On a Re­gional Scale

In 2011 over $1.8 bil­lion in for­eign in­vest­ments was chan­neled into the real eco­nomic sec­tor of Minsk Oblast

Economy of Belarus - - CONTENTS - Nadezhda MATVEYEVA

In 2011 over $1.8 bil­lion in for­eign in­vest­ments was chan­neled into the real eco­nomic sec­tor of Minsk Oblast

Mu­tu­ally Ben­e­fi­cial Part­ner­ship

The cap­i­tal re­gion is the sec­ond big­gest con­trib­u­tor to the na­tional econ­omy. It boasts a fa­vor­able ge­o­graph­i­cal po­si­tion, de­vel­oped trans­port in­fra­struc­ture, suf­fi­cient land re­sources, highly qual­i­fied per­son­nel, prox­im­ity to Minsk. How­ever, the lat­ter is to blame for un­even dis­tri­bu­tion of in­vest­ments. Busi­ness­men are mostly in­ter­ested in the ter­ri­to­ries clos­est to the cap­i­tal city, while we would pre­fer in­vest­ments into re­mote ar­eas that need di­verse and high-tech pro­duc-

The amount of in­ward in­vest­ments can be viewed as an in­di­ca­tor of busi­ness ap­peal of a coun­try or a re­gion, the level of trust of for­eign part­ners in fi­nan­cial and eco­nomic en­vi­ron­ment of a par­tic­u­lar place. Lo­cal au­thor­i­ties play an im­por­tant role here: they should present and sell a pe­cu­liar com­mod­ity called in­vest­ment op­por­tu­ni­ties. Deputy Chair­man of the Econ­omy Com­mit­tee of the Minsk Oblast Ex­ec­u­tive Com­mit­tee Ye­lena Sushke­vich talks to the Econ­omy of Be­larus Mag­a­zine about the state of ef­forts to raise for­eign in­vest­ments in Minsk Oblast, the cen­ter­most and big­gest re­gion of Be­larus.

tion fa­cil­i­ties. In the end, this will help cre­ate new jobs and raise salaries. It is par­tic­u­larly rel­e­vant for the Krupki, Berezino, Uzda, Kopyl, Vileika and some other dis­tricts of the oblast.

“Nat­u­rally, Minsk Dis­trict is of great­est in­ter­est for in­vestors; how­ever, we be­lieve other dis­tricts also have many things to of­fer. On our part we are ready to as­sist them in many ways and con­sider their pro­pos­als. To­day the most promis­ing ar­eas in­clude Dz­erzhinsk Dis­trict part of which was in­cluded in the Minsk free eco­nomic zone, as well as Smole­vichi Dis­trict and Lo­goisk Dis­trict where satel­lite towns are to be con­structed. Borisov Dis­trict has a great po­ten­tial, too. Ma­jor projects fi­nanced by for­eign cap­i­tal are be­ing im­ple­mented or will soon be launched here,” Ye­lena Sushke­vich says.

I would like to say that in 2011 Minsk Oblast made some progress in rais­ing for­eign in­vest­ments, although not all plans came to fruition. Last year, over $1.8 bil­lion in for­eign in­vest­ments was chan­neled into the real eco­nomic sec­tor (up 9.4 times com­pared with 2010), in­clud­ing $363.8 mil­lion in for­eign di­rect in­vest­ments.

For­eign di­rect in­vest­ments are the most de­sir­able form of for­eign cap­i­tal. It al­lows ma­te­ri­al­iz­ing largescale projects and is an al­ter­na­tive to in­creas­ingly ex­pen­sive loans, an ad­di­tional source of for­eign cur­rency rev­enues, an in­stru­ment of in­tro­duc­ing in­no­va­tive tech­nolo­gies that guar­an­tee ac­cess to for­eign mar­kets.

Sim­ply speak­ing, the term “for­eign in­vest­ment” em­braces cred­its and loans, the money that would need to be paid back. Mean­while for­eign di­rect in­vest­ment re­mains in the coun­try. Last year Minsk Oblast raised in­vest­ments from 59 coun­tries around the world. More than a third came from Rus­sia. Cyprus was sec­ond with $44.4 mil­lion (or 12.2%), Lithua­nia $26.9 mil­lion (7.4%), China $24.9 mil­lion (6.8%), Ger­many $21.2 mil­lion (5.8%).

In terms of for­eign in­vest­ment, the year 2011 was the best one for the past seven years. In terms of di­rect in­vest­ment there were bet­ter times. But we see a pos­i­tive trend here: they in­creased 3.7 times as against 2010, said Ye­lena Sushke­vich.

Net FDI (ex­clud­ing debt for goods, works, and ser­vices) for the year in­creased 2.3 times up to $104 mil­lion. About 54% of this sum was in­vested in the man­u­fac­tur­ing in­dus­try. The in­vest­ments were also put into trade, re­pair of mo­tor ve­hi­cles, pro­duc­tion of house­hold goods, per­sonal items (15.2%), trans­port and com­mu­ni­ca­tions (13.1%).

The bulk of the in­vest­ments was raised by or­ga­ni­za­tions with­out de­part­men­tal af­fil­i­a­tion through rein­vest­ment of prof­its, con­struc­tion projects, con­tri­bu­tions to the au­tho­rized fund. In 2012, Minsk Oblast in­tends to raise $187 mil­lion of in­vest­ment on a net ba­sis. Ma­jor in­vest­ment projects in­volv­ing for­eign com­pa­nies are to be launched in many dis­tricts.

Ex­am­ples of suc­cess­ful co­op­er­a­tion with for­eign in­vestors in­clude Henkel Bautech­nik, Coswick, Coca Cola Bev­er­ages, Lekpharm. They have been work­ing on the Be­laru­sian mar­ket for years and have earned a high rep­u­ta­tion. Ger­man in­vest­ments were used to cre­ate the Guer­ing Bel com­pany to pro­duce high-pre­ci­sion tools in Lo­goisk. The same town is home to the for­eign com­pany Mi­navto that pro­duces me­tal and plas­tic parts for au­to­mo­bile in­dus­try on the give­and-take ba­sis and also pro­duces com­po­nents for assem­bly au­to­mo­tive equip­ment con­vey­ors of lead­ing Euro­pean firms. More than 96% of prod­ucts are ex­ported.

Pri­or­ity to Pro­duc­tion

Of course, the in­flow of in­vest­ments de­pends on the fa­vor­able busi­ness cli­mate, which has been cre­ated in Be­larus for for­eign busi­ness. Ex­ten­sive pref­er­ences are pro­vided by De­cree No. 10 “Con­cern­ing the cre­ation of ad­di­tional con­di­tions for in­vest­ment ac­tiv­ity in the Repub­lic of Be­larus”. Ac­cord­ing to the doc­u­ment, cus­toms du­ties and VAT are not levied on the im­port of equip­ment, ten­ders, and the choice of a gen­eral contractor.

For­eign com­pa­nies can use their de­sign and es­ti­mate doc­u­men­ta­tion ad­justed to the Be­laru­sian con­di­tions. They are en­ti­tled to VAT de­duc­tions on the prod­ucts pur­chased in the course of the project. Since the de­cree was en­forced in 2009 Minsk Oblast has con­cluded over 400 in­vest­ment con­tracts worth Br9.5 tril­lion, of which about 50 in­volve for­eign in­vest­ment.

It is worth say­ing that when sign­ing in­vest­ment agree­ments,

com­pa­nies take into con­sid­er­a­tion not only ben­e­fits for the whole re­gion, but also for a con­crete dis­trict. Thus, some towns need projects with a small vol­ume of in­vest­ments as they help solve the prob­lem of em­ploy­ment. How­ever, the as­sis­tance of for­eign com­pa­nies in set­ting up var­i­ous pro­duc­tion fa­cil­i­ties is more im­por­tant.

For­eign in­vestors are ex­pected to help open new high-tech en­ter­prises in the re­gion in the near fu­ture. For in­stance, DI Juice of Cyprus will in­vest $15 mil­lion in the con­struc­tion of a com­plex which will com­prise a plant to pro­duce al­co­holic bev­er­ages and a lo­gis­tics cen­ter. Lithua­nian Morozprod­uct will fun­nel $6 mil­lion into the project to set up an ice cream plant in Pukhovichy Dis­trict. The project will be com­pleted in two years. We are also ea­ger to co­op­er­ate with for­eign com­pa­nies in wood­work­ing. Par­tic­u­larly, Aus­trian Eg­ger will launch the pro­duc­tion of flake boards in Borisov Dis­trict.

A plant to man­u­fac­ture Swiss com­muter trains will be built near Fa­nipol, Dz­erzhinsk Dis­trict. An im­por­tant project to set up the Be­laru­sian-chi­nese in­dus­trial park will be im­ple­mented in Smole­vichi Dis­trict.

A joint ven­ture to as­sem­ble agri­cul­tural equip­ment will be es­tab­lished at Min­skobla­groser­vice. Con­vex In­ter­na­tional and WM Kartof­fel­tech­nik Gmbh signed the rel­e­vant let­ter of in­tent at the Be­larus In­vest­ment Forum in Frank­furt am Main in Novem­ber 2010. The forum was held as part of the Euro­pean Fi­nance Week.

In­vestors are also in­ter­ested in the Be­laru­sian agri­cul­tural in­dus­try. We re­ceive pro­pos­als from Is­raeli, Rus­sian, Ira­nian busi­ness­men. Thus, Iran’s East­ern Sheep will in­ject al­most $12 mil­lion in the con­struc­tion of a sheep breed­ing com­plex for 10,000 sheep in Lo­goisk Dis­trict. For­eign in­vestors bought shares of the Vely­atichi and Vish­nevka 2010 agri­cul­tural plants. They are ea­ger to build turkey breed­ing farms. TDF Tech­nol­ogy Hold­ing AG of Switzer­land par­takes in the project to build a bio­gas com­plex in the Lan-nesvizh agri­cul­tural com­pany. By the way, the first bio­gas com­plex with the ca­pac­ity of 2MW was built at the agri­cul­tural com­pany Snov.

Tran­sit Plus Tourism

Minsk Oblast has a huge po­ten­tial to pro­mote tourism, first of all, eco­log­i­cal, health-im­prov­ing, agri­cul­tural, sport, and tran­sit tourism. The cen­turies-old cul­tural and his­tor­i­cal her­itage is of in­ter­na­tional in­ter­est; eco­log­i­cal sys­tems and nat­u­ral land­scapes of the re­gion are unique. The clean en­vi­ron­ment at­tracts tourists, too. Minsk Oblast has a broad net­work of health re­sorts that pro­vide pop­u­lar treat­ment and re­cre­ation ser­vices.

It is true that re­cre­ation and tourism in­fra­struc­ture is still un­der­de­vel­oped in the re­gion. For­eign busi­ness­men can be of­fered a num­ber of in­ter­est­ing projects here. Work in this area has al­ready been launched. Thus, an agree­ment has been reached with an Ira­nian

in­vestor to con­struct a sports and re­cre­ation cen­ter and a tourist vil­lage near the Zaslavl reser­voir.

Golf Club (the Rus­sian Fed­er­a­tion) plans to in­vest $18 mil­lion in a golf cen­ter in Minsk Dis­trict. The fa­cil­ity will open in 2012. A res­i­den­tial com­pound will be built nearby by 2014.

The Naroch Lake area has a great de­vel­op­ment po­ten­tial. A spe­cial pro­gram has been adopted to pro­vide in­vestors with pref­er­ences to run projects. Un­for­tu­nately, for­eign busi­ness­men do not rush to in­vest their money in this Be­laru­sian re­sort area yet. But we think the key word here is “yet”. We be­lieve that lo­cal au­thor­i­ties should be more flex­i­ble and mo­bile.

The lo­gis­tics sec­tor is an­other promis­ing in­vest­ment field, as main in­ter­na­tional trans­port cor­ri­dors pass through the oblast. Out of 22 sites de­ter­mined for the con­struc­tion of trans­port and lo­gis­tics cen­ters, 17 are lo­cated in Minsk Dis­trict. In­vestors from Lithua­nia, the UK, Iran and Azer­bai­jan come to do busi­ness in the re­gion. Azer­bai­jan is in­vest­ing in the con­struc­tion of a trade and lo­gis­tics cen­ter In­ter­stroipor­talplus ($18 mil­lion of in­vest­ment). Iran is par­tak­ing in the con­struc­tion of a trans­port and lo­gis­tics cen­ter Prile­sie ($145 mil­lion).

On the whole, about $70 mil­lion was in­jected into the de­vel­op­ment of the Minsk Dis­trict lo­gis­tics in 2011. First start-up fa­cil­i­ties were put into op­er­a­tion at eight lo­gis­tics com­plexes: Belta­mozh­ser­vice, Blt-lo­gis­tic, Oz­ertso-lo­gis­tic, Belvinges­lo­gis­tic, SHATE-M Plus, Twen­ty­four,bel­magis­tralav­to­trans, Kraft­trans.

Con­struc­tion works at six more sites are un­der­way. It is worth men­tion­ing that the ma­jor goal of lo­gis­tics cen­ters is to pro­vide a full range of trans­port and lo­gis­tics ser­vices for in­dus­trial and trad­ing com­pa­nies in cargo trans­porta­tion and de­liv­ery, ra­tio­nal­iza­tion of routes and trans­porta­tion mode.

In a bid to en­cour­age in­vest­ment in the re­gion, lo­cal au­thor­i­ties meet with for­eign in­vestors, or­ga­nize pre­sen­ta­tions of promis­ing projects. The eco­nomic po­ten­tial of the re­gion was pre­sented at large in­ter­na­tional fo­rums, in­clud­ing in Ger­many, Kaza­khstan, and Lithua­nia, which has a pos­i­tive im­pact on the in­flow of for­eign in­vest­ment in the lo­cal econ­omy.

The Coswick

com­pany es­tab­lished with the

help of Cana­dian in­vestors pro­duces wood block floor­ing

Since 2000 the com­pany MI­NAVTO of the Ger­man hold­ing com­pany G-tec has been mak­ing com­po­nent parts for car pro­duc­ers of Western Europe, Be­larus and Rus­sia

Trans­port and lo­gis­tics cen­ter Belvinges­lo­gis­tik op­er­ates near the vil­lage of Rakov. Ware­houses and

chill­ing rooms, a park­ing lot for heavy-duty trucks, of­fices and cafes are lo­cated on the area of 10 hectares

About Br22 bil­lion was in­vested in the up­grade of the Naroch ho­tel that now of­fers com­fort­able twoand one-bed rooms for 99 peo­ple

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