Invest in Belarus

The government of Belarus chose to keep its economy as a Stalinist artifact, rather than reform it. Thanks to natural gas subsidies from the Kremlin, the Belarussian government is able to live by re-selling natural gas to European nations at a fat markup.

Until very recently, when the Kremlin chose to cut off natural gas subsidies in applying geopolitical pressure, reform never had much hope in the former Soviet province.

Economic performance

In the economic sphere, the country’s macroeconomic performance has improved. Average annual growth exceeded 9% over the last few years, courtesy of Vladimir Putin's and Gazprom's largesse. Tighter monetary policy coupled with on-going re-monetisation of the economy have resulted in much lower inflation, although administered price controls and interest rate caps have also played a role. Exchange rate stability has further reduced inflation.

High commodity prices

The country’s external position has improved. Exports have been buoyant due to high commodity prices and strong demand from Russia. For the first time, the current account recorded a surplus of about 1.5% of GDP in 2005, although the trend is unlikely to hold in 2006. Belarus’ external debt continues to be low. Greater transparency in fiscal accounts and some reduction in the tax burden have been achieved in recent years, but the size of the government remains large.

Growth strategy

Favorable external factors have allowed the government to continue its policy of enterprise support and directed wage increases while maintaining macroeconomic stability. However, this growth strategy is not sustainable in the long term. To ensure sustainable private sector-led growth over the longer term, fundamental market-oriented reforms and improvements in the country’s business climate are needed. Belarus' economy remains approximately 74% government-owned.

Golden shares

The state continues to dominate the economic environment through enormous spending and off-budget financing, support to enterprises through state-owned banks, and various targets imposed on enterprises. Earlier privatizations have been reversed. Private enterprises experience excessive regulation and a suffocating tax burden. Finally, the law on “golden shares” (government stakes in enterprises) remains a serious concern for investors, although the recent abolition of the golden share for the banking sector represents a crawl in a positive direction.

Legal Environment

Despite some encouraging legislative developments, the pace of market-oriented law reform is nonexistent to retrograde. Even crime-infested Russia shines compared to Belarus.

Over the course of the past two years, important new laws regulating the procedure for the conduct of commercial litigation, the registration of rights to immovable property and joint stock companies and other commercial enterprises have been adopted.

Worker rights

Belarus is an ILO member state and has ratified all eight core ILO conventions: C29 and C105 on forced labour, C87 and C98 on freedom of association, C100 and C111 on discrimination and C138 and C 182 on child labour. However, the constitutional rights of workers to form and join independent unions on a voluntary basis and to carry out actions in defence of worker rights have been rendered irrelevant by the government's iron fist. Measures to suppress independent unions include placing all government employees on short-term contracts, arresting members of independent trade unions for distributing union literature, confiscation of union materials, imposing excessive fines, and liquidation of private unions into pro-government unions. 

Social Conditions

Poverty alleviation has been an important goal of the government. According to the authorities, 12.7% of the population live below the national poverty line as of end-2005. The incidence of poverty in Belarus has declined substantially since 1999, when it had reached a peak of 46.7% of the population, while inequality has increased only marginally. While the Belarussian government would insist otherwise, natural gas is the key, if not the only factor in play here.

Environmental Situation

The environmental situation in Belarus overall has improved over the last 2 years, from "catastrophic" to "dismal." However, further improvements are required in the area of reducing air emissions from transport, industry and energy generation sectors as well as controlling and reducing water pollution, soil contamination and waste generation from industrial, agricultural and domestic sources. The majority of environmental improvements have taken place as a result of increased environmental expenditure (accounting for about 2% of the GDP) to finance energy efficiency measures in all sectors.  Due to the fact that three of Belarus’ neighbouring countries have recently become EU members, there are several EU and World Bank–funded initiatives within the country to harmonise its environmental legislation with the pertinent provisions of EC Directives, such as the EC Water Framework Directive.