From Logistics to Industrial Cluster
Today, the Free Economic Zone (FEZ) Minsk is home to 139 resident companies with an estimated amount of investments of € 1.5 billion
Today, the Free Economic Zone (FEZ) Minsk is home to 139 resident companies with an estimated amount
of investments of 1.5 billion
I would like to start with some really good news. In line with Decree No. 596 passed by the President of Belarus on 26 December 2011, the area of the Free Economic Zone Minsk increased by 778.2 hectares to make up 2,500.94 hectares. This will naturally encourage investments, contribute to the growth of existing companies and increase industrial production. Geographically the FEZ companies are located in Minsk, Borisov, Molodechno and in Minsk, Borisov and Dzerzhinsk districts. Over the last two years, the territory of the FEZ has expanded 1.8 times and the number of its resident companies rose more than 1.5 times.
I would like to note that the FEZ Minsk has the greatest number of resident companies. We have registered 139 manufacturing compa-
The Free Economic Zone Minsk emerged on the economic map of Belarus in 1998. Today it is entering a new phase in the development: the FEZ Minsk has recently received additional premises. This promises new growth opportunities. The FEZ offers favorable business regulations and highly qualified staff; it is located near the capital city and major transport communication lines. This makes the FEZ a popular investment destination. How fast is the FEZ growing? What industries are most popular among investors? Have the economic woes discouraged investors from putting money in the FEZ? These and other questions were addressed to Head of the FEZ Minsk Administration Alexander AKHREMCHIK.
nies with the declared amount of investments exceeding $1.5 billion. Resident companies are engaged in a variety of activities, like machine building and metalworking (60%), construction materials (9%), communication devices and radio electronics (8%), chemical and petrochemical industry (8%), woodworking (7%), printing industry (7%).
Have the economic difficulties of the last year scared foreign investors away?
Quite the opposite: in 2010 the FEZ Minsk registered 11 economic operators, while in 2011 it welcomed 52 with € 632.9 million of declared investments. The interest in free economic zones will remain, because resident companies are enti- tled to tax and customs privileges, which makes business more profitable. Social stability and a dialogue between business and government are also crucial. Decree No. 10 of the President of Belarus enhanced the investment appeal of the country and helped raise more investments. The document provided an opportunity to conclude investment agreements on several levels, including in free economic zones. Seven FEZ Minsk resident companies have signed investment agreements with the Republic of Belarus represented by various government agencies. This entitles them to unprecedented benefits and allows them to complete projects faster.
Howmuchdoesthe“admission ticket” to the FEZ Minsk cost? Do all resident companies fulfill their obligations? Do you remember any cases when they went bankrupt?
To become a resident company, legal persons or self-employed businessmen should be located in the FEZ and sign an agreement with the FEZ administration.
The admission procedures and terms are specified in Decree No. 262 “Concerning activities of free economic zones on the territory of the Republic of Belarus” signed by the Belarusian President on 9 June 2005.
The document, in particular, stipulates that the amount of investments into an investment project shall make at least € 1 million. In addition, a resident company undertakes to sell at least 70% of the total output of goods (works, services) outside Belarus, to other residents of free economic zones.
Before an economic entity is registered as a resident company of the FEZ, we hold consultations and negotiations with it. Our potential resident companies clearly understand what privileges and preferences they are entitled to and what conditions they need to comply with. They submit their business plans for examination and only after that we sign a contract on the terms of activity in the Free Economic Zone.
All the contracts are supervised by the FEZ administration and analyzed at the end of each quarter by the Council of the FEZ administration. Therefore, cases of economic failure are few. In 2011, only one entity was stripped of the status of the FEZ resident company due to non-compliance with the terms and conditions of the agreement and one producer applied for withdrawal of the status as he underestimated or, to be more precise, overestimated his potential.
Recently the Free Economic Zone Minsk has been actively developing logistics. How promising is this sector for the metropolitan region? How many logistics companies have been registered with the FEZ Minsk?
Our country is located at the crossroads of important transport corridors, and Minsk is the center of this intersection. Therefore it is only fitting that we should develop logistics. The logistics development program for 2011-2015 is cur- rently underway in the Republic of Belarus. It is a fairly new and promising area and it is interesting to many investors. Logistics Center Prilesie, Blt-logistik, Logistic Park are already engaged in the design and construction of logistics complexes.
In 2011, Viciunai Logistik and the Eurasian multimodal logistic complex were awarded the status of a resident company of the Free Economic Zone Minsk to implement logistics projects. These enterprises are planning to invest € 19 million in the logistics system of Belarus.
A new potentially significant project to build an industrial cluster has been recently announced in the FEZ. Please tell us more about it. Who is the investor of the project?
The foreign investor is the British company Daejan Holdings Plc, which focuses on projects in Eastern Europe. Among its assets is a company that is listed on the London Stock Exchange and owns real estate worth more than $2 billion. This promises a steady income and significant investments.
Freshwater Bel has been set up at the FEZ Minsk to implement the project “Creation of a modern multifunctional industrial cluster”. Freshwater Bel committed to build a modern industrial park with the related infrastructure in the Minsk airport. The sponsoring company jointly with local and foreign partners is going to attract other strategic investors for the development of specific areas.
The cluster capable of hosting international producers representing various industries will be based on the multi-purpose infrastructure of a modern-day business park. It is planned that the project will be implemented in four stages with phase-in commissioning of functional facilities: industrial and logistics terminals, a business center, a trade and exhibition complex, hotels.
Total investments, according to preliminary estimates, will make about € 155 million. They will be channeled into construction of facilities and purchase of equipment. Sources of financing are own funds of the project sponsoring company and investments.
I am sure that this project which is designed to run in 2012-2017 will make the metropolitan region
economically stronger and create the prerequisites for long-term development.
What has changed in the work of the FEZ Minsk since the Customs Union and the Single Economic Space were set up? Are there any plans to harmonize business conditions in the free economic zones of Belarus, Kazakhstan and Russia?
Belarus, Kazakhstan and Russia have signed an agreement on the operation of free (special) economic zones in the Customs Union. In line with the document, no changes regarding preferences are envisaged for resident companies registered before 1 January 2012. They will enjoy the privileges they did before until 1 January 2017.
As for resident companies registered after 1 January 2012, products manufactured on the territory of the Republic of Belarus are considered goods produced in the Customs Union territory. Goods supplied outside the Customs Union will be considered export items. Only export items will be granted privileges.
Under the new terms, the FEZ administration should submit quarterly reports to the Customs Union Commission, which was done on 1 January 2012.
It is well known that the development of free economic zones makes part of the government investment program. Which projects have been implemented in the FEZ Minsk with the support of the state? What are plans for the future?
Every year the President approves a government investment program to develop infrastructure in the free economic zones using budget funds. In 2011, the FEZ Minsk utilized Br6.4 billion to upgrade an electric power substation and install a 25KW transformer in the Shabany industrial zone, which secured stable electricity supplies in the area. The FEZ Minsk also financed a major overhaul of the road network that cost Br3.8 billion.
In the near future the government is set to finance the construction of energy facilities, engineering infrastructure and a highway system. The 2012-2014 plans include the construction of three distribution substations with cable connection, four sewage pumping stations, a water intake, treatment facilities, collectors, nearly 10km of roads with the associated engineering infrastructure.
As for the FEZ administration itself, our major goal remains the same as it was 14 years ago, i.e. to attract investors and assist our resident companies with implementation of their projects.
In 2011 the FEZ Minsk completed the construction of five resident companies with the total area of 13,051.8 m2. The construction of another twelve companies is underway. Their working area will reach 326,448 m2. The design of another sixteen resident companies is in the pipeline (the expected area will make 805,964 m2). Eleven have received permits for design works and have had the location approved.
The FEZ Minsk business plan for 2011-2015 provides for an almost twofold increase in the production of export-oriented and import-substituting products, foreign investment.
Belarus-sweden joint venture Bahco Bisov is the only producer of bimetal band and hole saws in the CIS. The resident company raised about $23 million of direct investments to construct the plant
is among the leading European suppliers of roller
shutters and sectional gates. About 90% of the
produce of the company located in the FEZ Minsk is