BELARUS NEWS AND ANALYSIS

DATE:

21/11/2008

Belarus comes in from the cold

By Marina Denysenko

BBC News

A landmark investment forum in London is a sign that Belarus, long shunned by the West, is emerging from relative isolation.

Belarus was branded "Europe's last dictatorship" by the US, but that did not stop hundreds of businessmen flocking to the first Belarus Investment Forum this week.

"If two years ago somebody had told me Britain would be nationalising its banks and Belarus privatising, I would not have believed it," said one British lord attending the meeting.

The country of 10 million sandwiched between Poland and Russia, led by the authoritarian President Alexander Lukashenko, retains many features of the Soviet past.

High-ranking Belarusian government officials were until recently barred from visiting the EU, but the travel ban was lifted after the release of political prisoners.

Now Belarus has decided to embrace capitalism in earnest and offer state-owned assets for sale. It has launched a massive rebranding campaign in the West.

Soviet-style welfare

Belarus is a strange animal in the post-Soviet space. Virtually unreformed and with 75% of its economy in state hands, it nevertheless managed to keep its plants running and sell its machinery, fertilisers, textiles and cosmetics across the former USSR. Its people continued to enjoy social welfare benefits unheard of in other former Soviet republics.

Two years ago Mr Lukashenko came under pressure when Russia refused to continue subsidising energy deliveries in exchange for political loyalty.

Then a sudden drop in commodity prices hit Belarus's trade balance and forced it to seek aid from both Russia and the IMF, who pledged $2bn each.

Belarus Prime Minister Sergei Sidorsky surprised observers by announcing a list of some 600 companies slated for privatisation, as well as plans to streamline business regulations and reform the tax code.

"Just in one year, we moved 30 points up the World Bank's Doing Business ranking, to occupy 85th position - an improvement by 30 points on the previous year," Mr Sidorsky said proudly at the forum.

A High Technology Park has opened in the capital Minsk - a sort of Belarus Silicon Valley, offering IT companies based there a tax haven until 2020.

Location 'an advantage'

"Belarus should emphasise strongly its unique selling points," says Natalia Leshchenko, a senior expert with Sovetnik, a London-based consultancy.

"It is a key transport hub, a source of cheap and skilled labour, of huge fresh water reserves and it prides itself on its organic way of life."

It is not clear whether, in times of global economic hardship, these advantages will outweigh the risks associated with operating in a country known for arbitrary behaviour towards private businesses.

Yet there are some success stories, involving global brands such as Heineken or Siemens.

Austrian business, particularly active in Eastern Europe, entered the market with Telekom Austria buying Belarus's second largest mobile operator and the Raiffeisen banking group acquiring a Belarusian bank.

Securing access to top officials is important, as elsewhere in the former Soviet Union.

"We enjoy the great support of PM Sidorsky. Whenever we have a problem, we talk to him over the phone, and it's all sorted," said Basil Miller from Greenfield, a Dublin-based investment company, which aims to produce biofuel for EU consumers using Belarus sugar beet and other crops.

Look at the small print

Belarusians may need know-how and funds for modernisation, but they remain choosy.

"They will be selecting very carefully and setting lots of requirements," says local equity analyst Alexander Yatskevich, referring to coming sales of stakes in major Belarus banks. "A controlling stake will be left in state hands," he says.

Belarus wants to avoid the mistakes made by neighbouring Russia and Ukraine in the early 1990s, when hundreds of enterprises were asset-stripped and sold at bargain basement prices.

"If you want to buy shares, you can do that. But it's not about one dollar, but billion of dollars," President Lukashenko told the UK's Financial Times newspaper.

"When people queue for a year to buy our tractors, we can negotiate," he said, referring to the continuing demand for Belarus machinery in Russia.

Belarus will have to perform a delicate balancing act, juggling Western and Russian business interests.

"Western investors need to know there will be a level playing field. What they do not fully realise is that they are much more eagerly awaited than the Russians," Natalia Leshchenko says.

Source:

http://news.bbc.co.uk/2/hi/europe/7741201.stm

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