Martyn Bond observes delegates from the Republic of Belarus discussing their financial policies, outlining the advantages of investing in Belarus during this optimal stage in its economic development 

Fresh from a presentation in New York, a high-level delegation from the Republic of Belarus hit London in mid-November to press home the message that Belarus is open for business. It was headed by Sergei Roumas, Chairman of the Belarus Development Bank, and the Minister of Economy, Nikolai Snopkov, gave the opening address. With him on the platform at the Institute of Directors was First Deputy Foreign Minister Aleksandr Mikhnevich (also Belarus’s former Ambassador to the UK), Deputy Chairman of the National Bank Sergei Kalechits and Deputy Minister of Finance Maksim Ermolovich. They had just finished bilateral discussions with UK government ministers and were keen to lay out the advantages of investing in their country at this stage of its development.

Of course they had good news to tell. Partly the success of companies already operating in Belarus – Heineken, EPAM Systems, Dana Holdings and the Swedish firm WH International – and partly the attractions of new industrial and hi-tech parks, with all the tax and other concessions you would expect from a state keen to attract foreign direct investment. Belarus representatives claimed that already well over 200 companies with UK capital are operating in their country, and they aim to multiply that number by ten in the near future.  They offer ‘political and social stability, with low levels of corruption and crime,’ a heavy engineering inheritance from the former Soviet Union, vast reserves of potash, a vital ingredient in fertiliser, and a fast developing IT sector. Belarus is located at a crossroads for European transit, eastwards into the nascent Eurasian market of 170 million people ‘from Minsk to Yerevan’ and westwards into the EU single market of 500 million people.

Many of the details revealed in the presentations were striking.  Some 90 per cent of young people are in higher education, and a well-educated workforce gives Belarus a strong competitive advantage. The cost of an IT employee there is barely one seventh of the cost of an employee of equivalent training in Silicon Valley. One third of the country’s surface is water or wetlands, giving Belarus one of the highest levels of water reserves of any country on Earth – and an American water purifying company was investing, proof of its economic attractiveness.

The Deputy Minister of Foreign Affairs took the question of Western sanctions against Russia head on. Sanctions can hurt, he said, but they also offer an opportunity. “Don’t be afraid,” he argued. EU sanctions had “no real effect,” hitting only a small list of companies and a couple of hundred individuals. US sanctions hurt the banking sector more, but in food processing, for instance, there were more opportunities in Belarus than obstacles. Polish, Latvian and Lithuanian companies, he claimed, had reprocessed half a billion dollars worth of food products within the past two months and exported them to Russia. “Wake up, Britain,” he urged. “Minsk is only two and a half hours away by plane.”

His upbeat speech encouraged businesses to come to Belarus for the simple reason that “Belarus needs investment. You don’t need a partner. You can just come, register, get land allocation, a tax number, set up and start to work!” Other panelists confirmed that Belarus is now 57th in the league table of states for “ease of doing business” – “ahead of five states in the EU,” one claimed.

What about banking stability? The Deputy Governor of the central bank was reassuring. Of the 31 banks operating in Belarus, some two thirds are foreign-owned. Overall, the sector needs about US$1 billion additional capital, but already bank assets represent a high proportion of GDP. The real rate of return in the banking sector is 1.5 per cent and 2 per cent, he reported, and although the inflation rate was higher than he wanted, capital adequacy ratios were strong, nearer 15 per cent than the minimum 10 per cent required. The sector was well prepared for exogenous shocks, and the central bank kept adequate gold and foreign exchange reserves.

And financial policy? The Deputy Minister of Finance pointed to a five year record of improving the international position of Belarus. Government debt is low as a percentage of GDP, and tax and incentive structures for business were now attractive and “in line with European praxis.”  The government was budgeting for a US$2 billion surplus in 2015, had access to international markets to rollover debt, and expected to issue another bond in 2015 for US$2 billion, probably with ten years’ maturity, when the government redeems an existing six-year bond for US$1 billion. He was proud that his country had never defaulted on its debts – internally or externally – in more than 20 years since independence.

The other jewel in the crown for Belarus is the potential from its privatisation programme. There are about 3,500 state-owned businesses and Minister Snopkov declared, “There is not a single business we are not prepared to sell.” Of course, not only is the price important, but also the conditions. In discussion it became clear that Belarus is not in the business of sacrificing its security, its vaunted levels of social stability, and its quality of life. Tenders for privatisation of some industries are already open – www.investinbelarus.com – and the key Foreign Investment Advisory Committee already set up. This will clearly be a growing attraction for foreign investors.

But this openness to attract foreign investment raises some questions that the seminar was clearly not designed to discuss. While acknowledging that Belarus has a poor image politically, speaker after speaker concentrated on the economic prospects and steered clear of the human rights issues that are more frequently reported in the foreign press. Foreign investors face a dilemma, with Belarus as with any other country that has what one might politely describe as a ‘problematic public image.’ Does foreign investment simply bolster the existing regime, or is it an instrument for change? Or is that a false dichotomy? Would a richer and more developed country have a better chance of increasing democratic participation and respect for human rights? Do businessmen have a political responsibility, or is money blind