Successfully investing in Belarus


last updated on 19 May 2021 | reading time approx. 6 minutes


How do you assess the current economic situation in Belarus?

The Belarusian economy contracted in 2020 by a rather encouraging amount of only 0.9 per cent year-on-year. This happened despite the three economic shocks it faced last year:   

  • suspension of crude oil supplies from Russia in January,
  • pandemic-induced lock-downs at major trading partners, and
  • internal political crisis with manifold consequences.

In essence, Belarusian authorities managed to block the negative multiplier effects from the would-be production stoppage by massive ramping up of corporate debt in the state-owned real sector. The latter is resulting in a less pronounced but longer crisis. The latest economic intelligence by international and independent Belarusian institutions predicts further stagnation in 2021, with GDP growth in the rage from negative 2.2 per cent to positive 1.1 per cent.

At the same time, national debt is still below critical levels, giving the authorities much needed space to manoeuvre. The expected budget deficit is currently about 3 per cent of GDP, and the country can afford even more, provided it receives new financing.

The mere fact that the budget deficit is officially planned gives hope that the investment demand (i.e. demand for machinery and other capital goods), which has always been largely state-driven, will not plummet in 2021/2022.

Leaving aside political factors, the recovery of the Belarusian economy in 2022 may be based on the expected economic bounce back in Russia and on other major export markets.


How would you describe the investment climate in Belarus? Which sectors offer the largest potential?

Due to its geographical location, Belarus is an ideal hub for trade between the EU and CIS countries. Moreover, membership in the Eurasian Economic Union (EAEU) makes the country enticing to all companies looking for an advantageous location as a springboard into the markets of the common customs area of the EAEU, such as Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. In short, as a member of the EAEU, Belarus offers a domestic market of about 190 million consumers.

As state funding measures continue to be primarily focused on large companies and state-owned enterprises, estimations of the market value of those assets by the state as opposed to those by potential investors may at times show dramatic contrast. For the same reasons, new projects which contradict the objectives of the state may find themselves short of resources to successfully compete in the Belarusian market.

Nevertheless, any investments which do not interfere with the strategic plans of the authorities, especially those involving technologies which are new to Belarus, are very much welcomed and may profit from the multiple incentive programmes that Belarus offers.

In recent years, information and communication technologies have developed to become the leading sectors of the Belarusian economy. That development was substantially bolstered by the establishment of the Belarus High Technologies Park in 2005, which created favourable conditions for the development of software, as well as information and communication technologies, in the Republic of Belarus and significantly strengthened their international competitiveness.

Special economic zones, the Belarus High Technologies Park, specific relief for enterprises in small cities, the Industry Park, and the Orschansky region – all these incentive programmes attract investors by offering comprehensive tax relief. Moreover, foreign companies can benefit from investment incentives such as funding and tax advantages if they invest in regions outside urban agglomerations. Additionally, companies which conclude investment agreements with the Republic of Belarus over the implementation of investment projects can enjoy state guarantees, advantages, and privileged treatment in administrative procedures. This comprises the provision of land plots for the implementation of a project or exemption from import duties and import VAT connected with the import of manufacturing equipment.

Basic modernisation and expansion works related to industrial and other production facilities (glass, wood, and metal processing, food production, and the chemical and petroleum industries) provide opportunities to Western equipment manufacturers and technology suppliers. Numerous German companies deliver and install equipment or build it in collaboration with Belarusian partners as part of a joint venture.

Amid political unrest leading to certain deterioration of the international credibility of Belarus as an investment venue, Belarusian authorities are sticking to their plan for technical improvements in the investment climate, including modernisation of corporate and labour law, currency regulations, and taxation practices.


Consequently, a pragmatic investor who prefers well-considered decisions will have the upper hand. The potential of Belarus as an investment venue is just as high as it was before 2020.


What challenges do German companies face during their business ventures into Belarus?

The differences in the business and contract signing culture and an approach of authorities that is sometimes difficult to predict or turns out to be very formalistic pose challenges every now and then; however, they can be avoided or dealt with in most cases, if investors have experienced advisers on their side.

Important steps in ensuring legal and investment securities have been taken in recent years, bringing the country closer to Western European standards. For example, as early as January 2016, Belarusian authorities created the possibility of establishing incorporated companies with a sole shareholder and concluding shareholders' agreements between individual shareholders – a vital prerequisite for structuring legal relationships between joint venture partners in a legally clear way.

In the latest amendments to the Belarusian Tax Code, a Mutual Agreement Procedure (MAP) has been introduced. This encourages a further positive development in the taxation sphere, as ruling out of contradictions between bilateral double taxation treaties and national law should, in theory, lead to the long-awaited admission of OECD approaches to taxation of international transactions and foreign businesses in Belarus.


What is the economic impact on Belarus of the EU sanctions imposed on Belarusian ruler Alexander Lukashenko?

Most of the EU sanctions are personal sanctions or sanctions against selected businessmen. Their economic effect on the country has been quite limited and may be disregarded in most cases. However, some Western European companies (e.g. traders purchasing fertilisers and other chemical products from Belarus) may restrict their business relations with Belarusian state-owned counterparts due to expected extended sanctions or immediate political/reputational risks. Such steps may have temporary negative financial effects for some Belarusian companies, though no prolonged effect is expected.


In your opinion, how will Belarus develop?

In the long run, the adverse developments of 2020 have not changed anything for Belarus. The Belarusian legal framework and institutions have come through years of changes and reforms, and are now more liberal and transparent than ever. The latest developments in legislation show that the country has a good chance to stay on this course.

Russia remains an essential trading partner to Belarus. This creates a certain degree of dependence for the Belarusian real sector and places its growth in relation to the growth of the Russian economy and Russian industrial policies. Even so, due to the sanctions remaining and counter-sanctions applied between the EU and Russia, Belarus is regarded by European companies as the “Golden Gate” to Russia.

The success story of the Belarusian IT sector shows the high potential of the post-industrial private economy in Belarus. IT in Belarus accounts for more than 5 per cent of GDP and is showing remarkable resilience amid the crisis.

An enormous need for investment in many industries creates continuously high demand for products and technologies from the West. Overall, we expect that in certain areas Belarus will remain a very attractive and exciting business and investment location for German investors and other entrepreneurs, but also a location that is challenging and fraught with certain, yet mostly controllable, risks and uncertainties.


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Tobias Kohler


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