BELARUS NEWS AND ANALYSIS

DATE:

13/08/2009

Total transformation of Polish-Belarusian cooperation

In the series on Poland's economic links with countries covered by the EU Eastern Partnership scheme we take a closer look at the change in economic relations with Belarus. The following remarks were offered to Polish Market Online by the Polish Embassy in the Belarusian capital Minsk.

An essential factor in the development of economic cooperation between Poland and Belarus, next to the steady growth in the two countries' economies, was the resumption of the economic dialogue at government level in 2008.

Polish-Belarusian trade increased steadily between 2004 and 2008, growing about 29.2% in 2008 compared with 2007. The volume of trade of the order of USD 3 bln in 2008, ranked Poland as one of Belarus' principal economic partners and placed it 5th in Belarusian exports following on Russia, Holland. Ukraine and Latvia and 5th in Belarusian imports following on Russia, Germany, Ukraine and China. Poland mainly imported raw materials from Belarus (fuels - diesel fuel and liquid gas, mineral fertilisers, semi-finished products of iron, cast iron and steel and wood). Major items exported by Poland comprise machinery and mechanical devices as well as plastics and vehicles (tractors, motorcars, parts). Belarus ranks around 30th among Poland's trading partners.

Due to the effects of the economic crisis, in the first five months of 2009 a tangible drop of around 25% was evidenced in Polish exports to Belarus and around 60% in Polish imports. However, due to anti-crisis activities undertaken in the two countries, the rapid growth of trade is likely to continue. In the opinion of our Trade and Investments Promotion Section, as the Belarusian economy is increasingly a market economy, trade between Poland and Belarus may reach as much as USD 6-8 bln.

In 2008, Belarus posted a 37% growth in the influx of foreign investments which totalled USD 5.25 bln. Leaders among investing companies are from the Commonwealth of Independent States (mainly Russia) - 33% of total investments, followed by Switzerland - 20%, Austria - 14% and Britain - 12%.

Cooperation in investments between Poland and Belarus is usually in the form of direct investments in Belarus. Polish companies have invested around USD 200 mln, mainly SMEs. Starting from 1991, the estimated commitment of Polish capital is said to be around USD 250 - 270 mln, which ranks Poland 12th in FDI in Belarus. There were around 400 companies with Polish capital operating in Belarus in 2008 (380 in the previous year). Belarusian direct investments in Poland amount to an insignificant figure compared to total FDI.

The favourable location of Belarus and the proximity of its market, offers it access to other eastern markets, especially Russia and Kazakhstan. That is particularly true following the customs union of January 1 2010 between Belarus, Russia and Kazakhstan. To that may be added the still reasonably inexpensive and skilled labour, the good road infrastructure, all of which cause Belarus to be placed among interesting countries with long-term prospects for investment cooperation. The construction of a power station fuelled with Polish coal in Zelwa in Grodno district may be highlighted as one of the more important investment projects in Belarus with Polish capital which may be most rapidly implemented. The project to construct a pipeline under the Bug River to transport oil products to Poland (diesel fuel within the diversification of energy supplies) is also under review. Other large projects include modernising the Ros-Bialystok power line.

Polish banks and financial institutions have expressed the intention to commit finance in Belarus while the Warsaw Stock Exchange is ready to introduce Belarusian companies to the bourse. Polish businesses in the IT and telecommunications sectors have also said they are interested in expanding operations to Belarus.

Activation of cross-border cooperation within the "Bug", "Niemen/Neman/Nemunas", "Bialowieza Forest" and "Carpathians" Euroregions by bringing new European Union finance on stream by 2013, will go a long way toward integrating of border regions and activating of social and economic life, as well as creating an opportunity, to a certain extent, to shape Poland-Belarus economic cooperation.

The European Union's Eastern Partnership Programme has aroused interest in Belarus though it also poses a substantial question - whether Belarus will accept its conditions. The stance taken by the authorities is of a pragmatic character and is studied, in the present crisis period, as regards its economic principles - mainly the way it could support the economy with additional finance to modernise industry and create a hi-tech manufacturing potential. In so doing, much stress is given to the fact that the EU, next to Russia, is one of Belarus' most important trading partners, boasting a positive balance of foreign trade into the bargain, a fact which points to the need to bring the country closer to the EU.

Little, if anything, is being mentioned about other parts of the Programme, e.g. democratisation of social life. Those sections of the community who appreciate its importance as well as private business see the opportunity for a rapid growth of their companies, practical liberalisation of the economy, an approach to EU standards and, in the more distant prospect, membership of Belarus in the European Union. The country's political opposition supports access to the Programme since it offers opportunities to introduce democratic mechanisms universally practiced in EU member countries and which essentially differ from such regulations currently in force in Belarus.

It may be generally accepted that the effect of the mode of practice adopted in recent months by Belarusian authorities to create an economic counterbalance to Russia by forging closer contacts with the European Union could well be the membership of Belarus in the Eastern Partnership scheme.

Source:

http://www.polishmarket.com.pl/document/:20855?p=%2FEconomic+Monitor%2F

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