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

Economy of Belarus - - CONTENTS - Ok­sana SHIKUT

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

Alu­tex In­cor­po­rated

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

sold abroad

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