% — VAT); from 1 January 2016 the FEZ residents registered after 31 December 2011 enjoys exemption from profit tax for ten years; High-Tech Park (0% — income tax, 0% — VAT) and the industrial park Great Stone (0% — income tax for 10 years.( Foreign companies may reduce cost of investment and the tax burden when placing their business in small and medium towns of Belarus (0% — income tax for 7 years).

Belarus has significant economic potential, which stable industrial base together with an advantageous position on the map of Europe cause the country to become the vital link between the European Union and Russia. The geo-economic position makes Belarus a transportation and logisticsl hub of the Eurasian region. Belarus’ transport infrastructure is represented by a widespread network of highways, railroads and air links. Its highways are important part of the European road network. Nowadays companies that make investment in Belarus automatically get access to the Eurasian Custom Union that also includes Russia, Kazakhstan and other countries. Within this space there are no tariffs and there are no quantitative or other non-tariffs restrictions.

The Republic of Belarus is an export-oriented country with a developed industry, services and agriculture. The country is one of the leading world exporters of trucks, tractors, road-building and municipal engineering. Today every tenth wheel tractor in the world is made in Belarus.

Belarus produces 17% of all harvesters in the world, 6% of tractors, 6.4% of flax fiber and 1.6% of potatoes, and the share of producer BelAZ dump trucks reaches 30% on the world market. By producing 1.4% of the global volume of milk in the country, export of dairy products is about 4,6% of the world market, and butter is about 3%.

The eight most significant Belarusian goods, which account for between 30 and 0.6% of world productionare trucks, road-building machinery, tractors and agricultural machinery, refrigerators and household appliances, fertilizers, flax, chemical fibers and yarns, meat and dairy products.

Among countries of the former Soviet Union, Belarus holds leading positions in chemistry and petro-chemistry, agricultural and automotive machinery, agriculture, and light industry. There are significant developments in the sphere of high technologies, in particular in the manufacture of optical and laser devices, and automated control systems.

Belarus is one of the most creative countries

In the latest edition of the Martin Prosperity Institute’s annual Global Creativity Index 2015, Belarus ranked 37th, not only higher than other Eurasian Economic Union countries, but also better than some of the EU neighboring countries like Latvia, Lithuania and Poland.



Belarus was followed by the Russian Federation (38th). Kazakhstan, Armenia and the Kyrgyz Republic were far behind — 84th, 103rd and 111th respectively.

Out of the three components that are measured in the ranking (talent, technology and tolerance), talent is Belarus’ main asset as in the talent sub-index the country ranked 8th, placed equally with New Zealand, Slovenia and Sweden.

In the technology sub-index, Belarus was -41th as far as R&D investment is concerned and 25th in the number of patents per capita.

Belarus has tradition of excellent education. For every 10,000 people, there are 467 students in Belarus – 5th in the world after USA, Russia, Poland, and Finland. And one fourth of all students in Belarus choose to study technology and engineering

According to the World Bank, it is easier to start a new business in Belarus than in the U.S. Belarus ranks as the -12th best country in the world for the easiness of starting a business.

IT industry in Belarus

Belarus has a growing technology sector (as recently shown by its per capita exports). The volume of Belarus per capita exports of computer services exceedes those of USA and India. Thus, Belarus computer services exports reached 60 US dollars per capita, meanwhile the same export indicators in USA and India were 36 US dollars and 41 US dollars respectively.



Belarus is the only country among the members of its customs union (which includes Russia and Kazakhstan) with a positive balance in computer services. The number has grown rapidly over the past 5 years.

Belarus has become an unexpected top performer in information technology, with its programmers developing such worldwide hits as the World of Tanks game and mobile messenger app Viber. More than 38,000 people work in the IT sector and the value of its companies' exports is growing by 40 to 50 percent per year. It reached 800 million US dollars (740 million euros) in 2015. Belarus has encouraged the growth of IT companies with tax breaks. The developers of computer programs have relatively high salaries and have become elite.

The in-demand Belarusian programmers, most of whom are under 30, enjoy a wide range of perks. In a decade, the monthly salary for programmers at the tech park has risen from 236 US dollars to 2,000 US dollars, higher than in other countries in the region. The employees pay a fixed lower rate of income tax, 9 percent instead of 13 percent. They also get Western-style benefits packages.

Belarus is becoming known worldwide for its IT and software development capabilities. In 2011, the National Outsourcing Association (NOA) named Belarus 5th best outsourcing location, ahead of regional giants like Russia (18) and Ukraine (23). In 2012, it was one of Tholons’ top emerging outsourcing destinations and was included in Gartner’s Top 30 Offshore locations.

In 2015, Belarus was selected as one of the Offshoring Destinations of the Year in a shortlist announcement of country nominees by the European Outsourcing Association (EOA) as part the EOA Awards. The Awards recognize best practices in outsourcing by companies, individuals and countries.

Belarusian programmers' start-up ranked in the top-5 best innovative ideas for the American National Aeronautics and Space Administration (NASA). The international competition brought together 1,300 start-ups from 160 cities worldwide. In Minsk, the hackathon Space Apps Challenge was held in the business incubator of the Hi-Tech Park.

The Belarusian IT-project Wake Up NEO came in the top 25 in the People's Choice category and later reached the final. A quartet of programmers and the head of the Minsk planetarium within 48 hours developed a unique service that helps to calculate and estimate the orbit of an asteroid and determine the danger it poses to the Earth. The winners of the competition will have the opportunity to personally observe the launch of the NASA spacecraft from Cape Canaveral.

It was Belarusian programmers along with Israelis with Belarusian roots who developed the Viber free phone call app, working for Viber Media, which was started by two Israelis and has now been sold to Japan's Rakuten. Viber offers a mobile platform that works on any mobile device and allows free calls and messaging. The best-known Belarusian IT company, Game Stream, created the World of Tanks game, played by more than 100 million people around the world.

Historical background of Belorussian IT

As early as 1517, Belarus was one of the first nations in Europe to have its own printed Bible. Francysk Skaryna was one of the first people to print books. He printed them in Prague in Old Belarusian language.



Under the Soviet rule, Belarus was considered to be the “Silicon Valley”. During the Soviet era, Belarus was the IT and technology hub for the entire USSR. Belarus supplied over 60% of all the IT and technology systems used in the Soviet Union meaning that there is a long heritage of technology knowledge as well as deep expertise in a variety of technologies. Since the 1960s, Belarus has also become a software development hub and is responsible for coining the term “programmnoe obespechenie” or “software” in Russian.

This heritage of working with technology may also explain an important cultural difference with other technology hubs, such as India. When teams of techies are assigned to a project in Belarus, they usually feature a range of ages, experience, and knowledge of many technologies. The culture of being an engineer or technician remains strong in Belarus, so an expert programmer doesn’t feel shame in remaining ‘just’ a programmer.

The turning point for the IT industry came in 2005 when Belarus set up its Hi-Tech Park, where companies can work without paying any corporate taxes. High Tech Park Belarus offers some of the best tax benefits in Europe for tech companies. IT companies are exempt from all corporate taxes, including VAT, profit, real estate and land taxes. The government-led initiative has tremendously helped the IT sector. Almost entirely virtual, the Hi-Tech Park only has a handful of physical buildings close to the center of Minsk. Already ten percent of employees at the tech park are German, French, British and South Korean. The rest of the 144 companies that are “residents” of the park have offices elsewhere in Minsk or in other cities.

The success of this venture has encouraged the government to try to replicate its success in other innovative sectors as well. At present, two other technology parks are being established which are to follow a similar operational model. The Great Stone Industrial Park is a joint venture with China, which will be offering land plots and the infrastructure to establish high-tech manufacturing businesses with a preferential tax regime, as well as a range of other business privileges.

BelBioGrad is the latest national project to establish a Techno-park for innovative businesses in pharmaceuticals and nano- and bio-technology, under the auspices of the National Academy of Sciences which draws on its human capital. While BelBioGrad is still in a conceptual phase, the idea is to follow the model of BHTP as closely as possible.

Innovation clusters and their development

The last two decades have been characterized by rapid developments in networking and clustering. These processes have become a source of competitive advantage for local and regional economies as well as a challenge for economic policy and research. According to the European Cluster Observatory clusters indeed play a crucial role in economic reality and around 38% of all European employees work in enterprises that are part of the clusters. There is high correlation between the strength of regional portfolios (human resources, patent applications, employment in medium- and high-tech manufacturing) and regional innovation performance. Clustering is vital for the output of innovation as well as for the growth of productivity and competitiveness. So what are their characteristics?



Successful economies are those which have the ability to learn. They are able to take the ideas embodied in the existing academic knowledge and technologies, and translate them into an innovative capability. Taiwan experience demonstrates that intra- and inter-industrial spillover effects have a greater significance from the viewpoint of production growth than do individual companies’ efforts in R&D (Tsai, D.H.A., 2005, Knowledge Spillovers and High-technology Clustering: Evidence from Taiwan’s Hsinchu Science-Based Industrial Park, Contemporary Economic Policy, vol. 23, no. 1, pp. 116–128)

The research carried out in the Wielkopolska Region (Barbara Jankowska, Maciej Pietrzykowski, Clusters as absorbers and diffusers of knowledge, Poznań University of Economics Review, Vol. 13, Number 1, 2013) has provided an insight into the threats that hinder the fostering of innovativeness through economic cooperation within networks, including clusters. The threats related to the phenomenon of innovativeness can be associated with the barriers to cooperation between companies and R&D institutions involved in networks. The most important barrier is still a gap in the financial system supporting networking performance. It is a challenging task for the regional and local authorities to develop such a system and especially to decide how to finance it and subsidize network and cluster organizations. Beside the financial system, there is also the barrier in an entrepreneur’s mind which blocks cooperation. To break this barrier the regional and local authorities should promote such cooperation and demonstrate its benefits. Fostering knowledge spillovers and knowledge transfers in regional networks and clusters requires coordination among all relevant actors.

Belarus has necessary potential to become a hub for outsourcing. Thanks to its prudent policy of gradual transition, Belarus is one of the few post-communist countries that have managed to preserve the most valuable remnants of the human and physical capital that they have inherited from the past. It is still one of the most industrialized economies in the region just as was in Soviet times; however Belarus also has made some noteworthy achievements in innovative segments of its economy. The country has all necessary ingredients: an educated workforce, a research base, developed infrastructure. Thus, forward-looking innovative businesses and investors from abroad may find great opportunities in the high-tech enclaves of the Belarusian economy. Joint projects with Belarusian entrepreneurs that can attract venture capital are especially promising ones.