Belarus woos foreign money after Russia spat

By Michael Stott and Sean Maguire


MINSK - Much of the economy is state-run and Washington dubs it a dictatorship but Belarus has launched an unlikely drive to woo foreign investors, hoping for $1 billion of loans to offset falling Russian subsidies.

"We want to interest foreign investors in our country," Finance Minister Nikolai Korbut said in an interview with Reuters on Monday.

Those considering a bet on Belarus should ignore what they hear about the former Soviet state and see for themselves, he added.

Investors should be prepared for Belarus's unique brand of centrally-planned economic management, which has defied international prescriptions by growing by 9 to 10 percent a year for the last three years - a phenomenon dubbed "the Belarus puzzle" by some international economists.

But there is a cloud on the horizon.

Russia, Belarus's main paymaster and export market, sent shockwaves through the Minsk government at the start of this year when it doubled gas prices and announced an effective reduction in oil subsidies.

The move threatened to disrupt Minsk's "economy for the people."

This combines what Korbut terms "the best of the Soviet system" - such as collective farms and state-owned tractor plants - with elements of the market economy, including privately owned restaurants, shops and property.

Politics is best not discussed - a key opposition leader is in jail and the European Union says the election which returned President Alexander Lukashenko to power for a third time last year was rigged.

The United States and the EU have slapped entry bans and asset freezes on Lukashenko and other top Belarus officials. Since the row with Russia, Lukashenko has talked repeatedly of turning towards Europe but has not responded to EU calls for change in the way he runs his country.

The Minsk government is discussing financing needs with eight foreign banks and is even considering getting a sovereign rating, though Korbut did not want to disclose details.

Privatisation was "always on the agenda" but Belarus wanted good projects for the state so that its people and economy would not suffer, he added.

Korbut insisted that Belarus would survive the reductions in Russian energy subsidies - long considered by foreign analysts as a vital prop for the Belarussian economy - without abandoning its unique form of economic management.

"There is no panic or anxiety," he said. "You will see no queues in the streets here or anything like that. Things have become more complicated, but we are moving forward according to our own plans."

The government was confident that the budget deficit would not exceed the planned 1.5 percent of GDP despite the effect of higher gas and oil prices, Korbut said.

Approaching 10 years in office, Korbut had little time for IMF prescriptions about how to run the economy or European Bank for Reconstruction and Development mantras about structural reform.

"If you are trying to decide whether or not to invest on the basis of rumors, including the conclusions of the IMF, you are very unlikely to get a real picture," he said. "Ask people here instead...We have nothing to hide."