Republic of Belarus
The economic background of Belarus
As part of the former Soviet Union, Belarus had a relatively well-developed, though aging industrial base; it retained this industrial base – which is now outdated, energy inefficient, and dependent on subsidized Russian energy and preferential access to Russian markets – following the breakup of the USSR. The country also has a broad agricultural base which is largely inefficient and dependent on government subsidies. After an initial burst of capitalist reform from 1991-94, including privatization of smaller state enterprises and some service sector businesses, creation of institutions of private property, and development of entrepreneurship, Belarus’ economic development greatly slowed. About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. A few banks, which had been privatized after independence, were renationalized. State banks account for 75% of the banking sector. Economic output, which had declined for several years following the collapse of the Soviet Union, revived in the mid-2000s thanks to the boom in oil prices. Belarus has only small reserves of crude oil, though it imports most of its crude oil and natural gas from Russia at prices substantially below the world market. Belarus exported refined oil products at market prices produced from Russian crude oil purchased at a steep discount. In late 2006, Russia began a process of rolling back its subsidies on oil and gas to Belarus. Tensions over Russian energy reached a peak in 2010, when Russia stopped the export of all subsidized oil to Belarus save for domestic needs. In December 2010, Russia and Belarus reached a deal to restart the export of discounted oil to Belarus. In 2015, Belarus continued to import Russian crude oil at a discounted price. However, the plunge in global oil prices heavily reduced revenues. Little new foreign investment has occurred in recent years. In 2011, a financial crisis began, triggered by government directed salary hikes unsupported by commensurate productivity increases. The crisis was compounded by an increased cost in Russian energy inputs and an overvalued Belarusian ruble, and eventually led to a near three-fold devaluation of the Belarusian ruble in 2011. In November 2011, Belarus agreed to sell to Russia its remaining shares in Beltransgaz, the Belarusian natural gas pipeline operator, in exchange for reduced prices for Russian natural gas. Receiving more than half of a $3 billion loan from the Russian-dominated Eurasian Economic Community (EurAsEC) Bail-out Fund, a $1 billion loan from the Russian state-owned bank Sberbank, and the $2.5 billion sale of Beltranzgas to Russian state-owned Gazprom helped stabilize the situation in 2012; nevertheless, the Belarusian currency lost more than 60% of its value, as the rate of inflation reached new highs in 2011 and 2012, before calming in 2013. As of January 2014, the final tranche of the EurAsEC loan has been delayed. In December 2013, Russia announced a new loan for Belarus of up to $2 billion for 2014. Notwithstanding foreign assistance, the Belarusian economy continued to struggle under the weight of high external debt servicing payments and trade deficit. In mid-December 2014, structural economic shortcomings were aggravated by the devaluation of the Russian ruble and triggered a near 40% devaluation of the Belarusian ruble. Belarus entered 2015 with stagnant economic growth and reduced hard currency reserves, with under one month of import cover.
What makes Belarus trade friendly?
The Belarusian economy is just one reason why the counry is so attractive for international trade. Here are some other factors:
- geographical location;
- favourable investment climate;
- high skilled workforce;
- industrially developed economy ;
- well-developed transport and communications infrastructure.
Main industries in Belarus
Belarus has a well-developed industrial sector, which accounts for around 25,3% of the country’s GDP. Some of its main industries are:
- tractors and machinery including dump trucks and earth movers (Belarus tractors are well regarded throughout the region);
- motorbikes (eg Minsk Moto);
- radio electronics.
Free economic zones in Belarus
Each region of Belarus has a free economic zone. Businesses operating in these zones enjoy a range of benefits including:
- zero-rate tax on exports for the first 5 years;
- exemptions on turnover tax, road tax and property tax;
- entitlement to open foreign and Belarusian currency bank accounts;
- priority at border crossings;
- full exemption from import duty on raw materials.
What are the first steps to setting up a business in Belarus?
According to Belarusian law, businesses can be established by individuals or legal entities.
Foreigners are perfectly entitled to start a business in Belarus, so long as they abide by the relevant legal requirements.
As a first step, individuals and representatives of international companies in Belarus are required by law to provide notarized copies of their passports.
In some instances a notarized Russian translation is also required before the process of setting up a company can begin.
What are the legal requirements for foreign companies wishing to set up a legal entity in Belarus?
In order to set up and register a limited company in Belarus, you must complete the following steps:
- obtain a certificate from the Ministry of Justice verifying your proposed company name;
- open a temporary bank account at a Belarusian bank and make a 50% deposit of the proposed funds;
- obtain notarized copies of certificates of incorporation;
- prepare a business seal;
- register with the tax authorities and obtain your tax identification number;
- have your business seal and signatory card notarized;
- open a regular bank account.
- find out more information about legal company structures in Belarus
What are the tax liabilities for foreign businesses in Belarus?
Tax liabilities vary depending on:
- the nature of your business;
- the size of your business;
- the location of your business.
Tax breaks are available for businesses established in the Free Economic Zones, the High Technologies Park and rural areas.
Why should you invest in Belarus?
Belarus today is an attractive prospect for potential investors. Many benefits for investors include:
- economic stability;
- 6 free economic zones;
- progressive investment legislation guaranteeing protection of investors’ rights;
- Foreign Investment Advisory Council under the Council of Ministers of the Republic of Belarus;
- strategic geographical location;
- high skilled workforce;
- industrially developed economy;
- well-developed transport and communications infrastructure.
Why should you start your business in Belarus?
Foreign investment and trade with Belarus have risen 8-fold since 2002, and there are now more than 4000 joint venture and foreign enterprises in Belarus.
Currently the main trading partners are:
- Great Britain;
There are many reasons for such an increase in the number of international companies in Belarus. The main attractions are:
- Geographical location. Belarus, on the eastern border of Europe, is strategically well positioned as a major trading route between Europe and the CIS;
- Economic stability. In turbulent economic times, the Belarus economy has been less affected than those which rely on global markets. Market analysts predict a robust growth for the economy of Belarus;
- Favorable investment climate. Measures to encourage business include Free Economic Zones, a High Technology Centre and special tax incentives for businesses operating in rural areas or small towns;
- Investment regulations have improved considerably in recent years too. Belarus has also been named in the top 10 for regulatory reform in the World Bank and IFC report Doing Business 2009;
- Highly skilled workforce. Almost 50% of workers in Belarus have a higher education;
- Industrially developed economy. Currently around a third of the Belarus GDP comes from the industrial sector.
What issues do you need to consider before setting up business in Belarus?
As with any new market, it’s vital to do your research before embarking on any business venture in Belarus. As well as researching your market sector you should also find out about:
- legal requirements;
- employment laws;
- general business culture in Belarus.
Where can you get further help and advice?
The Belarusian government is committed to attracting direct foreign investment and promoting international trade. Several bodies and ministries are available to provide help and assistance to foreign investors.
A number of international law and accountancy firms have offices in Belarus. There are also several commercial organizations in Belarus that specialize in helping foreign companies to enter the market.