Fair Wind for Investment
In February 2016 Belarus and Israel made important steps to give a boost to bilateral cooperation. The two countries signed a protocol amending and supplementing the Belarusian-Israeli intergovernmental framework agreement on financial cooperation of 21 June 2011. The new document significantly simplifies the procedures of attracting Israeli credit facilities to finance joint projects in Belarus. The new arrangement is hailed by Belarusian and Israeli diplomats as a compelling evidence of growing trust between financial institutions of Belarus and Israel and mutual economic openness, which might spur cooperation in other areas.
Mechanism of Mutual Benefits
The signing of the additional protocol to the intergovernmental framework agreement on financial cooperation between Belarus and Israel is not an ordinary event in bilateral economic relations.
“The document was the result of joint efforts of the finance and foreign affairs ministries of the two countries. It significantly enhances the prospects for stronger Israeli investment presence in Belarus,” Ambassador Extraordinary and Plenipotentiary of Belarus to Israel Vladimir Skvortsov said. After all, foreign loans for business projects usually come with risk insurance coverage. Previously only the Belarusian government could act as a guarantor in the relations with the Israeli Insurance Company ASHRA. Once the protocol enters into force, these powers will be delegated to banks. Additional government guarantees will no longer be needed. Thus investors receive a brand new, flexible funding mechanism for joint projects in Belarus. “Its advantages are clear for both sides,” the diplomat said.
According to Ambassador Vladimir Skvortsov, one of Belarus’ priorities today is exploring new forms and possibilities of cooperation that would contribute to greater balance in bilateral trade with Israel, and also attracting high technology and investment in Belarus. From now on proposals of Israeli entrepreneurs will be more attractive for Belarusian customers while credit resources much more affordable. They will no longer be associated with lengthy procedures.
Israeli private sector also benefits from the protocol as it opens up additional opportunities to expand presence in the founding member of the Eurasian Economic Union, with which Israel intends to create a free trade zone. New terms of bilateral investment will significantly improve the competitive advantages of Israeli companies on the Belarusian market compared with other foreign firms.
Business with Good Prospects
The Israeli business circles view Belarus as one of the most promising countries for business development with clear business rules, well-developed infrastructure, well-trained workforce, a stable domestic and socio-political situation, and a low crime rate. The Belarusian Ambassador made sure of this during meetings with local entrepreneurs, and also during the negotiations within the framework of bilateral visits and large forums.
Many businessmen speak of the increasing appeal of Belarus as an economic partner thanks to its participation in the EEU with its 180-million-strong market. Once the protocol comes into effect, the interest of Israeli businessmen in Belarus will increase further and materialize into new joint projects.
Today Israel’s investments in Belarus are mainly channeled into agriculture, high technology and construction sector. Belarus is most interested in Israel’s solutions in pharmaceutical, chemical and energy industries.
Belarus and Israel carry out a lot of joint projects, with many of them being quite prominent. In the agro-industrial sector these are big pig farms with advanced cleanup systems built by AgriGo Company in Minsk Oblast and Mogilev Oblast, broiler chick farms, and the African catfish farm Merhav in Brest Oblast. The first stage of the enterprise to produce food additives and premixes was launched in the Free Economic Zone Brest with the help of Israeli investment. The project was implemented by a Belarus-born Israeli national who invested his own resources.
One of Israel’s largest investment companies, Fishman Group, keeps its strong positions on the Belarusian real estate market. Last year it completed the office and dwelling construction program in the Hi-Tech Park. The investment in the project totaled $50 million. The firm is determined to continue strategic cooperation with Belarus. Another big project in which the Israeli company takes part is the construction of a residential compound in the Lebyazhy neighborhood in Minsk.
A plant to collect and recycle used motor oil was opened in the town of Krupki, Minsk Oblast in autumn 2015. This high-technology plant, unmatched in the CIS, was built with the help of Israeli investors (over $20 million was invested by EDM Company).
“I would like to point out that the bilateral cooperation with Israel in the knowledge and service-based economy looks very promising taking into account its rapid advancement on a global scale. Today Israel is at the forefront of scientific research in a number of important areas. Belarus also has a considerable sci-tech potential. Our IT sector gets strong support from the government. Today we can say that cooperation with Israel in this area is becoming more successful and effective. One of the most illustrative examples is a mobile app Viber which has gone global. This app is a joint project of Belarus and Israel. Our computer services become increasingly popular in Israel,” said Vladimir Skvortsov.
What is Behind the Numbers?
In 2015 Israel invested $10.7 million in Belarus. It should be noted that big Israeli companies invest in Belarus via their subsidiaries located in other countries. This can be attributed, first of all, to Israel’s taxation system and, secondly, to the wide opportunities the Jewish diaspora provides to Israeli companies around the globe. The bulk of Israeli investment comes to Belarus from Cyprus and the figure of $10.7 million does not show the real scale of bilateral investment cooperation.
“The actual amount of investment channeled by Israeli companies into Belarus through their affiliated companies in third countries is considerably higher. Let us take, for example, the project to build the residential compound D3 in the Lebyazhy neighborhood of Minsk conducted with the participation of the Israeli Fishman Group. The company has plans to invest $70 million in this project alone. The money will be transferred through the Cyprus-registered company Svitland Development Ltd., so it will not be reflected in the Belarus-Israel investment cooperation statistics,” Vladimir Skvortsov explained.
There is another interesting fact. As of the beginning of 2016, Belarus’ unified state register of legal entities and self-employed businessmen
In 2015, Belarus raised $10.7 million in Israeli investments. However, this figure does not reflect the real state of affairs as big Israeli companies invest in Belarus via their subsidiaries in other countries
featured 141 companies set up with participation of Israeli legal entities and individuals, including 42 with 100% Israeli capital.
As for mutual trade, last year it totaled $130 million. Belarus exported slightly more than $19 million worth of products, down 7% from a year earlier. The decline was due to objective reasons, including the situation on the global market.
Belarus’ major exports in 2015 were metal products, casting molds, oil products, milk and concentrated cream, ice cream, ready-to-eat and tinned fish, chocolate, light industry products, sugar, and rapeseed oil.
Belarus traditionally imports pharmaceuticals, foodstuffs, fruit and juice, insecticides, herbicides, and agricultural equipment.
“If we look at the BelarusianIsraeli trade over the past five years, we can see a gradual upward trend, from $78 million to $130 million. The emphasis was placed on diversification of Belarus’ exports. Last year alone, we started selling 43 new products to Israel and earned more than $3 million. We actively promoted metal products, made considerable efforts to boost and diversify food exports, and worked hard to carve out market niches for other highquality Belarusian products that can be popular with Israeli people. It is also worth mentioning that we have achieved great results in the export of Belarusian services. In January-November 2015 it reached $19 million, with import at $3.2 million,” the Ambassador said.
Projects Ready to Roll
Belarusian and Israeli businessmen are currently discussing joint plans that may become reality in the near future, provided there are favorable conditions. Some of them can be implemented as soon as 2016.
The plans include construction of an export-oriented plant to produce engine oil, joint projects in power engineering, effective use of the Internet at schools, and promotion of the modern mobile payment system and the 4G mobile communications standard in Belarus.
Cooperation with the Israeli company Tadbik is the fruit of the efforts of the Belarusian Embassy in Israel to promote new investment projects. In December 2015 an agreement was signed to set up a joint venture to produce self-adhesive and heat-shrinkable labels in Fanipol. The decision to build such an import-substituting, export-oriented enterprise was made after a visit of a Tadbik delegation to Belarus organized with the support of the Belarusian Embassy. The enterprise will create new jobs.
The Belarusian Embassy helped organize 54 visits of Belarusian and Israeli businessmen in 2015. All these meetings helped expand the range of partners, establish direct business contacts, study new investment cooperation avenues, promote commercial initiatives, and, of course, find opportunities to bolster Belarus’ export to Israel.
“In order to fulfill the strategic task of expanding Belarus’ export, we have to take into account the local realities such as the relatively small market capacity and tough competition on each segment of this market, the free trade regime between Israel and its traditional economic partners and Israel’s experience of trade with other EEU
Belarus’ major exports in 2015 were metal products, light industry products, casting molds, oil products, milk and concentrated cream, ice cream, readyto-eat and tinned fish, chocolate, sugar, and rapeseed oil
member states that mostly supply raw materials (oil, oil products, grain) which we cannot offer. The economies of Belarus and Israel are export-oriented but are not complementary. We compete with each other in a number of major segments (agricultural and hi-tech products, equipment, electronics, etc.),” explained Ambassador Vladimir Skvortsov. “Nevertheless, we continue looking for the trade niches we can occupy. First of all, this pertains to the export of all kinds of foodstuffs,” he added.
According to Israeli specialists, Belarus can be one of the major suppliers of milk ingredients for kosher products. Many Belarusian dairy enterprises use production technologies that comply with Kashrut standards. However, food exporters need a kosher certificate, a kind of permission without which it is impossible to gain a foothold on the Israeli food market. The majority of Belarusian enterprises are not ready to go for it. However, there has been progress in the field recently. Belarusian manufacturers are getting increasingly interested in this line of business.
Export of high-quality Belarusian foodstuffs to Israel is rather promising. Sugar, rapeseed oil, ice cream, confectionery, powdered milk are not the only products which are currently popular with Israeli consumers.
A marketing research conducted by the Embassy showed that Belarusian beef is in demand. The Israeli side has tough sanitary requirements and urges all suppliers to obtain veterinary certificates permitting the delivery of these products. These requirements are similar to the standards and norms of the European Union. In the majority of cases Belarusian manufacturers do not have such certificates. It is important for our exporters to address the matter to get access to the Israeli market.
There are orders for Belarusian light industry goods which have been present on the Israeli market for a long time albeit in small quantities.
“We are currently in talks with the economic operators of the two countries. We would like them to expand the range of exports. Customized production of clothes can be an effective form of cooperation. Belarusian manufacturers of building materials can also find their niche in Israel. Flexible pricing will give a chance to promote timber, glass, cement, ceramics, and metal products,” Ambassador Vladimir Skvortsov said.