Fair Wind for In­vest­ment

Economy of Belarus - - FRONT PAGE - Marta ASTREIKO

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.

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