CONTENTS:

Registration certificate No. 346 of 23 April 2009

by the Ministry of Information of the Republic of Belarus

EDITOR-IN-CHIEF Tatyana VLASOVETS

EDITORIAL BOARD: Dmitry ZHUK, Svetlana BALYSHEVA, Irina BUFETOVA, Yulia KOMAR

BELTA photographers: Natalya ABLOZHEY, Alexander DIDEVICH, Gennady ZHINKOV,

Nikolai PETROV, Viktor TOLOCHKO, Oleg FOINITSKY, Alexander KHITROV, Sergei KHOLODILIN

EDITORIAL BOARD:

FOUNDER:

Council of Ministers of the Republic of Belarus

MEMBERS:

Ministry of Economy of the Republic of Belarus, Ministry of Finance of the Republic of Belarus,

Ministry of Foreign Affairs of the Republic of Belarus, Belarusian Telegraph Agency BelTA

Mikhail MYASNIKOVICH

Prime Minister of Belarus, Corresponding Member of the National Academy of Sciences of Belarus (NASB), Doctor of Economics, Professor (Chairman of the Editorial Board)

Boris BATURA Chairman of the Minsk Oblast Executive Committee

Igor VOITOV Chairman of the State Committee for Science and Technology, Doctor of Technical Sciences, Professor

Igor VOLOTOVSKY Academic Secretary of the Department of Biological Sciences, NASB, Doctor of Biology, Professor

Dmitry ZHUK Director General of Belarusian Telegraph Agency BelTA

Vladimir ZINOVSKY Chairman of the National Statistics Committee

Alexander ILYUSHCHENKO

Director General of the NASB Powder Metallurgy Association, NASB Corresponding Member, Doctor of Technical Sciences, Professor

Viktor KAMENKOV Chairman of the Supreme Economic Court, Doctor of Law, Professor

Dmitry KATERINICH Industry Minister

Sergei KILIN NASB сhief academic secretary, NASB Corresponding Member, Doctor of Physics and Mathematics, Professor

Nikolai LUZGIN First Deputy Chairman of the Board of the National Bank of the Republic of Belarus, Ph.D. in Economics

Sergei MASKEVICH Education Minister, Doctor of Physics and Mathematics, Professor

Anatoly MOROZEVICH Rector of the Academy of Public Administration under the aegis of the President of Belarus, Doctor of Technical Sciences, Professor

Alexander MOSHENSKY Director General of Santa Impex Brest

Oleg PROLESKOVSKY Information Minister

Nikolai SNOPKOV Economy Minister

Anatoly TOZIK Deputy Prime Minister, Ph.D. in History, Professor

Andrei KHARKOVETS Finance Minister

Vladimir SHIMOV Rector of the Belarusian State Economic University, Doctor of Economics, Professor

MODERNIZATION

Alexei DAINEKO

Modernization:

Priorities and EssenceA country’s prosperity hinges on the pace

of its economic modernization 4Tatyana IVANYUK

Learning

from MistakesTotal investment spent on the upgrade of Belarus’ wood processing industry

is estimated at €801.9 million 9Olga BELYAVSKAYA

A New Lease on LifeBelarus is set to upgrade

about 3,000 enterprises in 2013 13

Yekaterina NECHAYEVA

Ingredients of SuccessBelarusian companies can rival many world-famous producers 16

IN THE SPOTLIGHT

Tatyana POLEZHAI

Business Plan

for the CountryRational use of resources and modernization

of enterprises are the major preconditions for sustainable economic growth 24

Yekaterina MARKOVICH

Smart ConstructionRegulations were enacted in Belarus on 1 April

to allow designing only energy-efficient housing 30LABOR MARKET

Striving for BalanceBelarus is working to create civilized conditions

for export and import of labor resources 34

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DESIGN: Andrei BORODUN

PROOFREAD BY Natalya PYATNITSA

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Company address: BelTA, 26 Kirova Street, Minsk, 220030, Belarus Mail address: 30 Engels Street, Minsk, 220030, Republic of Belarus, phone: 327-37-80, fax: 222-33-29. E-mail: economy@belta.by, www.belarus-economy.by

QUESTIONS TO THE MINISTER

Mineral WealthRational mining and investment in subsoil use

are the key to sustainable economic growth 38

STATE AND BUSINESS

Irina NOVIKOVA

Public-Private Partnership:

Fashion or Trend?The business model of public-private partnership (PPP) is the

key to fast socio-economic growth 44FOREIGN ECONOMIC TIES

Marta ASTREIKO

Living Within Means,

Trading WiselyBelarus is set to expand its export by 15.2% in 2013 50

Yekaterina BABKEVICH

In Search of New Ways

and SolutionsIn 2012, Belarus and the Czech Republic secured

an almost 23% increase in the bilateral trade which now stands at $571.3 million 57

BANKS AND FINANCE

Modern Payment TrendsThe share of cashless payments

in the total number of card transactions increases year to year 62

Anna KOT

Cards, Banks, CashThe share of non-cash transactions in retail trade

in Belarus is expected to increase fourfold to make up 50% by 2016 66

Alexander BENKO

Bringing Down StereotypesIs it possible to “spin up” the Belarusian stock market? 71

Steady Forecast

for Leasing BusinessIn 2013 the demand for manufacturing equipment available

via leasing is expected to rise in Belarus in view of the plans to modernize the economy 74

TRANSPORT

Tatyana IVANYUK

Belarusian Railways:

151 Years and CountingEvery year about 150 million tonnes of cargo

and 100 million passengers are transported by rail 80AGRICULTURE

Alexei MELESHCHENYA, Tatyana SHAKEL

Lucrative AbundanceBelarus has been steadily increasing

the export of dairy and meat products 88REGIONAL NEWS

Tamara MARKINA

Successful StartToday products made in Lida District are sold

in 70 countries worldwide 94BUSINESS ENVIRONMENT

Protos Means “First” in GreekProtos Group is investing about €20 million

in the expansion of metal structures production 98INVESTMENTS

Nadezhda RADIVON

Stadler settles in BelarusThe Belarusian-Swiss electric transport factory in the town

of Fanipol will start manufacturing merchandise in late 2013 102EXHIBITIONS

Latvia: A View on the Baltic SeaThe National Expo of the Republic of Belarus held in Riga

in December 2012 marked an important milestone in the Belarusian-Latvian relations 104

Platform for PunditsThe 20th Healthcare in Belarus 2013 expo

took place in Minsk on 26-29 March 108Know How to Change the World

Belarus ranks sixth in the pace of advance of information and communication technologies 110

TRADE

Vladimir VISHNEV

Demand Creates SupplyBelarusians see benefits in bringing

big supermarket chains to the regions 116PLACE ON THE MAP

Capital of

the Land of Castles 118

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MODERNIZATION

Modernization: Priorities

and Essence A country’s prosperity hinges on the pace

of its economic modernization

Fundamental Objectives

The first decade of the 21st cen-

tury was marked by an increas-

ingly fast commercialization of sci-

entific discoveries (from 40 years

in late 19th century – early 20th

century to 3-4 years now). Science

has turned into a leading economic

power. Research and development

projects and intellectual property

account for an increasing share of

investment. In science-intensive

industries investments in research

outpace investments in equipment

and construction. The government

policy in the field of research, inno-

vations and education will play a

bigger role in creating an environ-

ment conducive to scientific pro-

gress.

The objective of science is not

just to accumulate new knowledge,

but to provide adequate financial

return in relation to outlay taking

into consideration the substantiated

priorities and long-term strategies

of the government innovation pol-

icy. This policy is aimed at building

up new capacities and providing

domestic producers with new com-

petitive technologies and produc-

tion facilities.

Developed and developing coun-

tries have different views on how

economic growth targets should be

met. The former strive to sustain

technological leadership and associ-

ated benefits. The latter are trying

to break to the forefront of scientific

and technical progress and occupy

their niche in the global division of

labor. Therefore, countries pursu-

ing aggressive innovation policies

should focus on creating and build-

ing up capacities in a narrow field

of studies and innovative activities.

In this context, the central issue

to be addressed by modernization

can be defined as “speed differ-

ence issue”. Belarusian companies

upgrade their production facilities

and refresh the product offer more

slowly than the companies set up

using foreign direct investments

of transnational corporations in

neighboring countries.

Even having government sup-

port, domestic companies are una-

ble to compete on equal footing

with transnational corporations,

because they lag behind in terms

of financial resources, technolo-

gies, know-how and management.

Market analysis has revealed that

manufacturers who do not make

part of transnational corpora-

tions are eventually ousted from

international markets. At present

Alexei DAINEKO, Doctor of Economics, Professor, Director of the Institute of Economics of the National Academy of Sciences of Belarus

Economic modernization has been suggested by the Belarusian President as a major instrument to enhance competitiveness and maintain national security. It is viewed as a timely and most adequate response to challenges and threats posed by downturns of the global economy. Globalization, acceleration of sci-tech progress, and growth of transnational corporations toughen up competition on the international market in terms of speed and quality of innovations. Earlier, competition mostly revolved around traditional products with competitors focusing on the quality and economic parameters of products, while in the past 20 years the major driving force behind competition has been the creation of fundamentally new products and services with a considerable share of added value. Against the backdrop of the global recession, the growth capacities of traditional export commodities are more than limited. The one who creates a new commodity and, consequently, a new sales market gets super profits until competitors turn out a similar product. You need not look hard to find examples. We have witnessed mobile phones, laptop computers and Internet services transforming from novelties to mass-market products.

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013transnational corporations generate over a

quarter of the global GDP, own about 4/5 of

licenses and patents, and account for 2/3 of

the international trade in goods and services

with up to 40% of transactions conducted

within the corporations.

Taking into consideration the differ-

ence in the availability of resources (natu-

ral, labor, material, intellectual and other

resources) that determine specific compara-

tive advantages, every country chooses its

own priorities and objectives of economic

modernization. Thus, while implementing

its modernization program Belarus should

channel its efforts into the industries that

will help it find and boost its positions in the

international division of labor in the long-

term perspective.

Belarus boasts world-class know-how in

a number of fields, like laser equipment,

theoretical substantiation of computer-

assisted performance management of steel

parts, technologies to produce new materials

and substances. These industries advance

Belarus to the fifth and sixth technological

paradigms.

Modernization should not be viewed as

a one-time project but a continuous process

to improve the institutional, technological,

labor, managerial, territorial, branch-wise

and financial structure of the economy.

Individual modernization projects can be

found in various program documents (the

socioeconomic development program of

the Republic of Belarus for 2011-2015, the

state innovative development program of

the Republic of Belarus for 2011-2015, the

national export development program of the

Republic of Belarus for 2011-2015, the indus-

trial complex development program of the

Republic of Belarus for the period until 2020,

etc).

The aforementioned documents are

closely correlated with the goals of most

countries regardless of their economic devel-

opment, which reflects the global trends in

technological progress and relevant expecta-

tions of business and society. They are ori-

ented towards the formation of the high-tech

industries of the fifth and sixth technological

paradigms, the development of such impor-

tant knowledge-intensive and high-tech sec-

tors as energy (including energy efficiency

and conservation), nano- and bio-technology,

information and communications and aero-

space technologies, environmental manage-

ment and national security.

For systematic modernization to be suc-

cessful, many conditions should be in place,

of which the most important are clearly

defined objectives and the means to achieve

them. The means imply both resources and

methods to address the tasks.

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3 The resources necessary for

upgrade include:

science and technology (pat-

ents, licenses, know-hows, technical

documentation);

raw materials (by types of raw

materials, semi-finished products,

components);

equipment and technology;

energy (all sources of energy –

electrical, thermal, hydraulic, etc.);

required volumes of cargo traf-

fic and vehicles (including loading

and unloading);

communications and informa-

tion management;

land, water and other natural

resources;

human resources (taking into

consideration increase and decrease

in the able-bodied population, spon-

taneous and organized migration

and redistribution of the population

across regions and settlements).

In this context, Belarus should

focus on the following main areas.

Transformation of Ownership Structure

Increasing the share of private

ownership is essential for improv-

ing the efficiency of the economy

as a whole, since entrepreneurship

Share in GDP

Added value share in

industry’s output

Production sector 46.1 31.1

including:

Agriculture, hunting, and forestry 9.2 39.7

Mining and processing industry 24.3 26.3

Civil engineering 9.6 42.6

Services sector 41.2 62.7

including:

Trade; repairs of automobiles, household items,

and personal-use goods 12.1 65.7

Transport and communications 7.6 57.7

Finance 4.4 81.8

Real estate operations, rent and services to customers 6.3 72.6

State administration 3.9 78.9

Education 4.3 75.4

Healthcare and social services 2.9 66.0

Net taxes on products 12.7 -

Total 100.0 -

Table 1. Percentage of added value in the output per type of business activity in the Republic of Belarus

can absorb, on the one hand, excess

employment from large state-owned

enterprises, and on the other hand,

utilize private initiative.

Belarus has enacted a number

of strategic documents to liberal-

ize business environment in accord-

ance with the priorities laid down

in Directive No. 4 “Concerning pro-

motion of entrepreneurial initiative

and stimulation of business activity

in the Republic of Belarus” of 31

December 2010.

Significant assistance to private

business is also spelled out in the

newly adopted program of state

support for small and medium-

sized enterprises in the Republic of

Belarus in 2013-2015. In addition to a

set of targeted events, the document

provides for the national and local

budgets and the Belarusian Fund of

Financial Support of Entrepreneurs

to allocate significant resources –

from Br113.3 billion in 2013 to Br169.5

billion in 2015.

Further economic growth will

also depend on the use of the instru-

ments of public-private partnership

that brings together the public and

private interests and resources for

mutually beneficial investment pro-

jects. Public-private partnership can

and should become an important part

of the modernization of strategically

important sectors such as transport,

energy, public utilities, social sector,

science and innovations.

Services in GDP

The services sector plays a cru-

cial role in building an effective

non-resource economy and improv-

ing the overall labor productivity.

This sector has contributed to the

economic modernization in many

countries. For example, the Republic

of Korea specializes in engineering

consulting and construction ser-

vices, Singapore in financial, and

India in computer and information

services.

Belarus is lagging far behind

developed countries in terms of the

maturity of the sector. For example,

in the United States, UK, Germany,

Japan, its share in the GDP ranges

from 66% to 86%, while in Belarus

it does not exceed 40%. The world

expects a further growth of this

sector on the heels of technological

advances and the influx of workers

who used to work in the production

sector.

Services have a lower share of

material and energy expenses in

production costs, a higher propor-

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Picture 1. The GDP energy intensity across a number of countries in 2010, according to the International Energy Agency (IEC). GDP is calculated in U.S. dollars at the exchange rate of 2005.

(The volume of primary fuel and energy resources is calculated in kilograms of oil equivalent).

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tion of added value and are highly

attractive for investment compared

to industrial production. The table

below presents data on the propor-

tion of added value in the output by

industry (Table 1).

The sectors “Finance”, “Real

estate operations, rent and ser-

vices to customers”, “Education”,

“Healthcare and social services”

demonstrate the largest share of

added value, which makes them top

priority for the sake of developing

the domestic and foreign trade of

the country. The sectors of tourism

services, transport and communica-

tions have a considerable potential.

For each type of service it is

necessary to define the area of

specialization through the analysis

of the most promising market niches

both in the country and beyond its

borders. For instance, online dis-

tribution of advertising products

looks quite promising on the inter-

national market of computer ser-

vices. Geographical analysis may

be focused on the search for a mar-

ket with an increasing demand for

a particular service. For instance,

due to maturity of the financial

and insurance service market of

developed countries, the Republic

of Belarus might expand into

the CIS.

Today the computer and infor-

mation services market in many

ways shapes the development of

the Belarusian economy, promotes

its competitive ability, and creates

favorable conditions for the coun-

try’s further integration into the

global system.

Raising Investment, Joining Transnational Corporations

Integration into global produc-

tion and distribution networks of

transnational corporations gives

domestic companies an access to

foreign direct investments and new

technologies for innovative modern-

ization. It is also a powerful factor

for promoting economic competi-

tive ability and export potential of

the country. Such integration also

brings financial resources in the

country without aggravating its

external debt.

Yet, there is the other side of

the story when transnational cor-

porations outsource labor-inten-

sive, energy-consuming and even

environment-damaging manufac-

tures to developing countries. Here,

three important principles are

of paramount importance. First

of all, since Belarus is not rich

in resources, the focus should be

placed on low resource-intensity

products. Secondly, it should be ana-

lyzed which of these products have

the greatest sales capacity. And,

thirdly, when raising FDI in prior-

ity industries, it is important to take

into account the specificity of the

sectors and regions and the risks for

the domestic business.

Belarus has embarked on the

creation of holding companies and

big production enterprises (state

corporations). In this regard it is

important that all of them should

have a strategy for development and

integration with the main partners

in the Single Economic Space and

the CIS and set up new specialized

production operations with a high

added value.

It is also important for the Single

Economic Space to use a globally-

recognized form of interaction such

as international cooperation of cap-

ital, i.e. participation of economic

operators from several countries in

the authorized capital of companies

located either in the participating

countries or in third countries.

Innovation Development Roadmap

There is an array of documents

and programs regulating the inno-

vation sector in Belarus. It is impor-

tant to incorporate all their funda-

mental provisions into one nation-

wide document which could serve

as a roadmap.

This format means harmoni-

zation of all measures and events

into a clear-cut sequence of stages

with full account of the existing

resources (scientific and technical

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3 personnel, physical infrastructure,

finances). The document stipulates

an elementwise control of every

stage.

Entrepreneurship and inno-

vation are two major interrelated

areas of the roadmap fuelling the

Belarusian model. Foundation

for the former was laid down by

Directive No. 4 of the President of

the Republic of Belarus. The basis

for the latter is yet to be formed

on the principles of public-private

partnership in the innovation area.

The public-private partnership

principles for the innovation road-

map are as follows:

the government encourages

world-class research projects to

be implemented with the use of

the domestic intellectual potential

to promote the national economic

growth;

the business sector finances

commercially viable research pro-

jects on order and in the interests of

manufacturing enterprises;

the government and business

cooperate on programs and projects

aimed at manufacturing competi-

tive and high technology products

with a high added value, make con-

tributions to the development of the

innovation infrastructure.

Higher Energy Efficiency

One of the priorities of economic

modernization is more efficient use

of fuel and energy. Given preferen-

tial oil and gas prices in the Single

Economic Space, the saving of fuel

and energy resources can become

a crucial source of additional rev-

enue which can be injected into the

upgrade of industrial assets.

The GDP energy intensity is

one of the indicators used world-

wide to measure energy efficiency

of the economy at the macroeco-

nomic level. As seen in Picture

1, the GDP energy intensity in

Belarus is lower than that in other

CIS countries, including Russia and

Ukraine, yet there is still room for

improvement. In Poland, Lithuania,

Latvia, Estonia, which are similar

to Belarus in terms of climate and

nature, the GDP energy intensity is

three times as low.

This parameter is important

for making products more competi-

tive. Therefore, if Belarus reaches

the world’s average energy inten-

sity index, locally-made goods will

create good competition to foreign

products on the global market.

Personnel and Administrative Potential

At the stage of transition towards

innovative economy, it is essential

to have the brain capital able to

conduct cutting-edge research, com-

mercialize new technologies, and

get good commercial benefits from

these innovations.

A new architecture of gov-

ernance is needed, first of all,

to improve the quality of public

administration, efficiency of gov-

ernment agencies. It is important to

enhance interaction between state

administration bodies and the soci-

ety and raise the efficiency of the

administration system in the con-

text of economic modernization.

Such transformation should

be systematic. Time is ripe for

unique administration technolo-

gies adjusted to the specific needs

of the Belarusian society, and new

administrative and management

processes. It is necessary to develop

a new balanced and transparent

structure of functions, reorganize

workforce, and introduce a new sys-

tem of stimuli and incentives.

Export-Oriented Economy

Commodity export growth has

always been one of the primary

objectives of the Belarusian econ-

omy. At least 65% of goods should be

exported. This target was set forth

for 2012 and will remain relevant

in 2013.

The main goal is to gain a foot-

hold in traditional markets and

branch out into new ones. In the

modern globalizing world the major

problem is not to manufacture prod-

ucts but to sell them at a profit.

Therefore, winning over new mar-

kets is vitally important today.

It is important to enhance coop-

eration with major foreign compa-

nies, set up joint ventures, look for

new forms of mutually beneficial

cooperation and integration in the

industries where we cannot occupy

leading positions on our own.

In 2013 Belarus is set to export

more traditional energy commodi-

ties to non-CIS countries, and agri-

cultural products and machinery to

the CIS states. The sales growth will

be, first of all, expressed in physical

terms.

It is necessary to draw atten-

tion to the export of services. The

growth of services export should

outstrip that of goods. Belarus

should make a more effective use of

its transit capacities, facilitate the

export of transport services, first of

all, the export of national transport

companies carrying goods from for-

eign countries. Moreover, it is essen-

tial to boost the export of telecom,

tourism, computer and information

services.

The near-term key goal is to turn

Belarus into a large-scale interna-

tional transport and logistics hub

using its favorable geographic loca-

tion. Transit of goods can become

a major source of budget revenues.

Therefore, modernization of the

most important industries of the

economy will shape a new institu-

tional structure of the economy and

lay down the foundation for effec-

tive social and economic develop-

ment.

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Learning from Mistakes

Total investment spent on the upgrade of Belarus’ wood processing industry

is estimated at €801.9 million

Obstacles and Setbacks

Wood processing companies

embarked on technical upgrade and

renovation in 2007 when Presidential

Decree No. 529 “Concerning the

development of the wood process-

ing industry” was passed. An invest-

ment program was elaborated to

make sure that upgrade efforts

will be efficient and consistent.

The program provided for build-

ing new production facilities fitted

with top-notch equipment at exist-

ing factories. The ultimate goal

was to manufacture products with

improved properties for the domes-

tic and foreign markets. Additional

revenues from selling profit-making

goods were expected to stabilize the

financial standing of wood process-

ing companies and create objective

preconditions for their growth.

Although the upgrade projects

eventually kicked off, the pace and

outcome of this dramatic overhaul

left much to be desired. Last year,

the audits and checks conducted by

the State Control Committee and the

General Prosecutor’s Office revealed

that over Br1 trillion of budget-

ary funds invested in the technical

upgrade over the past three years

did not produce the desirable effect.

It became clear that the investment

projects got stalled and the invested

resources were used inefficiently,

including over $500 million of for-

eign currency investments.

While visiting the company

Borisovdrev in late November 2012,

President of Belarus Alexander

Lukashenko criticized both the

administration of the Belarusian

state timber industry concern

Bellesbumprom and the affiliated

companies. He stated that the wood

processing companies had failed the

modernization program adopted in

2007. He noted that the technical

upgrade of industrial companies,

including woodworking enterprises,

should be the focal point of Belarus’

economic policy. He demanded

that deadlines should be strictly

observed. Large-scale projects are

expected to diversify the economy

and reduce Belarus’ reliance on

western countries.

During the visit to Vitebskdrev

in December 2012 the President

urged installing production lines

at idle premises to manufacture

high-quality products that can sell

well abroad. After studying the state

of efforts to upgrade and revamp

Mogilevdrev, the head of state

ordered to finish the investment pro-

ject as soon as possible. He upheld

the idea of starting furniture pro-

duction at the Mogilev-based com-

pany, because the furniture busi-

ness will allow a closed production

cycle and increase the added value

of the company’s output.

To make sure the wood process-

ing companies will stay on mod-

ernization track, the State Control

Committee will oversee the imple-

mentation of investment projects at

the key companies of the concern.

Key Areas of Focus

Any problems can be resolved,

even the most complicated

ones. During the next five years

Bellesbumprom Concern is set to

revamp each of its enterprises. As

a result, revenue per employee will

increase to at least $60,000. Salaries

will rise too. As expected, the share

of the industry in the GDP will

increase from 1.9% to 10%. More

import-substitution projects will

be implemented, and more timber

products will be exported. If all

the projects are implemented, the

output in U.S. dollars will expand

2.5 times in 2012-2015 to a total of

$2.3 billion. It is expected that by

2015 merchandise export will rise

to $1.02 billion, the foreign trade

surplus will increase to $567.8 mil-

lion, i.e. up more than 2.8 times as

against 2012.

From the earliest times the humankind has been using wood to build houses, make furniture and home decoration. Wood processing products are an integral part of our everyday life. Belarus abounds with wood raw materials. Using an uninterrupted production cycle, from logging operations to wood processing, the country can fully meet domestic needs in wood products and export the rest to the demanding West and insatiable East. To boost Belarus’ wood processing capacities, companies working in the industry have launched a number of large-scale upgrade projects, which, unfortunately, are not progressing smoothly.

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“Setting even a minor process

in motion is fraught with prob-

lems. Here we are talking about

the major overhaul of the industry

that did not carry out large-scale

projects for years. Therefore, enter-

prises have faced a number of prob-

lems including external ones when

implementing these projects. For

example, the course of moderni-

zation was affected by the global

financial crisis twice in 2009 and

2011. We encountered such prob-

lems as delays in banking lending,

and in insurance of foreign credit

facilities,” said Bellesbumprom

Concern Chairman Mr Alexander

Pereslavtsev.

The important area of moderni-

zation is the creation of new facili-

ties to manufacture wood boards of

improved quality. In fact, accord-

ing to Bellesbumprom Concern, low

consumer properties of such goods

are the main reason holding back

the production of up-to-date furni-

ture and exports.

Currently, the companies

Ivatsevichdrev, Rechitsadrev and

FanDOK are working to be able

to make 480,000 cubic meters of

chipboards and laminated boards

per year. Vitebskdrev, Gomeldrev,

Mostovdrev, and Borisovdrev

are getting ready to start manu-

facturing MDF/HDF boards with

the aggregate capacity of 550,000

cubic meters per year. Mozyr Wood

Processing Plant is gearing up to

produce 140,000 cubic meters of

insulating fiberboards per year.

A new particle boards and lami-

nated boards shop with the annual

capacity of 250,000 cubic meters was

commissioned at Ivatsevichdrev

last year. It boasts high-efficiency

German equipment. In addi-

tion, Mogilevdrev and Gomeldrev

launched sawmill plants which pro-

duce 60,000 and 52,000 cubic meters

of timber per year respectively.

The priority plans of

Bellesbumprom Concern include

a project to start the production

of 2-6mm thick particle boards at

FanDOK, with the annual capacity

of 30,000 cubic meters. Vitebskdrev

is expected to start manufacturing

MDF/HDF boards; Borisovdrev is

set to upgrade the wood harvesting

facilities and start using energy effi-

ciency technologies. Rechitsadrev

will retrofit the chipboard facility.

This year will see the launch of a

project to start the furniture pro-

duction with the use of MDF/HDF

boards at Ivatsevichdrev. The pro-

ject is estimated at $30 million.

Next year we plan to put into

operation new plants at Gomeldrev

and Mostovdrev with the total

annual capacity of 350,000 cubic

meters of fiberboard. The new facil-

ities are expected to produce a wide

assortment of furniture and other

products for the construction indus-

try in the future.

“These projects are showing a

high maturity level: technological

equipment has been supplied in

full, building and assembly works

are in progress. All is on schedule.

Implementation assessment meet-

ings are held on a weekly basis

under the chairmanship of First

Deputy Premier of Belarus Mr

Vladimir Semashko or heads of the

concerns and oblast executive com-

mittees,” Alexander Pereslavtsev

said.

Big import-substitution invest-

ment projects have been launched in

the paper-and-pulp industry. Among

them is a turn-key construction

project of a bleached sulfate fac-

tory at the Svetlogorsk pulp and

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As expected, the share

of the industry in the GDP

will increase from 1.9%

to 10%

The state-run forestry, wood processing, pulp-and-paper indus-

tries concern Bellesbumprom unites 50 organizations with over 40,800

employees. The concern specializes in three sectors, namely wood pro-

cessing and furniture production, timber harvesting, pulp and paper

production. The aggregate annual output makes up about $900 million.

Bellesbumprom Concerns ships over 50% of the output abroad.

EDITORS’ NOTE

cardboard mill with the total capac-

ity as high as 400,000 tonnes a year.

Dobrush Paper Factory, a subsidi-

ary of the Belorusskie Oboi Holding

Management Company, will be refit-

ted to start producing coated and

uncoated cardboard goods. China’s

loan resources are used to imple-

ment these projects.

It is expected that ongoing

expansion of the production of lam-

inated MDF panels and chipboards

as well as laminated flooring will

raise the domestic demand for tex-

ture paper from $4.5 million in 2011

to $24.6 million in 2015. To meet the

mounting demand for texture paper

a new plant will be built in Shklov

to produce base paper for decorative

materials with the total capacity of

up to 30,000 tonnes per year. Czech

loans will be used to materialize

these projects.

According to Alexander Pere-

slavtsev, there are neither design

offices nor R&D institutes nor con-

struction organizations in the struc-

ture of Bellesbumprom Concern.

This is why it cannot influence

directly the course of exploration,

building and assembly works. In

turn, this affects the pace of invest-

ment projects. The industry still

runs short of skilled workers and

strong design institutes. The pro-

jects were developed by private

companies or regional establish-

ments lacking practical experience.

As a result, preparation of design

and estimate documentation was

protracted and did not allow for

assessing the costs in concurrent

engineering, caused some extra

expenditure on acquisition of mate-

rial resources and wages. Keeping

in mind high inflation rates, the

projects got more costly.

It is worth mentioning that

upgrade projects are being imple-

mented at the operating factories,

and the launch of a new project was

preceded by significant efforts to

take down the outdated networks,

premises and equipment and to

move engineering networks out of

the construction footprint.

Bellesbumprom Concern

believes that today the major

emphasis should be made on provid-

ing the wood processing and pulp-

and-paper industries with skilled

workers and operating personnel.

Therefore, Bellesbumprom Concern

is looking into every possibility to

encourage specialists to stay put,

including through addressing their

housing needs.

The key to successful imple-

mentation of the projects is effec-

tive teamwork of design engi-

neers, constructors and suppliers

of technological equipment that

take part in erection and start-up

works. Moreover, it is important to

train workers to operate new equip-

ment, Chairman of Bellesbumprom

Concern Alexander Pereslavtsev

said.

International Perspective

The investment projects will

enable the wood processing enter-

prises to start producing new com-

petitive goods popular both on the

domestic market and abroad. This is

important because Bellesbumprom

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presence on the markets of the

SES member states, diversify the

export geographically, and branch

out into new sales markets in the

countries outside the Customs

Union.

After Russia’s entry to the WTO

Belarusian wood processing com-

panies got a better access to the

markets of the SES member states.

Today the export of various com-

modities is regulated based on the

demand/supply ratio in each par-

ticular market and the maturity

of a price segment, according to

Bellesbumprom Concern. Moreover,

the Single Economic Space opens

up opportunities for the participa-

tion in public procurement con-

tracts, particularly, for the con-

struction industries of Russia and

Kazakhstan. Today manufacturers

do not need to adapt to the require-

ments of a particular market as

technical regulations and sanitary,

veterinary and food safety require-

ments have been harmonized. There

are no customs duties. All forms

of state control have been removed

from the internal borders of the

SES member states.

Nevertheless, Belarusian goods

will inevitably face growing compe-

tition on the SES market in the mid-

term perspective. Sooner or later

import customs rates will stop being

used as a major mechanism to pro-

tect industrial products. Russia’s

accession to the WTO will make

Belarus reduce import customs

duties on many goods which are

now sold duty-free on the Russian

market and import duties for third

countries. Therefore, one of the

main strategies of Bellesbumprom

Concern is to pursue an aggres-

sive export policy in the SES and

make foreign trade more efficient by

means of more vigorous investment

and innovative effort.

In the near future forestry,

wood processing, pulp-and-paper

industries will face the challenge

of further growth, which cannot

be achieved without improving the

quality and technological level of

exports. Therefore, the companies

need to continue their moderniza-

tion efforts and advance technologi-

cally.

Tatyana IVANYUK

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A New Lease on Life

Belarus is set to upgrade about 3,000 enterprises in 2013

Giving a Boost

Modernization is the focal point

of Belarus’ economic policy for a

reason. Against the backdrop of

toughening competition on the

global market and the accession of

the major trading partners to the

World Trade Organization, the qual-

ity of products came to the fore-

front. Аfter all, the one who will be

able to offer the best price and qual-

ity will stay on top.

This is the reason why Belarus

is working hard to enhance com-

petitiveness of domestic goods. The

efforts include renovation of pro-

duction facilities, assimilation of

cutting-edge technologies, imple-

mentation of innovative and invest-

ment projects. This comprehensive

approach produced appreciable

results in the agricultural industry

where modernization has almost

been finished. Today Belarusian

foodstuffs and products of process-

ing companies are sold worldwide

and bring substantial foreign cur-

rency revenues to the country’s

budget.

A similar modernization policy

should be pursued in the manufac-

turing industry and other economic

sectors. This will secure sustainable

economic growth in the long run,

facilitate the advancement to a new

technological paradigm, and allow

increasing productivity of labor

and, consequently, salaries and the

well-being of Belarusians.

The year 2013 can be rightly

called the culmination of moderni-

zation efforts, because the bulk of

the works to revamp production

facilities is to be carried out this

year. The sooner domestic compa-

nies install modern equipment and

start making new products, the

sooner they will reap the benefits.

They have no time to drag their

feet.

Alexander Lukashenko urged

to speed up modernization at the

February session of the Council

of Ministers, which reviewed the

social and economic development

of Belarus in 2012 and set the tasks

for 2013.

“Every manager should make

sure that modernization got well

underway. In 2013, we should do

the bulk of the work. If we are

slow at the start, it will be impos-

sible to catch up later. The Council

of Ministers and the National

Bank should create the necessary

The country has embarked on a large-scale modernization of the manufacturing sector. Its major objectives and mechanisms have been outlined by President of the Republic of Belarus Alexander Lukashenko. During this five-year period the national economy is expected to make a quality breakthrough. In line with the socio-economic development program for the period until 2015, GDP, industrial output and real income of the population are to increase more than 1.5 times. The major driving force behind the growth will be technical upgrade and establishment of innovative companies and facilities.

In 2013 the country will earmark Br134 trillion

for modernization and innovation

projects

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economic conditions for moderniza-

tion to be a success,” said Alexander

Lukashenko.

The modernization process can

be called successful if annual rev-

enue from sales reaches at least

$60,000 per employee. The President

drew attention to the fact that he

wants socially responsible upgrade,

and this requirement will remain

unchanged. It is no secret that cer-

tain enterprises still employ exces-

sive staff. Every worker laid off in

the course of modernization must

be helped into work.

Only Feasible and Effective Projects

Taking into account the objec-

tives set out by the head of state, the

government has formulated strict

requirements for modernization:

every enterprise should have a plan

and stick to it. Every plan should be

aimed at maximizing benefits from

modernization. The funds will be

channeled mainly into the acqui-

sition of new equipment rather

than reconstruction of industrial

buildings, in other words, in exte-

rior renovations. Such an approach

will quickly bring the desired

result.

Financial matters regarding

modernization projects will be

under constant control of the gov-

ernment. The requirement is one:

all funds must be spent wisely.

Squandering is unacceptable, Prime

Minister Mr Mikhail Myasnikovich

reiterated.

“All economic entities asking

for funds must promise that these

resources will be used effectively

and bring high returns in the short

term,” said the head of government.

Every invested ruble must yield

two to three rubles in added value,

and the bulk of the projects should

pay back in three or maximum five

years, he said.

In 2013, Br134 trillion is to be

allocated for modernization and

innovative development of enter-

prises. Total capital investments are

projected at Br200 trillion in 2013.

This will be budgetary assignments,

proprietary funds of enterprises,

bank loans, and foreign investment.

To stimulate innovation and invest-

ment projects, some Br9 trillion was

budgeted in 2013. Another Br2.6 tril-

lion will be assigned by innovation

funds.

It would seem that given this

level of financial support, the

moder nization program would run

smoothly. Unfortunately, feasible

and well-calculated projects are few

and far between. In addition, heads

of ministries, departments, oblast

executive committees and Minsk

City Council are not actively work-

ing on raising foreign investments

and inexpensive credits for modern-

ization.

According to Finance Minister

Mr Andrei Kharkovets, the budget

has necessary resources to support

modernization in the country, in

particular by subsidizing lending

rates on the whole volume of mod-

ernization loans this year.

“We will support only those

producers whose investment pro-

jects are designed to increase added

value and who are unable to service

loans on their own. State support is

for projects with high added value

only,” he said.

The same policy is pursued

by the Economy Ministry of the

Republic of Belarus.

“We see two main criteria to

assess the success of upgrade pro-

jects. It is the demand on foreign mar-

kets and added value figures meet-

ing European standards,” Eco nomy

Minis ter Mr Nikolai Snopkov said.

It is noteworthy that moderni-

zation will mainly cover the state

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projects at the companies of the

Industry Ministry is expected to

increase the foreign trade surplus in

goods from $2.4 billion in 2011 to $3.9

billion in 2015. Investment projects,

re-equipment, optimization and

efficient use of production space

and equipment, reorganization will

allow increasing proceeds from

sales of goods, services and works

2.1 times by 2015. Gross added value

per employee is expected to go up

2.3 times over the period. The total

investment for upgrade programs at

the Industry Ministry is estimated

at $3.1 billion.

At the same time, the state is

ready to support upgrade and inno-

vation development of private com-

panies. It is important to have it

as a bilateral movement, and see

business taking an active part in

re-equipment in the manufacturing

sector.

Priority to Innovations

The Premier believes that mod-

ernization in Belarus should care-

fully follow certain requirements.

Among them is state support to

projects, full responsibility of the

managerial staff, development of

public-private partnership, integra-

tion with the world’s leading com-

panies and the rewarding of the

national and regional managerial

personnel for active participation in

modernization.

Mikhail Myasnikovich is confi-

dent that modernization is impos-

sible without investment and inno-

vations. That is why innovation

projects aimed at quality economic

growth should be kept front and

center of the managerial staff at

any level.

By the way, the list of the most

important innovation and invest-

ment projects has been drafted

already. They were selected follow-

ing the contest and review by gov-

ernment bodies and other state-run

organizations. The list includes

711 projects which will be divided

into three groups depending on

their importance for the country’s

economy. The first group includes

nine crucial projects to the tune

of Br9.7 trillion. The second group

comprises 25 projects worth almost

Br24 trillion. The other projects are

included in the third group.

The first group deals with pro-

jects to build a pharmaceutical com-

pany complying with the European

GMP standards, ramp up the produc-

tion of epitaxial elements at OAO

Integral, launch the manufacture

of optoelectronic equipment using

thermal imaging laser systems, con-

struct a hydromechanical transmis-

sion plant, set up the production of

super heavy-duty all-steel tires at

OAO Belshina.

There are plans to implement big

projects in nanotechnologies and

microelectronics. Space technolo-

gies are among the priority areas.

Belarusian specialists are planning

to build a new space vehicle and

the necessary ground infrastruc-

ture with a view to enhancing the

Belarusian-Russian orbital group

of satellites for the remote Earth

sensing.

There are two scenarios to

finance projects included in the first

group. In line with the first sce-

nario, 15% of the total project costs

will be financed by the innovation

funds, the other 85% will be covered

by loans. The national budget will

make up for the interest rates dur-

ing the entire period of loan servic-

ing. The second scenario stipulates

that the innovation funds will cover

100% of the project costs. The inter-

est rates will be reimbursed from

the national budget, too.

It is expected that the regula-

tions on the reimbursement of

interest payment will be simplified.

The relevant documents are now

under consideration in the admin-

istration of the President of the

Republic of Belarus.

There are plans to create more

incentives to promote effective and

high quality production retool-

ing. However, managers should not

count on total state support, soft

loans and subsidies. The state will

impose tough control over the use

of funds allocated for moderni-

zation. No ruble must be wasted.

This is not only the requirement

of the head of state and the gov-

ernment but also the criterion to

evaluate the efficiency of the reno-

vation efforts of each and every

company.

Olga BELYAVSKAYA

Br9 trillion of budget funds will be used to

energize innovative

and investment projects in 2013

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MODERNIZATION

Ingredients of Success

Belarusian companies can rival many world-famous producers

Comprehensive modernization of the manufacturing industry has been among the most notable economic trends in Belarus recently. Upon the instructions of the Belarusian head of state, domestic companies are elaborating efficient upgrade plans to be implemented within a short period of time. This task is reasonable and urgent, because quality renovation and modernization is a key to higher labor productivity, lower production costs, and increased competitiveness of products. In the long run, it will help strengthen the Belarusian statehood and improve the well-being of people. It is obvious that it is impossible to carry out major upgrade projects relying solely on internal resources. Modernization requires top-notch equipment, cutting-edge technologies, and finances. Where can Belarus get these ingredients for successful modernization? What is the difference between modernization Belarus-style and modernization Europe-style? What do Western investors think of the business climate in Belarus? These and other questions are addressed to Mr Janez SKRABEC, Director of the Slovenian company Riko d.o.o. that has been operating in Belarus for about two decades already.

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Belarusian market for about two

decades. Its major business in

our country is provision of engi-

neering services. In other words,

you help Belarusian companies

purchase equipment and technol-

ogy on favorable terms…

Indeed, we have over twenty

years of experience in providing

engineering services and supplying

equipment to well-known produc-

ers of vehicles, tractors and air-

planes. Riko has become an impor-

tant strategic partner of a number

of companies, including Belarusian

enterprises. Using our expertise

and knowledge we assist our cus-

tomers in choosing the most optimal

technologies, developing concepts

of new production lines, compiling

a list of equipment to be delivered

and tested. We also help to deliver

and commission technological lines.

Your customer portfolio fea-

tures many companies, includ-

ing those based in the European

Union. Could you compare tech-

nical proficiency of Belarusian

and foreign companies?

In my opinion, Belarus was

the most technologically advanced

republic of the Soviet Union.

Objectively, it still is. After all, man-

ufacturing is the major driving force

of the country’s economic growth.

In Russia, for example, raw materi-

als, natural resources, namely oil

and gas, account for 90% of exports.

Unlike Russia, Belarus does not

abound with natural resources, but

boasts a powerful industrial base

inherited from the Soviet Union and

highly-qualified professionals. This

combination is a secret behind suc-

cess. You have to be self-reliant and

work hard. This is a philosophy of a

businessman, and I like it.

This philosophy yields good

results. I can say that Belarus has

been making appreciable progress

year to year. We closely cooperate

with many Belarusian companies

and see that all of them are work-

ing hard to become more techno-

logically advanced and competitive.

They can rival many world-famous

producers, because they are hungry

for new technologies, they try to

keep up with modern trends and

learn to operate in the market envi-

ronment.

Riko has its TOP 10 projects

running all over the world. The

list is posted on the official web-

site of the company. It features

three Belarusian companies,

namely BelAZ, MAZ and MZKT.

If we analyze the list, we will

see the role and place of Belarus in

our company. The list is a kind of

ranking. Four projects from this list

are implemented in Russia, three in

Belarus, one in Slovenia, Macedonia

and Ukraine each. As you see,

Belarusian companies account for a

significant share of our operations,

even though Belarus is a rather

small country (compared, for exam-

ple, to Russia). Actually, besides

the three above-mentioned enter-

prises, we also cooperate with MTZ,

Gomselmash, Atlant and Triple.

I would like to note that our

Belarusian office performed better

than our offices in Moscow and Kyiv

in 2012. The turnover of financial

assets of our Minsk office made

up €70 million last year; the staff

increased to 60 people. By the way,

when we started our operations in

Belarus, we had only two people

working in our office.

The latest in-trend in the

Belarusian manufacturing indus-

try is modernization and invest-

ment. What do you understand

by the concept “modernization”

and does your understanding

coincide with the opinion of your

Belarusian partners?

For any enterprise, whether

it is in Belarus, the EU or China,

upgrade is a necessary precondi-

tion for being successful. Therefore,

the modernization trend in your

country is welcome, of course. It

is extremely important that the

Belarusian enterprises with which

we cooperate perceive moderniza-

tion not as the replacement of old

equipment with new tools, but as

replacement of old equipment with

the most advanced tools meeting the

highest world standards.

For example, the longeron

production line, which has been

installed on the order of Minsk

Wheel Tractor Plant (MZKT trade-

mark), is the second one of a kind

in the world. Another example is

the delivery of complex technologi-

cal equipment for construction of

shafts, axes and clogs for Minsk

Tractor Works (MTZ trademark).

This is one of the most advanced

lines and the largest project we have

recently completed in Belarus. In

the aggregate the project featured

over 110 pieces of equipment worth

tens of millions of euros. We imple-

mented the project together with

the German firm Niles-Simmons.

By the way, when implementing our

projects, we try to use Belarusian

equipment if possible. For example,

the MTZ project included 16 pieces

of processing equipment made by

Belarusian manufacturers.

Our customers from Belarus are

very professional and extremely

selective. They are great patriots of

their country and they are proud of

their achievements. When negotiat-

ing, discussing delivery terms, they

fight for every penny, and it is not

easy to work with them. So I cannot

say that the projects carried out in

Belarus were the most profitable

for us.

They say the most difficult

negotiators are Chinese ...

You just don’t let go. The truth

is we, businessmen, never count

on easy solutions. We must con-

stantly prove our worth. I think

many Belarusians know what I am

talking about.

MAZ, one of your partners in

Belarus, is in talks with Russia’s

KamAZ over the establishment

of a holding company. How might

this affect your cooperation?

If the current system of equip-

ment purchases, in particular,

through tenders, does not change,

the relations with MAZ will remain

the same. However, the challenges

will remain as well: we will have to

provide good quality at a competi-

tive price.

Let us continue the unification

theme, only this time at the level

of the states. I am talking about

the Single Economic Space (SES)

and in the future the Eurasian

Union of Belarus, Russia and

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Kazakhstan. Will it have any

impact on your work in Belarus?

Have you already experienced the

advantages of the SES?

I am sure that with the formation

of the Single Economic Space, excel-

lent prospects open up for Belarus.

In my view, your country has many

undeniable advantages: law and

order, no corruption, transparent

competition, good living conditions,

highly-skilled workforce, favorable

tax system, and in the future the

access to the huge consumer market

of the Single Economic Space. The

access to such a market will encour-

age many investors to open firms

here, in Belarus. You will greatly

benefit from that.

And you?

And we too, because we can

reach out to the entire Eurasian

market from here. And since we

have been working in Belarus for a

long time and feel comfortable here,

this will give us advantages too.

We should also bear in mind

that the manufacturing industry,

the auto-industry in particular, is

on a steady decline in the European

Union. Plants are shut down, jobs

are cut. The economic crisis in some

EU countries has affected foreign

trade.

It is an absolutely different pic-

ture in the CIS: production is on

the rise, new plants are emerging,

and modernization is gaining pace.

I hope even more companies will be

set up in Belarus as the European

market is shrinking and yours is

expanding. As a result, you have

every chance to get more foreign

direct investments.

In my opinion, there are still

no signs for prompt economic

recovery in the European Union.

Experts view the Asian market as

the most promising one. I believe it

was a very forward-looking step for

the Belarusian authorities to pro-

mote cooperation with China and

Southeast Asia.

Talking about the authori-

ties and the role of the state,

some foreign businessmen work-

ing in Belarus take note of a

strong administrative leverage in

the country. Have you faced any

administrative pressure in your

work here?

There are situations when some

methods which I would call unfair

competition are used under the

guise of protecting the rights of

Belarusian producers.

In order to purchase equipment

from a foreign firm a Belarusian

plant should get permission from

the Industry Ministry and call a

tender. However, the results of the

tender, as it turns out, can dis-

please some participants and can

be called off because of someone’s

complaints. We have won a tender

at one of the companies for the third

time already, and there is one firm

which still puts obstacles into the

import of the equipment we offer.

I am convinced that the results of

the tender should not be changed

in favor of a Belarusian firm which

does not take part in the tender

from the very beginning and then

announces it is able to supply similar

equipment.

As for other business conditions

in Belarus, they suit us just fine. In

any way, they are not worse than

those in Slovenia for instance. In

my view, your state accomplishes

its major task very well. It secures

equal access to education and

healthcare. The unemployment

rate in the country is low. Culture

and sport are steadily developing.

The country provides high social

standards. The results of the work

of the Belarusian state are visible,

and they are positive. Perhaps, the

administrative leverage is strong

but it works.

Riko came to Belarus with

investment projects in mechani-

cal engineering. Later the com-

pany expanded its business and

started doing projects in the

energy sector. What other plans

do you have in mind for this area?

We continue the construction

and upgrade of several power sta-

tions in Minsk and the oblast. In

February 2011 we signed a contract

with Minskenergo to build two

power plants in Minsk with the

total capacity of 110KW (€54 mil-

lion). Turn-key projects to construct

two stations Dolginovskaya and

Petrovshchina have been already

implemented.

Due to quality execution of

these projects, we were able to win

another tender and sign the second

contract with Minskenergo in April

2012 for the construction of two

more power stations (Brestskaya

and Kamennaya Gorka) and the

upgrade of three operating trans-

former substations of 110KW/10KW

with cable lines in Minsk. The cost

of the contract is estimated at €41.1

million. The delivery date is set for

late 2013. Our company acts as a

general contractor responsible for

all loan resources.

Keeping in mind the scale of

these projects, we are doing our

best to streamline works and reduce

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projects are vital for Minsk as the

city is rapidly expanding, and its

demands for electricity are increas-

ing. Hence, the role of modern reli-

able and powerful electric stations

is increasing too.

What other sectors are you

going to tap into?

I am confident that environmen-

tal engineering is a promising area

in Belarus. We have gained con-

siderable experience in this field.

For instance, we have successfully

implemented projects related to

waste collection and recovery, water

and air treatment in Slovenia.

We can share our expertise and

knowledge with Belarusian special-

ists. In particular, our company

took part in a tender to build a

waste recycling plant near Minsk.

It was the first time we took part

in such a tender. And as it usually

turns out the first attempt was not a

success.

Riko has applied for a tender to

build a turn-key waste processing

plant in Grodno. The company sug-

gests fitting the plant with cutting-

edge equipment and launching a full

cycle with the maximum selection

of recyclable materials. In line with

the company’s offer, this method

will allow processing 90% and bury-

ing only 10% of waste.

Another strategic cooperation

avenue is the logistics systems engi-

neering. The logistics sector is vig-

orously developing in your coun-

try. The government draws special

attention to this process. The logis-

tics system development program

till 2015 is now implemented in

Belarus. Existing logistics centers

are working to expand the storage

infrastructure. I think our experi-

ence in this field will be useful to

Belarus too. We have already imple-

mented dozens of projects to com-

mission high-efficiency systems of

storage, transportation and distri-

bution in many countries. One of

the most successful projects is the

one to set up the Lebedyansky auto-

mated storage facility for finished

products at the food processing com-

pany in Russia.

In one of the interviews you

said that the company is inter-

ested in shipping equipment for

the future Belarusian NPP. Can

you update us on the progress

made?

Slovenia has been operating the

nuclear power plant in Krsko since

1983. However, it is not as powerful

as the Belarusian one. Its capacity

is just 730MW. The Slovenian NPP

is considered one of the safest in

Europe. Stress tests conducted after

the Fukushima accident in Japan

proved that the power plant is safe.

Its safety relies on the fact that the

power plant is operated by a num-

ber of companies specializing in

this industry. They perform regu-

lar equipment diagnostics, replace

obsolete parts, etc.

At first service companies

worked only with the Slovenian

NPP. Today they are large enough

to branch out into foreign markets.

For example, they assist with run-

ning similar facilities in the United

States. Slovenian companies would

like to help maintain and operate

the NPP in your country. For this

purpose, we will initiate a special-

ized seminar in Minsk in April.

Riko is running the biggest

loan and investment project in

the history of Belarus-Slovenia

relations. This is the project to

construct the Kempinski hotel

complex in Minsk downtown.

What is the progress made and

are you confident that the hotel

will be commissioned on sched-

ule in late 2013?

Indeed, Riko is a general con-

tractor of the project to build the

hotel complex at the prestigious

area in Minsk downtown (near the

circus building). It will include the

five-star Kempinski Hotel, 81 apart-

ments and offices, service facilities

and a parking lot. The estimated

cost of the project is about €120 mil-

lion.

Our company is a general con-

tractor of the construction project.

The project is sponsored by the

Belarusian company Elite Estate.

The architectural design was cre-

ated by the famous Moscow-based

company SPEECH.

The cost of the Kempinski Hotel

construction project is €57 million.

At present all the works are on

schedule. We are planning to deliver

the hotel by the end of the year. We

have already prepared three typical

room designs (one in the Slovenian

style, and two in the European style)

and submitted them to the customer.

The most famous project of our

company is Moscow’s Peter I Hotel.

We have also built Kempinski hotels

in Slovenia and Croatia. Therefore,

we are familiar with the strict

requirements and standards. I hope

that Kempinski Hotel will be Riko’s

trademark both in Belarus and the

CIS.

Yekaterina NECHAYEVA

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The Belarusian Chamber of Commerce and Industry

(BCCI) holds a traditional nationwide contest Exporter of the

Year Awards.

According to the BCCI, the event aims to identify and reward

companies and businessmen who posted outstanding export

achievements, to encourage export-oriented manufactures

and to enhance the prestige of Belarusian companies on the

international market.

Winners will be chosen in 18 nominations, including

mechanical engineering, metalworking, metallurgy, oil

refining, chemical and petrochemical industry, electronics and

instrument making, electrotechnical and optical industry, light

industry, food industry, agriculture, production of household

goods, forestry and logging industry, furniture-making and

paper-and-pulp industry, construction and production of

building materials. The best exporters will be selected in

the following nominations “Small Business Management”,

“Rehabilitation and Treatment Products”, “Development

of Information Technologies”, “Services”, “Self-Employed

Businessmen”. The winners will be announced and honored

in April-May 2013.

Nominations coming in for Belarus' Exporter of the Year 2012 Awards

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IN THE SPOTLIGHT

Business Plan for the Country

Rational use of resources and modernization of enterprises are the major preconditions

for sustainable economic growth

President’s Assessment

The social and economic devel-

opment of the country in 2012 and

the tasks for 2013 were discussed at

the Council of Ministers’ session

led by President of the Republic

of Belarus Alexander Lukashenko.

The head of state warned the

government right away that the

discussion would focus on prob-

lems and failures, as well as new

challenges.

The session lasted almost

seven hours. Reports were deliv-

ered by the Prime Minister, Vice

Premiers, Head of the National

Bank, Chairman of the State

Control Committee, governors, and

company chiefs. That was a very

detailed and focused discussion.

The Belarusian head of state

made a policy statement as he

spoke about the most pressing

problems impeding the country’s

economic growth. The President

also outlined short-term objectives

and tasks. According to Alexander

Lukashenko, the country’s eco-

nomic development is not proceed-

ing as planned and leaves much to

be desired.

However, in 2012 Belarus even-

tually reached financial stability

and macroeconomic balance: infla-

tion slowed down considerably, the

foreign trade deficit was reversed,

the domestic currency market sta-

bilized, gold and foreign currency

reserves were kept intact while the

country fully met its external and

domestic loan obligations. The most

important economic sectors – manu-

facturing industry and agriculture –

demonstrated good growth.

Belarus managed to consoli-

date positive trends in the social

sphere: real income of individuals

increased by 21%, pensions were

revised upward four times; house-

hold deposits in Belarusian rubles

and foreign currency rose 1.6 times.

The average nominal monthly sal-

ary neared Br5 million ($552) in

December. People on the govern-

ment payroll received about $418 in

equivalent.

“It is clear that in recent years

we have had to deal with numer-

ous challenges brought about by

the economic crisis and the global

The socio-economic development targets set for Belarus in 2012 were pretty tough. The country did its best to meet them and the efforts resulted in the $3 billion commodity trade surplus, something that had not happened in many years. However, five out of the twelve most important targets were not fulfilled. They include the GDP growth, increase in industrial production, reduction in material intensity in the manufacturing industry and GDP energy intensity, and the inflow of foreign direct investment. Almost all the regions failed to meet the gross regional product targets, while the city of Minsk performed even worse than in 2011.

In 2013 the export is

projected to reach

$60 billion, up $8 billion

(or 15%) from 2012

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recession. There is hardly any coun-

try that has not been affected by

the crisis in some way or another.

Belarus is no exception. Therefore,

the government should be credited

for preventing the Belarusian econ-

omy from collapsing,” the President

noted.

However, a slowdown in major

economic sectors that became more

pronounced in H2 2012 is a mat-

ter of serious concern. Alexander

Lukashenko warned that the sit-

uation that happened last year is

totally unacceptable; if the govern-

ment let it happen again, it will be

immediately dismissed.

The President harshly criticized

the work of the Cabinet and the

entire executive branch for inac-

tion, inability to anticipate nega-

tive developments and fear to make

decisions. “Ill-conceived decisions,

red tape, failure to meet deadlines

and fulfill instructions of the

President speak volumes about the

style and methods of the Council of

Ministers,” Alexander Lukashenko

said. “So far, the general assessment

is unsatisfactory!” the head of state

emphasized.

Industry

Since the manufacturing indus-

try largely shapes the development

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3 of the entire economy, comprehen-

sive and effective measures should

be taken to promote the industrial

sector and increase the production

of innovative goods, the head of

state demanded.

The President expressed con-

cern over the monthly contraction

in the industrial output. A number

of enterprises have reduced the out-

put and exports by 20 to 30%. “If the

markets for our traditional products

shrink, why do you not come up

with innovative goods instead?” the

head of state asked.

The President believes that it is

vitally important to take comprehen-

sive and effective measures, ranging

from imposing order and discipline

to implementing upgrade projects.

So far, things are not good in reality,

remarked Alexander Lukashenko.

He recalled the situation with the

modernization of enterprises of the

woodworking and worsted indus-

tries when he had to intervene to

give impetus to investment projects.

Investment

The head of state slammed the

government and local authori-

ties for poor effort to raise foreign

investments and implement invest-

ment projects.

Seventy-six projects included in

the national register were supposed

to be completed in 2012. Yet, by the

beginning of 2013 nearly half of

them had not been wrapped up.

Alexander Lukashenko noted

the lack of in-depth analysis of

business proposals.

“For the past several years

we have witnessed a reduction in

investment in fixed assets, more so

in fixed assets in use: 42% of capital

investment in 2012 as against 46%

in 2011. We should aim for not less

than 50% here,” the head of state

said.

In 2012 Belarus raised only $1.4

billion in foreign direct investment,

down 65% from 2011. “Almost eve-

rything was spent on trade and the

financial sector. Here, ministers

and governors do not even need to

take effort. These investments do

not require your involvement,” the

President said.

He criticized the Economy

Ministry and the National Agency

of Investment and Privatization for

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013the poor effort. The process of rais-

ing foreign investment is understood

solely as the sale of state property.

However, approaches to privatiza-

tion in Belarus remain unchanged.

“The principle is known: want to

buy – pay a price and take the obli-

gation to invest in production, save

jobs, provide people with decent sal-

aries and pay taxes to the budget,”

the President remarked.

Services Industry

Today, people are very displeased

with the quality of services pro-

vided by the construction indus-

try, housing and utilities services,

transport and communications.

The President noted there is little

improvement here.

The major goal of these indus-

tries should be lower costs, reli-

able operation of life support

systems, timely and qualitative

provision of services. Alexander

Lukashenko demanded that in the

Year of Frugality particular atten-

tion be paid to the quality of ser-

vices and energy conservation in

the construction industry because

one third of Belarus’ energy

resources is spent on providing hot

water supply and the heating of

buildings.

“People say, and I agree with

them, that the construction indus-

try in our country, like in the neigh-

boring countries, is the most cor-

rupt sector. People even call it a

‘mafia’ industry,” said Alexander

Lukashenko. He drew attention to

the fact that the industry did not get

rid of old problems: budget money

is spent ineffectively, the volume

and cost of design, construction

and installation services are over-

stated, books are cooked, and tar-

iffs are manipulated,” remarked the

President.

“Putting pressure on custom-

ers by raising the cost of projects

in order to squeeze out additional

money for wealthy lives and patching

holes caused by poor management

will end badly for many construc-

tion industry executives,” warned

the head of state. The President also

noted that Belarusian construction

companies regularly fail to hit the

target to increase the export of con-

struction services. Meanwhile, the

import of these services exceeds

the export 1.5 times. As a result, the

industry has a deficit of $193 mil-

lion, twice as bad as in 2011.

As for the utilities sector, the

President instructed the govern-

ment to grapple with prices for

utilities services in Belarus. “We

keep insulting people saying that

they are subsidized. Look into the

matter from the beginning to the

end and calculate how much each

service should cost,” Alexander

Lukashenko said.

In turn, the government deems

it necessary to switch to pre-estab-

lished prices in each region where

the cost of utilities services will be

determined taking into considera-

tion the local environment.

Agriculture

The agriculture industry per-

forms well in general. Yet the

President expressed serious con-

cern over the increase in the num-

ber of loss-making companies. They

accounted for one third of the total

last year. Their aggregate net loss

soared 11 times. Despite consider-

able support from the state, the

majority of agricultural companies

still do not have financial resources

for expansion. “I will put it straight:

no one should expect that debts will

be written off. You should grow

more efficient, raise responsibility

of managers and specialists,” the

head of state warned.

Alexander Lukashenko pointed

out that not all of his instruc-

tions had been implemented in full

regarding the industry. It pertains,

first of all, to flax production, the

area where huge state resources

are put in and no results are given

in return, and to the upgrade of

dairies, which has been making

extremely slow progress.

About Prices

The head of state also talked

about the problems on the consumer

market. The President drew atten-

tion to the fact that the inflation

rate gained momentum at the start

of the year and this aroused con-

cern in the public, which was quite

understandable. The head of state

stressed that macroeconomic stabil-

ity in the country depends on the

solution of this problem.

“Starting from 2011, the Bela-

rusian ruble has been devalued

2.9 times. Consumer prices rose 2.6

times, of them prices for food pro-

ducts increased almost three times,

for non-food products and services

2.5 times. Does your pricing policy

aim to catch up and outpace the

devaluation rate?” the President

asked.

The head of state is convinced:

“If we do not restrain the inflation

now when we have a fairly stable

exchange rate of the national cur-

rency, we will incur greater domes-

tic expenses, and our products will

lose competitiveness, in particular,

products meant for export”. In this

respect, the head of state demanded

to take more aggressive steps to

curb the inflation and put a stop to

loose pricing practices”.

“The situation is absurd some-

times. The State Control Committee

reported to me that some com-

pany chiefs, following some price

increase schedule adopted by the

government at the beginning of

last year, have been raising their

prices thinking that this schedule

was some kind of price rise guide-

line,” Alexander Lukashenko said.

“If we fail to restrain the inflation,

we will create serious problems for

ourselves on the consumer market

and make it harder to carry out eco-

nomic modernization,” the head of

state added.

Social Sector

Analyzing the state of things in

the sector, Alexander Lukashenko

drew attention to a considerable

gap between the remuneration of

labor in the budget-financed sec-

tor and the national economy in

general: today public-sector salaries

make up 80% of the country’s aver-

age salary while it should be at

least 90%.

“We should avoid moderniza-

tion by means of restraining wage

increases for teachers and health-

care workers. The load should be

distributed fairly. The budget sector

also needs to get its organizational

structure in order,” the President

said.

Alexander Lukashenko also

touched upon the problem of per-

sonnel training, which is lagging

behind the retooling of leading

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3 enterprises in a number of indus-

tries. “Modernization is welcome

here, too. It is necessary to enhance

the practical component of educa-

tion to avoid situations when young

specialists have to spend several

years to come to grips with things.

We need to eliminate non-special-

ized training, raise the efficiency

of material, technical and finan-

cial resources, keep the balance of

interests of regions, industries and

organizations. We need to regulate

everything. However, this might not

happen within a year. If the state

needs certain categories of special-

ists, we need to train them,” the

President said.

Modernization and Export

According to Alexander

Lukashenko, export and moderniza-

tion should be the locomotive which

will haul the entire economy.

The bulk of work is to be accom-

plished in 2013. The annual pro-

ceeds from sales of at least $60,000

per employee will be the indicator to

qualify the modernization as effec-

tive. Nearly 60% of enterprises with

a state-owned share have less than

$20,000 in proceeds per employee.

The President also remarked that

the banking system of the country

should provide the so-called “long

money” for modernization projects.

For this purpose, the National Bank

has to deal with the availability of

Belarusian ruble loans for the real

production sector. “But you have

to exercise the toughest control

here. Loans should be given for con-

crete and highly-efficient projects,”

Alexander Lukashenko demanded.

The President said that companies

should not apply for loans to per-

form routine operations, like pay-

ment of salaries.

At the same time, the head of

state believes that Belarus should

not give up on foreign loan resources,

but attract them only on the terms

which are favorable for the country.

For example, as part of loan agree-

ments with China, Belarus can raise

up to $12 billion.

“Citing the lack of resources

will not count as an excuse,” the

President warned. “Every company

should have an upgrade plan cou-

pled with an efficient business plan.

Such projects will be supported

through funds and cheaper loans,”

he added.

Moreover, the President believes

that the country needs to involve

Belarusian businessmen in mod-

ernization and assist them in imple-

menting their initiatives. According

to Alexander Lukashenko, Bela-

rusian businessmen are ready to

engage in this work.

The President reminded that he

still wants modernization to be car-

ried out in a socially responsible

way. It is essential that salaries and

real incomes should grow on the

back of higher labor productivity.

Speaking about export, the

President ordered to ensure a for-

eign trade balance. In 2013 the

export is expected to reach $60 bil-

lion, up $8 billion (over 15%) from

2012. “Raising the export is the key

factor to recovering the high pace of

economic growth and is a guarantee

of macroeconomic stability in times

of peak foreign debt payments,”

Alexander Lukashenko stressed. In

his words, the entire top-down com-

mand structure from members of

the government to local authorities

should make their contribution to

the export effort.

Wrapping up the session

the President said that the year

2013 had been declared the Year

of Frugality. Therefore, both the

government and local authorities

should concentrate on the effi-

ciency and rational use of natural,

fuel, energy, material and human

resources. Alexander Lukashenko

noted that Belarus should make

ample use of its huge resources in

all industries. The country should

do its utmost to find ways to reduce

production costs, decrease energy

and material intensity of prod-

ucts, and carefully spend budget

funds.

“Everyone – from chief execu-

tives to workers – should clearly

understand that the saving of

resources and the focus on economic

modernization are not a one-time

campaign but the pillars of eco-

nomic security of the country. The

entire society should concentrate

on fulfilling these urgent national

targets,” Alexander Lukashenko

stressed.

Tatyana POLEZHAI

As a result of modernization

the annual sales proceeds per one employee should soar from $20,000

to $60,000

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Smart Construction

Regulations were enacted in Belarus on 1 April to allow designing only energy-efficient housing

The energy efficiency topic is getting increasingly relevant in Belarus and the entire civilized world. Limited resources and high energy costs prompt the country to find ways to reduce energy consumption. An emphasis is placed on residential housing because it is a major energy consumer accounting for about 35% of all heat energy consumed in Belarus! Taking into consideration that 80% of energy resources is imported, heat losses translate into considerable amounts of foreign currency going down the drain.

Obvious Benefits

Scientists undertook to chal-

lenge the situation. In 2007 special-

ists of the Atayev Research Institute

of Housing Construction showed

what they had done: Minsk’s first

energy-efficient house consumed

several times less heat energy than

the neighboring houses. The bene-

fits were obvious; therefore the topic

has got the spotlight in recent years.

Energy efficiency of high-rise build-

ings and detached houses started to

be discussed at all levels. For exam-

ple, in February Grodno hosted a

seminar on turnkey construction

of detached houses. The seminar

was attended by Prime Minister of

Belarus Mr Mikhail Myasnikovich.

The forum started with discussing

the energy-efficient house built in

2009.

It took an hour to cover all the

advantages of the “thrifty” house.

Who would doubt! After all, heat

consumption in such a house makes

just 35kWh per square meter a year,

whereas neighborhood houses show

completely different figures: a house

built in the 1950s consumed 220kWh

per square meter a year, a house

built under Khrushchev consumed

190kWh, and a house constructed in

Brezhnev times consumed 170kWh.

If we translate these figures into

the language of money, we will see

that residents of energy-efficient

houses will pay merely Br2,000-3,000

per month or even nothing. This

was achieved due to several fac-

tors, including heat recovery venti-

lation, introduced with assistance

of the Atayev Research Institute of

Housing Construction.

“Heat recovery ventilation helps

maintain a comfortable tempera-

ture and humidity preventing damp-

ness and mold,” Vice Governor of

Grodno Oblast Mr Vladimir Deshko

commented on the benefits of the

new solution. “Residents of energy-

efficient houses pay four times less

for heat supply than their neighbors

living in the houses of the same age.

The difference can be even bigger

if the former make most of heat

recovery.

All the energy-efficient houses

built in Belarus offer consider-

able savings. These houses were

built in almost all the regions of

Belarus under the auspices of the

Architecture and Construction

Ministry as part of the energy-

efficient housing construction pro-

gram. Therefore it is obvious that

this segment of design and con-

struction needs “a restart”.

Naturally, developers are pre-

pared to work using new standards.

Belarus will soon produce import-

substituting components for heat

and energy supply equipment and

climate control systems.

“Belarus has a powerful manu-

facturing industry, including R&D

divisions. Therefore we will be able

to produce the sufficient amount

of these devices on our own, thus

minimizing import,” Mikhail

Myasnikovich said.

He noted that an energy-efficient

building can be rightly called “a

smart house” that saves money

for its residents and the state. The

importance of this project should

not be underestimated.

Towards Energy Saving

After the collapse of the Soviet

Union, Belarus found itself cut off

from sources of raw materials. Thus

energy saving became a priority

of the government policy, includ-

ing in the construction and mainte-

nance of the housing stock. Initially,

in order to reduce heat losses and

increase heat insulation of build-

ings, Belarusian developers insu-

lated walls and used new windows.

Energy savings in such houses

reached 30-40%. Then all new homes

in Belarus were equipped with heat

meters and heat energy regula-

tors. Later on the Atayev Research

Institute of Housing Construction

developed programmable heat regu-

lators, which were installed in all

buildings in the country. During

daytime they maintain normal

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In 2012 energy-efficient

housing accounted

for 12% of the new homes

built in the country (504,000 square

meters)

temperature in the public building

stock. At night, temperature drops

to +15°C. It generates approximately

15-20% in energy savings. In addi-

tion, new regulations have been

adopted to ensure such heat regula-

tors are used to residential housing.

By now, however, these meth-

ods of saving have exhausted them-

selves as in the houses that are

built according to modern stand-

ards, 60% of heat is lost through

air exchanges, i.e. money is thrown

to the wind in the literal sense, for

example, through the exhaust sys-

tems.

“The institute came to realize

that the problem of energy effi-

ciency in residential and public

housing stock comprises a variety

of tasks and is complex. So address-

ing issues separately is meaning-

less,” said Mr Vladimir Pilipenko,

Director of the Atayev Research

Institute of Housing Construction.

“Thus, we came up with the idea

of a modern energy-efficient home

with optimal characteristics, taking

into account specific climatic and

urban conditions. We realized that

it is necessary not only to insulate

buildings and install new windows

but to switch to advanced ventila-

tion systems – heat recovery venti-

lation. This approach has become

the basis of an energy-efficient

house concept which is used today

in Belarus.”

Other issues related to the tech-

nical implementation of energy-effi-

cient homes have been addressed.

Since the institute seeks to ensure

that all components used in the con-

struction of energy-efficient build-

ings are locally manufactured, they

have developed windows that keep

heat indoors much better than the

standard ones and also modern

approaches to the building envelope.

In addition, house insulation has

become wiser, with the focus on the

places of the greatest heat losses.

The outcome of many-year

work was the first energy-efficient

house built in conjunction with

the construction company MAPID

in Pritytskogo Street in Minsk in

2007. All the solutions developed

by the Atayev Research Institute

of Housing Construction were used

in its construction: new-generation

windows, inhomogeneous heat insu-

lation, heat recovery ventilation

systems, horizontal heating systems

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LABOR MARKET

Striving for Balance

Belarus is working to create civilized conditions for export and import of labor resources

Weak Points

Now that labor resources can

move freely across the borders of

the Single Economic Space, each

country seeks to attract labor

resources and prevent outflow

of skilled workers. It is perfectly

understandable. However, it is also

clear that you cannot resolve the

migration issue by bans and restric-

tions (after all, the borders are

open!). Therefore, to avoid a brain

drain, Belarus needs to come to

grips with the domestic labor mar-

ket and eliminate the issues that

push people to leave the country.

However, it is not exactly clear what

these issues are, because there is no

reliable information about the scale

of migration, its causes, employ-

ment periods abroad, qualifications

of migrants and so on. Thus, any

migration policies are based on

assumptions rather than facts.

The issues facing the domestic

labor market include a misbalance

between supply and demand and

the uneven distribution of work-

ers across regions and qualifica-

tions. The latter is underpinned

by the flawed educational system

that fails to take into consideration

economic needs. Over 75% of the

vacancies submitted to employment

offices offer blue-collar jobs. There

is obviously a deficit of skilled blue-

collar workers. While some people

cannot find a job, a great number of

vacancies are not even considered

by potential employees.

“Employment issues are

reported mostly by individual com-

panies and are attributed to a great

number of uncompetitive jobs and

overstaffing coupled with a lack of

qualified employees. This leads to

low productivity of work, a high

staff turnover and slow production

upgrade,” Labor and Social Security

Minister Ms Marianna Shchetkina

said. “Production upgrade neces-

sitates staff reduction. However,

this should be done in an evolu-

tionary way, using HR diagnostics

and providing re-training options to

employees. Every employee should

be provided with rewarding work,”

she added.

While analyzing the labor mar-

ket, we cannot ignore demographic

factors. According to projections,

the amount of labor force will fall

by 500,000 in 2012-2020. Therefore,

it would be naive to think that

the number of labor resources will

considerably increase even if we

get some of unemployed people to

work (according to statistics, the

number of people who do not work,

study or serve in the army now

makes up 450,000). In this context,

the focus should be placed on qual-

ity rather than quantity of labor

resources.

Apart from new labor market

regulations and reforms of the

education system, we need drastic

changes in the real economic sector,

which pertains to modernization

and improvement of the business

climate, among other things. Taking

into consideration that the num-

ber one reason for labor migration

is a better salary abroad, employ-

ees should be provided with more

labor incentives at home. Salaries

should grow simultaneously with

productivity of labor. Perks and

benefits should not be underesti-

mated, because they can become an

additional stimulus for keeping an

employee with a company.

Deputy Premier of Belarus Mr

Anatoly Tozik emphasized that the

out-migration of labor resources

cannot be stopped by administra-

tive methods; economic incentives

are needed.

“Naturally, we need to raise

salaries. We should make them as

high as in the neighboring states,

to prevent the drain of skilled and

unskilled labor. At the same time,

this should be done taking into con-

sideration the purchasing power

parity,” he said.

Labor migration is a very complicated issue. It has always been so in all the countries of the world, because it has not only economic but also social and political implications. Although hardly anyone knows the real scale of labor migration, a lot has been said about its reasons and consequences, its good and bad sides. You would agree that one cannot make a fair judgment about it without verified facts and figures that are a cornerstone for subsequent conclusions. Unfortunately, the statistics on labor migration are inadequate, which creates a perfect ground for various insinuations. The number of Belarusian migrant workers ranges from 100,000 to more than one million, according to various sources. Therefore, the labor migration issue is viewed from different economic and political perspectives.

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3 Few go abroad to work under

official contracts (this is especially

true of blue-color jobs). The major-

ity of migrants are employed in

the shady sector, with all the conse-

quences: lack of remuneration, out-

right violations of safety require-

ments, working from dark to dark,

seven days a week, tough living con-

ditions and other “flavors” of the

everyday life of an illegal alien. In

short, work till you drop.

By the way, it is not easy for

qualified professionals to get pro-

moted up the career ladder. It is

extremely difficult to jump from the

middle tier to the top (in addition to

the talent you need to be as tough as

nails) ...

Most often migrant workers face

such problems as under-payment.

According to a Russian study, only

25% of the Belarusians have signed

written agreements with employers.

Verbal arrangements subsequently

turn into “verbal” payments.

Belarusians get into troubles also

because of dishonest recruitment

agencies. A typical case of fraud:

a person pays for certain informa-

tion services, signs papers without

reading, and then he finds himself

with no money and no job. There are

cases of not only payment cheats

but also cases of slavery. Sometimes

we hear news reports about tragic

situations when Belarusian workers

were injured or killed at work in the

neighboring countries.

Some of those who have already

worked abroad are going to do so

again. Some of them (the minority)

are dreaming of settling down in

another country with their fami-

lies. Others are determined to earn

money abroad but live in Belarus.

Some migrants do not plan on going

overseas again even for high wages.

Money cannot make up for back-

breaking work, poor living condi-

tions in overpopulated dormitories

and trailers without conveniences,

away from parents, wives and chil-

dren.

It should be kept in mind, how-

ever, that the majority of migrant

workers are young people aged

between 25 and 35. They are more

mobile, more ambitious, less

attached to a particular place than

adult migrant workers who have

families and property. For instance,

a 30-40% difference in earnings

would hardly make a person with

kids and own apartment make a

move but is likely to lure young

people. Little appeal of jobs in the

manufacturing sector of Belarus

shies young people away from this

“unprestigious” sector. In the future

this could lead to a serious prob-

lem of ageing personnel. The aver-

age age of workers has recently

increased in the sector. It was 39.8

years on average in 2007, and 40.4

years in 2010.

Perhaps to some extent the situ-

ation in the labor market of Belarus

will be mitigated by the arrival of

Russian and foreign employers who

are ready to pay more than their

Belarusian counterparts, but still

less than in Russia or Europe.

Builders for Export

Brain drain hit the national

healthcare, transportation, IT and

construction sectors the hard-

est in 2011-2012. The construction

industry suffered the worst. While

implementing construction projects

Belarus (especially Minsk) had to

invite workers not only from other

regions of the country but also from

other countries.

According to the National

Statistics Committee, the export of

construction services in Belarus

soared 87.1% in 2012 as against 2011

to reach $417.9 million. Imports of

construction services were also

on the rise to reach $610.9 million

(191.2% to 2011).

According to the Architecture

and Construction Ministry, the

situation with the personnel has

finally stabilized in the sector, put-

ting an end to the outflow of build-

ers. Mr Alexei Shilo, Head of the

Department for Foreign Economic

Activity of the Architecture and

Construction Ministry, acknowl-

edged the difference in earnings

for builders in Belarus and Russia,

and stressed that in order to even

them out the exports of services

should be increased: “Those special-

ists who have left the country are

starting to come back. They still

want to work abroad but this time

under the guidance of Belarusian

organizations.”

According to the National

Statistics Committee, almost 97,800

building specialists got hired in

Belarus in 2012, including 3,200 in

newly-created jobs. An estimated

116,300 constructors were dismissed

over the period. The employed/

dismissed ratio made up 84% and

remained the lowest in the country.

For comparison: transport and com-

munications sector - 91.1%, process-

ing industry 91.3%, manufacturing

sector 91.7% , education 93.5%, agri-

culture, gaming and forestry 94.4%.

With this, the figure hit 110.9% in

trade, auto services, household

goods and individual supplies sec-

tors, 104.5% in healthcare and social

services, 104.1% in financial sector,

102.2% in hospitality and catering

industry, and 95.2% on average in

the country (a total of 875,800 people

were employed, including 51,800 in

newly-created jobs; 919,800 people

were dismissed). Last year a total

of 4,571,100 people were employed

in the country, down 1.8% from 2011.

According to the Labor and

Social Security Ministry, in late

2012 the demand for workers was

registered in the processing indus-

try (22.5% of the total), construc-

tion (17.1%), agriculture, hunting

and forestry (11.8%), trade, auto

services, household goods and indi-

vidual supplies (10%), transport and

communications (9.8%), healthcare

and social services (7.1%).

It is well-known that migration

is a reserve for replenishing human

resources. To stabilize the demo-

graphic situation the country needs,

first of all, a large-scale compensat-

ing immigration program based on

a differentiated approach depend-

ing on the category of migrants,

national interests. On the other

hand, the country should continue

working hard on its own intellectual

and creative potential.

Reaching Balance

Belarus is focused on creating

civilized conditions for the move-

ment of workforce.

In particular, the national demo-

graphic security program for 2011-

2015 earmarks Br2.8 billion per year

to boost immigration in Belarus. It

is worth saying that Belarus’ neigh-

bors are already working to attract

foreign workforce to cover natu-

ral population loss and replenish

labor resources. The migration gain

index envisaged by the national

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makes up 60,000 people per 5 years.

The government would like

able-bodied and educated people to

come to Belarus. The agricultural

industry opportunities, availabil-

ity of comfortable housing in rural

areas can attract migrants to the

regions lacking workforce. By the

way, immigrants coming to Belarus

usually work as builders, farmers,

coaches, cooks.

One of the main objectives of

the national program to promote

employment in the Republic of

Belarus for 2013 is the regulation of

foreign labor migration with a view

to ensuring a necessary balance

between the use of national labor

resources and foreign workforce.

For this purpose it is essential to

monitor labor migration processes.

There are plans to improve migra-

tion control, first of all, between the

countries of the Single Economic

Space. It is also necessary to update

the list of jobs in the manufacturing

and services sectors where there is

a deficit of workforce in Belarus.

Perhaps, it is important to keep

an eye on remittance flows. It is nec-

essary to create conditions to encour-

age migrants to transfer money via

banks. At present the majority of

labor migrants use informal trans-

fer channels. They send money with

their friends or bring it home them-

selves. This is widespread in neigh-

boring countries, namely Russia,

Poland, and Ukraine. Unfortunately,

many Belarusian migrants are una-

ware of the foreign income offset

agreements. They do not know how

these matters are regulated. Others

do not want to advertise that they

work abroad.

According to the National Bank

and the Finance Ministry, migrant

remittances to Belarus are below

1% of the GDP per year. The volume

is very small in comparison to other

CIS member states. In Tajikistan

remittances make 47-50% of the

GDP. The amount of remittances

to Moldova which is considered

one of the biggest players on the

labor migration market increased

by $50 million to reach $1.5 billion

in 2012. About $1.3 billion was sent

to Moldova via various fast money

transfer systems.

Addressing the problem with

money transfers will produce a

number of benefits. It is safe for

the Belarusians working abroad

and is good for the economy. In the

future the Belarusians could use

these means to invest in business

startups or make long-term savings

as bank deposits.

Labor migration has a mixed

impact on Belarus’ social policy. On

the one hand, Belarus gets addi-

tional income from migrant remit-

tances. Moreover, migrants are paid

in foreign currency, which prompts

the inflow of foreign currency to

Belarus. Labor migrants acquire

new experience, knowledge, mas-

ter modern technologies, raise their

competitiveness. They bring this

useful “baggage” to the home coun-

try. Other positive sides of labor

migration are lower pressure on the

national labor market, lower risk of

unemployment growth. On the other

hand, huge budget funds were spent

on professional training of workers

who enhance the potential of a for-

eign country. Moreover, labor migra-

tion creates additional pressure on

the Social Security Fund because

the country does not receive pay-

ments due. A considerable part of

tax revenues needed to support the

budget-financed sector is lost.

Therefore, labor migration has

both pros and cons. The top priority

is to maximize gains and minimize

losses.

Yelena PRUS

It is estimated that 85-90% of the labor

migrants from Belarus work

in Russia

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QUESTIONS TO THE MINISTER

Mineral Wealth

Rational mining and investment in subsoil use are the key to sustainable economic growth

Belarus has its fair share of mineral resources. Our country has the world’s third biggest commercial reserves of potassium salts that generate a lion’s share of budget revenues. However К2О is not the only mineral the country has. Promising mineral resources include coal, oil shale, oil, dolomite, chalk, clay, construction sand and gravel mixes. Proved reserves alone are enough to reduce the country’s reliance on imported raw materials and to sell substantial amount of minerals and products from them domestically and abroad. However, in order to take advantage of its mineral potential, Belarus needs to extract, process and turn mineral resources into a commodity. Will investments be able to speed up the process? What deposits are investors most interested in? What environmental protection measures are taken to offset the impact of mining operations? These and other questions are addressed to Minister of Natural Resources and Environmental Protection of the Republic of Belarus Mr Vladimir TSALKO.

Mr Tsalko, at present

Belarus is actively look-

ing for investors in its min-

eral resources industry. What

deposits will be developed first,

what deposits draw the most

interest and what investment

proposals have investors put

forward?

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raise investments into the devel-

opment of construction mate-

rials deposits, which number is

pretty big in Belarus. In December

2012 the Ministry of Natural

Resources and Environmental

Protection announced a tender

to choose concessionaires for

the clay deposits Kuropatie and

Golbitsa (Postavy District), chalk

deposit Dobrushskoye (Dobrush

District), sand-and-gravel mate-

rials deposit Perenosinskoye

(Baranovichi District), sand and

sand-and-gravel deposits Ulesie

(Dokshitsy District), oil shale

deposit Turovskoye (Stolin District

and Zhitkovichi District).

In 2013 we plan to announce sim-

ilar tenders for the plaster deposit

Brinevskoye (Petrikov District),

iron ore deposit Okolovskoye

(Stolbtsy District), bentonite clay

deposit Ostrozhanskoye (Lelchitsy

District). Private business is dem-

onstrating vivid interest in these

deposits because these raw mate-

rials have a wide variety of uses:

they are used in their unprocessed

form and as the basis for produc-

tion of construction materials that

are in big demand both domesti-

cally and abroad.

In principle, like in any other

industry, investors’ interest

depends on the profitability of a

project, the payoff period and the

availability of tax preferences.

Investors are mostly interested, of

course, in potassium deposits.

In 2011 an investment project

was launched to construct and

commission a mining and dress-

ing complex in Minsk Oblast. The

designed capacity of the complex

is 1.1 million tonnes of potassium

chloride per year. The project is

running at the Nezhinsky (eastern

part), Smolovsky and Lubansky

sections of the Starobin deposit

of potassium salts. The project is

implemented by Slavkali.

Another major investment pro-

ject involves commercial develop-

ment of the Petrikov deposit of

potassium salts, construction and

commissioning of a mining and

dressing complex in Gomel Oblast.

The capacity of the complex is

estimated at 1.5 million tonnes of

potassium chloride per year. The

project is run by Belaruskali.

Naturally, these are long-term

projects. As of 1 January 2012,

recoverable reserves of potassium

salts in Belarus were estimated at

7.3 billion tonnes of raw salts (К2О

– 1.4 billion tonnes). Planned pro-

duction will make up 41.2 million

tonnes in 2013, 42.3 million tonnes

in 2014 and 42.5 million tonnes in

2015.

The absence of clear-cut laws

in this field was believed to dis-

courage investments, including

foreign investments. A bill on

concessions has been drafted to

straighten relations between the

state and investors over mining

operations. Could you, please

unveil the details of this bill?

The new bill aims to maintain a

balance of interests of the state and

business and regulate their rights

and responsibilities that arouse

in connection with investments in

natural resources industry. A con-

cession contract is a written agree-

ment obliging a concession grantor

to transfer the right to own and

use concession property, including

exclusive property of the state, to

a concessionaire for a fee. This per-

tains to natural resources too.

The bill on concessions has been

developed by the State Property

Committee and the Economy

Ministry of the Republic of Belarus.

It should be noted, however, that the

matters arising out of and in con-

nection with investments in natural

resources industry are sufficiently

formalized in the Belarusian legis-

lation.

The Presidential Decree

“Concerning the list of assets that

could be offered in concession” was

adopted back in 2008 in further-

ance of the Investment Code of the

Republic of Belarus. The resolution

of the Council of Ministers and the

Ministry of Natural Resources and

Environmental Protection govern-

ing the use of subsoil under conces-

sion contracts was passed the same

year.

Decree No. 442 as of 3 October

2011 “On certain matters arising out

of and in connection with invest-

ments in natural resources indus-

try” grants concessionaires the

right to use the privileges and pref-

erences envisaged in Decree No. 10

Belarus’ industrial reserves of potassium salts

make up over 7.3 billion

tonnes

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3 of the President of the Republic of

Belarus as of 6 August 2009.

Lavishly endowed with

potassium salts, Belarus lacks

hydrocarbon raw materials and

has to import them in signifi-

cant amounts. Do we have any

hope of discovering new oil

fields?

Annual production of oil in

Belarus is around 1.7 million

tonnes per year, which covers

about one-third of the country’s

needs. Over the years the total

production of “black gold” in the

Belarusian Polesie has made up

more than 125 million tonnes. The

largest fields are located in Gomel

Oblast. These are the Rechitsa,

Ostashkovichi and Vishanskoye

oil deposits.

The explored oil deposits can

last 33 years, with the oil produc-

tion being at the present level. As

of today 77 oil fields have been

discovered in Belarus. They hold

about 250 oil deposits. However, it

should be said that in the Pripyat

Trough around a half of the initial

oil reserves remain unexplored,

and this requires improving the

accuracy and efficiency of explo-

ration works.

Of course, we would like to

not only maintain the current pro-

duction level but also to increase

it. To this end, we are planning

to intensify prospecting works in

the promising oil-bearing regions,

including the underexplored

areas in the marginal parts of the

Pripyat Trough.

We attach great importance to

the exploration of deep horizons

going down 5,000-6,000 meters.

There are expectations that great

undiscovered “treasures” may lay

hidden at such depths. For exam-

ple, in Glusk District we drilled

the Shumyatichskaya well 5.101

meters deep and received an oil

inflow at the point of 4,300 meters.

Thus, we pin high hopes on the fur-

ther surveying in the submerged

parts of the Pripyat Trough.

By the way, the results of the

surveying in recent years have

showed that there are real chances

of discovering new, albeit small,

oil deposits in the northern part of

the Pripyat Trough.

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been actively working on the

technologies for extracting

shale gas, which they say could

be the energy solution in the

future. Is Belarus considering

producing gas from shale?

In 2012, in accordance with the

instructions of the head of state

and the Prime Minister of Belarus

to assess the prospects of discov-

ering shale gas deposits in our

country, we established a group of

experts. Its members are special-

ists of the Ministry of Natural

Resources and Environmental

Protection, National Academy of

Sciences of Belarus, Belneftekhim

Concern, and Russian experts with

surveying experience in shale gas.

In January-February 2012, the

group conducted an express-anal-

ysis of the possible discovery of

shale gas deposits in the territory

of the Republic of Belarus. As a

result, they selected eight promis-

ing sites: three in Brest Oblast

within the basins of the Podlaska-

Brest cavity and five in Gomel

Oblast within the Pripyat Trough.

The feasibility of development

of shale gas deposits will be deter-

mined based on the results of the

geological survey. But I want to say

that not everything is simple with

this raw material. Its industrial

production involves significant

environmental risks.

It is common knowledge that

in the present-day world the sus-

tainable development of a coun-

try depends not only on a well-

developed industrial complex

but also on the conservation of

natural resources and a favora-

ble ecological environment.

Which areas in this regard do

you believe to be of top prior-

ity for Belarus? Which environ-

mental projects is our country

part of, how efficient are they?

Belarus’ socioeconomic devel-

opment program for 2011-2015 out-

lines the main goal of the national

environmental policy, i.e. environ-

mental enhancement and safety,

efficient use of natural resources,

maintenance of natural integrity,

including unique natural com-

plexes.

As for the main components of

the environment – subsoil assets,

air (including climate), water,

soil, biodiversity, specially pro-

tected natural sites, the program

describes the top priorities at the

national level, relevant events and

a mechanism of their implementa-

tion.

Apart from the major environ-

mental document, the country is

implementing a whole array of gov-

ernmental, national, sectoral and

regional programs and developing

strategic long-term documents.

In particular, the Ministry

of Natural Resources and

Environmental Protection acts as a

state customer of a whole bunch of

such documents, including the pro-

grams on developing deposits and

raw-materials in the Republic of

Belarus in 2011-2015, government

programs on securing the opera-

tion and development of Belarus’

national environmental monitor-

ing system for 2008-2014, a branch-

wise program on developing the

state hydrometeorological services

for 2011-2015.

Belarus is taking part in the

program “Monitoring of the

Earth’s Polar Areas and Support of

Arctic and Antarctic Expeditions

2011-2015” as well as the national

action plan to fulfill Belarus’

commitments to the provisions

of the Stockholm Convention on

Persistent Organic Pollutants

(POPs) in 2011-2015.

Specialists of the Ministry

of Natural Resources and

Environmental Protection take

an active part in the preparation

of the country’s strategic envi-

ronmental documents. Among

them is the Water Strategy of

the Republic of Belarus for the

period up to 2025, the strategy on

the preservation and sustainable

use of biodiversity for 2011-2020,

a strategy for the implementation

of the UN Convention to Combat

Desertification.

The ministry attaches utmost

attention to expansion and

enhancement of international

technical cooperation. Foreign

technical aid is viewed as an addi-

tional source and one of the instru-

ments to improve environmental

protection and rational nature

management.

Every year about 1.7 million

tonnes of oil, or one third of

the oil used in the country,

is produced in Belarus

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3 Today Belarus is implement-

ing 13 international technical aid

projects with the total financing

exceeding $18 million.

So far, a number of strategies

have been developed as part of

the EU/UNDP project “Support for

the development of a comprehen-

sive framework for international

environmental cooperation in the

Republic of Belarus” to improve

solid household waste manage-

ment. Highly-efficient equipment

has been acquired to upgrade the

waste management system in the

towns of Mosty and Kobrin.

One more project, Persistent

Organic Pollutants Management,

was implemented in the country

under the auspices of the Global

Environment Facility. The project

enabled the country to deactivate

and take out for disposal to France

some 823 tonnes of PCB wastes

and to destruct the Slonim pesti-

cides landfill.

Six projects of the interna-

tional technical aid have been

implemented in the water protec-

tion sector. They focused on the

rational use of water bodies of the

Baltic Sea and the Black Sea.

In 2013 Belarus has launched

a UNDP/GEF project “Landscape

approach to management of peat-

lands aiming at multiple ecologi-

cal benefits”. The project envis-

ages rewetting of degraded agri-

cultural lands on the total area of

about 4,311 hectares of depleted

peat deposits.

Besides, the government of

Belarus and the European Union

are getting ready to sign an agree-

ment on financing the project of

international technical aid “Green

Economy in Belarus” (the project

is estimated at €12 million).

The ministry maintains close

cooperation with the EurAsEC and

CIS member states in nature pro-

tection. By the way, let me remind

you that in the Commonwealth

of Independent States the year

2013 has been declared the

Year of Ecological Culture and

Environmental Protection under

the chairmanship of Belarus.

And the last question, Mr

Tsalko. The problems of solid

domestic waste management,

use of recyclable materials are

on the agenda in virtually all

countries. What measures are

taken in Belarus to resolve the

problems?

The volume of domestic waste

in Belarus and, perhaps, every-

where, is constantly on the rise.

This has a detrimental effect on

the environment. Waste processing

and the use of recyclable materials

have become an important task for

the state.

At present there are several

mechanisms to involve recyclable

materials in the economic turno-

ver in Belarus. First, there is a

vast network of waste manage-

ment centers of the Belarusian

Union of Consumer Societies, the

trade and manufacturing associa-

tion Belresursy, the Housing and

Utilities Ministry, Belvtorchermet

Company. Second, there are con-

tainers for the separate collection

of domestic waste and special

disposal sites for complex house-

hold equipment (transport vehi-

cles), etc. Third, there are domestic

waste sorting stations.

Waste sorting stations operate

in a number of Belarusian towns,

for example, in Pinsk, Polotsk,

Mozyr, and Pukhovichi. There

are sorting stations at housing

and public utilities service cent-

ers in the majority of Belarusian

regions.

The majority of recyclable

materials produced by waste pro-

cessing companies are paper, card-

board, textiles, polymers, glass cul-

let, ferrous and non-ferrous metals.

What is the output and importance

of these resources? I will give an

example: in 2012 local scrap metals

accounted for more than 50% of

the total volume of raw materials

used by Belarusian Steel Works for

the first time in history.

Belarus has a well-developed

strategy to organize efficient waste

collection, disposal and processing

of domestic waste, production of

recyclable materials and an action

plan to implement the strategy for

2011-2015. In particular, the docu-

ment provides for the launch of the

second line of the waste process-

ing plant in Mogilev, opening of

waste sorting stations in Grodno,

Minsk, Vitebsk, Borisov, Bobruisk,

Orsha, Mozyr and Soligorsk.

Tenders to transfer six

Belarusian deposits in

concession were announced in

December 2012

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the expansion of the waste man-

agement network and increasing

the number of containers for the

separate collection of solid domes-

tic waste. There are plans to open

regional centers collecting waste

which can be used as recyclable

materials, including complex

household equipment and trans-

port vehicles in all Belarusian

regions and the city of Minsk.

An important step to expand

the use of recyclable materials is

the establishment of a mixed glass

cullet sorting facility in Minsk.

This is a recycling center to pro-

cess various types of recyclable

materials using non-waste tech-

nologies. The installation of spe-

cial containers for food wastes in

Belarusian retail outlets is impor-

tant for the collection and disposal

of eco-damaging wastes.

Decree of the President of the

Republic of Belarus No. 313 of

11 July 2012 “Concerning certain

aspects of consumer waste man-

agement” is aimed at reducing the

volume of solid waste burial and

minimizing their adverse effect on

the environment.

In line with the document, the

principle of extended responsibil-

ity of manufacturers and suppliers

of packed goods, packages and the

accompanying list of commodi-

ties, including complex household

equipment (refrigerators, wash-

ers, etc.), oil products, rubber-con-

taining items (tires and casting),

charging devices and other goods

is introduced in Belarus.

This is a very important

moment. From now on the decree

obliges legal persons and self-

employed businessmen who manu-

facture or import the abovemen-

tioned goods in plastic, glass, paper,

cardboard packages to collect, dis-

pose or use packages and goods

after the expiry date of the latter.

By the way, for this purpose

manufacturers and suppliers can

either use their own waste collec-

tion systems or pay a state-run

non-profit waste management

center established at the Housing

and Utilities Ministry.

People should bear financial

responsibility for bringing damage

to environment. This is the only

way to make it effective.

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STATE AND BUSINESS

Public-Private Partnership:

Fashion or Trend?The business model of public-private partnership (PPP)

is the key to fast socio-economic growth

Back StoryThe first important step towards

public-private partnership in

Belarus was made by a traditional

State of the Nation Address deliv-

ered by the Belarusian President on

20 April 2010. The address empha-

sized the importance of new forms

of interaction between business

and the government. The President

was more specific about the idea of

PPP in his next State of the Nation

Address a year later: “One of our

most important tasks today is to

come up with efficient mechanisms

of public-private partnership and

the adequate legal framework. This

will create a foundation for a new

format of relations between the gov-

ernment and business. This new

format will be based on agreements

on joint projects that are of para-

mount importance for the public.”

The State of the Nation Address

was followed by Directive No. 4

“Concerning promotion of entre-

preneurial initiative and stimu-

lation of business activity in the

Republic of Belarus” that was

signed on 31 December 2010. Article

8 of the Directive deals with the

formation of the legal framework to

encourage public-private partner-

ship in Belarus.

A concept of the draft law

“Concerning public-private part-

nership projects in the Republic of

Belarus” was elaborated. In August

2011 the draft law “Concerning

public-private partnership projects

in the Republic of Belarus” was

developed. It passed international

examination and was to be enforced

in 2012. But it was not. It was not

even on the agenda of the parlia-

ment for 2013. More than that, there

is some doubt as to whether the PPP

law is needed. Skeptics insist that

investment projects related to infra-

structure development could rely

on the Investment Code that has a

provision on concessions. Others

say that it would suffice to develop

the law “On concessions”.

Most of technologically

advanced countries have effective

laws on public-private partnership,

including the EU (2003), Germany

(2003), Poland (2005), the Republic

of Korea (1997), Ukraine (2010),

and Moldova (2009). The Russian

Federation has not drafted a single

law on PPP yet, but regional govern-

ments are authorized to pass such

laws and have been taking advan-

tage of this opportunity for the last

ten years. The federal law is to be

enforced in Russia in 2013.

In fact, Belarus is not even in the

list of countries promoting public-

private partnership. It cannot be

found in any rankings and coun-

try profiles made by international

organizations.

Several years ago Deloitte &

Touche compiled a rating of coun-

tries promoting the business model

of public-private partnership. Of

all the former USSR republics,

Russia was the only one in the list

and it stood at the very bottom of

the ranking. Belarus was not there

(Pic. 1).

So, what is public-private part-

nership all about? Is it just a tribute

to fashion or a modern economic

trend? Why do the majority of

Irina NOVIKOVA, Doctor of Economics, Professor,

Head of the Economic Theory Sub-Department at the Academy of Public Administration under the Aegis of the President

of the Republic of Belarus

The recent two or three years have seen an increased interest in public-private partnership in Belarus and elsewhere. PPP is discussed in newspapers, at scientific conferences, roundtable sessions, and seminars. International experts come to Belarus to share best practices. In 2011, the Academy of Public Administration offered a master’s course in the discipline “Management of investment projects in public-private partnership”. The curriculum of the fourth-year students now features the discipline “Mechanisms of public-private partnership”.

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3 of infrastructure, higher quality of

services, including public admin-

istration services, and building an

innovation-driven economy. Public-

private partnership is meant to

redistribute responsibilities and

risks connected with the develop-

ment of clusters which usually fall

within the scope of the state.

It is worth saying that to manage

such a business model one needs to

carefully divide spheres of influ-

ence of the state and the business.

As a rule, in PPP projects the pub-

lic sector is in charge of setting

parameters and standards for infra-

structure facilities and the services

sector.

Private business is, in turn,

responsible for the development,

construction, and financing of the

project. It is in charge of project

management in compliance with the

established standards and param-

eters and assumes the responsibil-

ity to observe these requirements

when providing services. In return,

the private sector gets paid by the

state or the consumer. The size of

payments depends on the results of

work. By the way, this model needs

clear-cut standards and parameters.

Otherwise, public-private partner-

ship lacking norms and standards

will instigate corruption and abuse.

For example, in Russia this

model was compromised in the

municipal services sector. Managing

companies received money from

the state and tenants. However,

there were no effective norms and

laws. As a result, the industry was

enmeshed in corruption. This hap-

pened not because of the defective

PPP model, but because of the lack

of the adequate legal framework

and standards which regulate the

business. By the way, the draft law

“Concerning public-private part-

nership projects in the Republic of

Belarus” envisages only transpar-

ent tender procedures. The state is

the only controlling body. In fact,

the real mechanism of public-pri-

vate partnership needs to be con-

trolled by the people who will use

public and municipal services. It is

essential to establish multilateral

ties between the state, the civil soci-

ety and business in order to engage

the general public in the adminis-

tration of public affairs. Therefore,

if the bill is passed it will be neces-

sary to amend the legal framework

related to public organizations.

Why do we need public-private

partnership in Belarus? What does

it give to the state, government,

citizens, and business? Using this

business model the government

gets an opportunity to save a lot of

financial resources and accelerate

social and economic development.

The business model will help raise

the quality of the necessary expen-

sive infrastructure (roads, depots,

airports, terminals, schools, water

treatment and sewage facilities,

bridges, waste processing facilities,

etc.), take advantage of the funds

and managerial solutions of private

business, and share risks with them.

In such a way private business gets

access to the industries previously

dominated by the state, i.e. private

companies are given new invest-

ment opportunities and a chance to

communicate with the government

directly. Consumers will enjoy an

optimal price/quality ratio, acceler-

ated development of the infrastruc-

ture and higher quality of public

services.

The business model will play

a big role in the innovation sec-

tor. It is especially important for

us because the social and economic

development program for 2011-2015

envisages radical modernization of

all sectors of the economy, establish-

ment of new science-intensive and

high-tech production facilities.

Moreover, if we are going to join

the WTO we must fulfill the acces-

sion requirement which says that

at the precompetitive stage the state

can finance up to 75% of scien-

tific research. At the competitive

stage the share of state financing

cannot exceed 25%. The innovation

sector needs private investments.

Therefore, the innovation industry

should be reformed in line with the

requirement. This is what Russia

has been doing since the early 2000s.

The majority of countries apply

this business model. Among them

are the United States, Germany,

France, Austria, Australia, the

Netherlands, China, India, Israel,

Canada, etc.

Therefore, public-private part-

nership is not a tribute to fashion.

Nowadays it is a major trend in

the majority of countries, which is

connected with globalization and

geo-economics. Public-private part-

nership is now the main instrument

of state regulation of the national

economy.

If we are slow in passing the bill

“Concerning public-private part-

nership projects in the Republic of

Belarus” and the bill “Concerning

state support to technological inno-

vations” in the innovative and tech-

nological sector, we will lose com-

petitiveness needed to raise foreign

investments and develop the inno-

vation-driven economy. It is com-

petitiveness that should ensure geo-

economic breakthrough together

with Russia and Kazakhstan,

with whom we are partners in the

EurAsEC. This integration is based

on the cluster and network region-

alization in the innovation sector

built to the public-private partner-

ship model.

PPP is not just cooperation between

the public and private sectors but a business model of interaction

between the state and business

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FOREIGN ECONOMIC TIES

Living Within Means, Trading Wisely

Belarus is set to expand its export by 15.2% in 2013

The year 2012 was a good year for Belarus’ foreign economic operations. The major achievements of economic diplomacy include a record high export of goods and services that reached $51.89 billion and a trade surplus. According to updated information, the trade surplus in 2012 amounted to $2.9 billion. Such a breakthrough would have been impossible to achieve solely by expanding the export of individual commodities. The secret behind the breakthrough is dramatic transformation of Belarus’ export strategies. The details of Belarus foreign economic policy are unveiled in an interview with Deputy Foreign Minister of Belarus Mr Alexander GURYANOV:

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013Last year witnessed ground-

breaking changes on the global

market. They should become a ref-

erence point for our export strat-

egies. I would single out five of

them.

First of all, we reached a bal-

ance of trade in goods by means of

the faster export growth over the

import growth. For the first time

we posted a trade surplus. It made

up $111 million. It is not much, but

it shows that we are learning to

import just as much as we can pro-

duce and sell abroad.

Secondly, we managed to main-

tain the export growth mainly by

increasing the physical volume

of Belarusian products. Belarus

objectively expanded its “physical”

presence on external markets. If

we look at the previous five-year

term, we will see that Belarus’

export figures were increasing on

the back of higher prices. However,

in 2012 the prices remained virtu-

ally unchanged, while the physical

volume rose by over 10%.

Thirdly, we expanded the export

of our traditional industrial and

agricultural commodities.

Fourthly, we managed to “ration-

alize” the import. Thanks to our

efforts to restrain “appetites” for

intermediate and consumer import

and to pursue aggressive import-

substitution policies, the aggregate

amount of imports remained vir-

tually the same as in the previ-

ous year (it inched up merely by

1.6%). This was despite the fact that

we imported more oil products, oil

and gas. Thus, Belarus is learn-

ing to live within its means and to

import only those products it really

needs.

Fifthly, thanks to the establish-

ment of the Customs Union and the

formation of the Single Economic

Space (SES), Belarusian companies

considerably boosted the export of

products to the Russian Federation

(by $1.8 billion) and Kazakhstan (by

$130 million). I would like to make

one thing clear: Belarus earned

this money by exporting industrial

and agricultural goods with a high

added value, not highly liquid pet-

rochemical products.

Have our SES partners also

taken advantage of closer inte-

gration?

Naturally! In recent time repre-

sentatives of the Eurasian Economic

Commission have often said that

both Russia and Kazakhstan are

happy with the positive trends on

the common market. Our trade

within the Customs Union is more

vibrant than our trade with third

countries. This demonstrates that

by removing barriers and facilitat-

ing direct contacts between compa-

nies, we managed to intensify the

mutual trade within the “troika”

format.

The export of services

exceeded $6.6 billion in 2012, up

by 14.5%. However, it is far from

what we aim to sell…

We will work on boosting the

export of services. By the way, in

the majority of developed countries

the export of services accounts for

at least a quarter of foreign rev-

enues.

For many years we have main-

tained a surplus in services trade,

which partially offsets the deficit

arising out of the merchandize

trade. We should strengthen this

trend in the future as well.

There are a number of services

which are provided on the territory

of Belarus. Such services include

transportation, insurance, banking,

computer services, various retail

business services, logistics, health-

care and education.

However, there are some services

that are more difficult to promote.

By these services I mean construc-

tion services. In construction, we

need to utilize, to the maximum

extent possible, the expertise and

knowledge that we have previously

acquired. We have worked in the

Russian Federation and Venezuela.

We ought to follow the principles

used by successful overseas engi-

neering companies which rely on

expensive engineering services. We

are fully capable of doing it and we

need to pursue this strategy aggres-

sively.

Why not complement the

exported goods by the associated

services. We could start with the

export of technologies and proceed

to the maintenance and servicing

of the exported products on site.

The same would apply to logistics,

transportation and insurance. This

With the creation of the Customs Union and the

Single Economic Space, Belarusian

companies increased exports

to Russia by $1.8 billion

and Kazakhstan by $130 million

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3 Main foreign trade partners of the Republic of Belarus

43,824.5 47.4

8,036.0 8.7

7,878.7 8.5

4,469.1 4.8

3,425.1 3.7

2,801.5 3.0

2,297.8 2.5

1,643.4 1.8

1,556.3 1.7

1,006.7 1.1

Share

in total trade, (%)

Trade in 2012,

USD million

particular approach will allow us to

increase the export.

The target for the export of ser-

vices set out in the national export

promotion program is clear, namely

to increase the share of services to

at least 20% in the overall volume

of our export. That said, we should

not forget about the opportunities

arising out of the Hi-Tech Park and

the science sector in general. In col-

laboration with some countries, the

National Academy of Sciences has

been creating the so-called technol-

ogy transfer centers, which allows

utilizing the existing potential.

Our country has extraordinar-

ily extensive experience and knowl-

edge of various technologies and

products – all of which can be suc-

cessfully exported in the form of

services. When I was Ambassador

to South Korea, I noticed an inter-

esting peculiarity - we have a strong

research base which however can-

not be fully utilized just within the

Belarusian economy. No wonder

countries such as South Korea and

Japan, whose industries develop so

rapidly, constantly display interest

in Belarus as they do not gener-

ate as many new ideas that would

allow them to keep abreast with

their development. New ideas are

exactly what we, Belarusians, can

offer and which up till now have

been collecting dust on the shelves

of labs.

Other areas that can be poten-

tially successful are medicine and

education. In particular, as a result

of close collaboration between

healthcare companies and various

embassies, the export of medical

services grew by 4.3 times last year

alone.

The project to build the turnkey

mining complex in Turkmenistan

has allowed Belarus to increase

not only supplies of technical

products and technologies but

also educational services. The

number of Turkmen students at

Belarusian universities is almost

5,000 people. This is a prime exam-

ple of an integrated approach to

The share of services

in Belarus’ total export

will continue increasing

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013when issuing export loans. There is

a system of export risks insurance

offered by Eximgarant of Belarus

which is constantly increasing

the volume of operations. There

is the national leasing operator

Promagroleasing. The Development

Bank of the Republic of Belarus

has been established to implement

government programs. We will do

our utmost to get the bank involved

in the promotion of export.

Two important steps were made

last year. Firstly, the procedures

to get export loans were simpli-

fied. Particularly, this pertains to

the time-constrained projects that

require small loans and prompt

support when the government com-

pensation of banks’ losses does not

exceed $500,000. We have stream-

lined the administrative algorithm

of harmonization. These efforts

have already produced results.

According to Eximgarant of Belarus

and banks, the number of opera-

tions to issue export loans using

these instruments has increased

considerably.

The Finance Ministry, the

Economy Ministry and the Foreign

Ministry have been working on the

possibility to allow issuing loans in

Belarusian rubles. This amendment

was introduced by Decree No. 534.

The procedure to get permission

from the National Bank to prolong

a foreign trade operation and to use

insurance of export risks has been

facilitated, too. Nowadays it is possi-

ble to get financial support to partic-

ipate in foreign tenders and to hold

advertizing campaigns necessary to

branch out into foreign markets.

The volume of budget financ-

ing of export loans and insurance

through Eximgarant of Belarus has

increased.

The Finance Ministry, the

Economy Ministry and the Foreign

Ministry have recently met with the

representatives of Eximgarant of

Belarus, Promagroleasing and the

Development Bank to discuss ways

to improve the structure and vol-

ume of export support. We have con-

sidered the idea to create a specific

centralized institution, an export

bank. We have agreed that the

Development Bank will coordinate

the work. Moreover, the national

leasing operator Promagroleasing

has already become part of the

Development Bank. It is quite pos-

sible that the bank may undergo fur-

ther structural changes with a view

to turning the institution into a spe-

cialized export promotion agency.

Of course, certain problems per-

sist. I would put it this way: we have

necessary instruments, but they are

underused. Moreover, we have not

resolved the problem of state export

loans which are more preferable

than commercial loans while imple-

menting big contracts or long-term

projects abroad. In the near future

the Development Bank will embark

on this work and we will be able

to say with certainty that we pro-

vide all the necessary instruments

to promote the export of our manu-

facturers.

We would also like to popular-

ize preferential export loans envis-

aged by Decree No. 466 among our

clients in Ukraine, Moldova, South

Africa, Indonesia and other coun-

tries. Financing will be provided by

the bank of the country purchas-

ing Belarusian goods. Belarus’ gov-

ernment, in turn, will compensate

interest rates for borrowers. Such

a scheme has been a success in

Russia. It is implemented as part

of the cooperation with Sberbank.

In fact, Russia’s Sberbank issued

loans to Russian purchasers of the

Belarusian equipment, while the

government lowered interest rates

in order to make this form of loan

assistance more attractive.

The government has given an

instruction to consider ways to

develop the scheme. Particularly,

there are plans to implement it

jointly with Russia’s VTB Bank.

This scheme is also feasible in

other countries, for example, in

Nigeria which is eager to buy many

freight vehicles. Other countries

are interested, too. For example, we

negotiate the possibility to export

Belarusian quarry equipment to

Australia and Mozambique.

In 2013 the country aims to boost

the export of goods and services by

15.2% over 2012. This is to be done

notwithstanding price fluctuations

on the global market.

We need to make joint efforts

to reach our main goals – to boost

export and make a contribution to

Belarus’ economic development.

Marta ASTREIKO

Belarus has developed

almost the entire range

of export promotion

tools

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Belarusian exports to the

Czech Republic increased

by 17.2% in 2012 as against a year earlier to reach $130.4 million

Mr Markovich, how would you

describe the current relations

between the two countries?

Unfortunately, the political coop-

eration is in the frozen state at the

moment. Since the Czech Republic

is a member of the European Union

(EU) that has adopted a certain

strategy towards Belarus, the offi-

cial Prague follows the common EU

policy by supporting all the state-

ments and restrictions imposed on

Belarus by the EU and its North

Atlantic allies. At the same time

the Czechs try to establish their

own channels of cooperation with

Belarus at various levels and their

country is not closed for us. Thus,

last year there was less negative

political rhetoric on Belarus and

certain Czech diplomats were taking

cautious steps to establish contacts

with their Belarusian counterparts.

The Foreign Ministries of Belarus

and the Czech Republic renewed the

bilateral dialogue. For instance, a

telephone conversation was held on

the occasion of the 20th anniversary

of the diplomatic relations and the

two ministries exchanged congratu-

latory messages. The foreign min-

isters agreed that the Belarusian-

Czech relationship has great future

and the Czech party confirmed

interest in the bilateral dialogue

with Belarus and in the Belarus-

European Union dialogue.

Belarus is committed to develop-

ing contacts at the political level,

including by means of economic

cooperation. This is the right

approach as economy is the back-

bone of political relations and if

partners see that economic coopera-

tion yields good results (increased

tax revenues and trade turnover,

additional jobs, lower unemploy-

ment), they will get closer at the

political level too.

As for the economic situation,

in 2012 the two countries reached

record breaking results in their

bilateral trade with the highest

trade turnover, export of services

and Czech investments in Belarus

ever.

The bilateral trade soared by 23%

in 2012 over 2011 and reached $571.3

million. The Belarusian exports

to the Czech Republic went up by

17.2% last year over 2011 to reach

$130.4 million. A comparative analy-

sis of exports from the CIS member

states to the Czech Republic showed

that only two countries, namely

Belarus and Moldova, boosted their

exports last year.

However, Belarus posted a $310.5

million deficit due to the implemen-

tation of several large investment

projects to upgrade Belarusian pro-

duction facilities by Czech compa-

nies in 2010-2012. Therefore, invest-

ments accounted for about 80% of

the total imports from the Czech

Republic, which last year reached

$440.9 million, an increase of 26.8%.

As you have already men-

tioned, economic relations

between Belarus and the Czech

Re pub lic are getting stronger

and numbers confirm that. Does

this mean that the stability of the

bilateral economic cooperation

can break the ice at the political

level?

For sure. Belarus should con-

tinue focusing on economic coopera-

tion as the successful development

of the trade-economic ties will be

beneficial for political contacts. This

area should remain a priority for the

two countries as even when the polit-

ical relations were at low ebb the

Czech officials were always against

economic restrictions and anything

that could slow down economic

cooperation. It is true that Czech

financial institutions follow the US

sanctions against Belneftekhim

Concern. Yet, when it comes to joint

projects, the Czechs choose what

suits their economy best.

Besides, the Czech Republic is

virtually the only country in Europe

that openly declares its interest in

boosting economic ties with Belarus.

This is reflected in the Czech exports

strategy for 2012-2020, which is based

on three main principles: intellec-

tual exports, export development and

support of business opportunities.

The document also lists the coun-

tries that are priority export destina-

tions for Czech products divided into

several categories. The top category

includes 12 countries that are most

important for the Czech Republic

in terms of exports and business

cooperation. They are Brazil, China,

India, Iraq, Kazakhstan, Mexico,

Russia, Serbia, Turkey, Ukraine,

the USA and Vietnam. The next

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category includes 25 countries that

the Czech Republic is very inter-

ested in boosting cooperation

with. They are Angola, Argentina,

Austria, Azerbaijan, Belarus, Egypt,

Ethiopia, Chili, Croatia, Ghana,

Israel, Japan, Canada, Colombia,

Morocco, Moldova, Nigeria, Norway,

Peru, Senegal, Singapore, the South

African Republic, Switzerland,

Thailand and the United Arab

Emirates. As we see, Belarus was

not only included into the export

strategy but also in the future plans

of the Czech Republic. As part of the

Customs Union Belarus is in the top

category and Czech businessmen are

well aware of that.

In the Czech Republic Belarus

is known for its potassium fer-

tilizers, agricultural machines,

tires and pipes. What else can

Belarus offer to Czechia?

Indeed, Belarusian goods are

popular in the Czech Republic.

Belarusian manufacturers have

been selling a wide variety of com-

modities from petrochemical prod-

ucts and tractors to mattress bases

and bedding items. Belarus-made

aluminum structures, raw and pro-

cessed flax, glass fiber, animal fat

and vegetable oil, butter, shirts and

hats are popular commodities in the

Czech Republic.

Last year, there were 215 export

items on the list of Belarusian

exports to the Czech Republic. For

the first time ever Belarus supplied

a $1 million worth of white salt.

This is our small victory as Belarus

managed to gain market access with

this highly demanded product.

As for the prospects of coop-

eration, we have yet to find our

own market niche. Given the fact

that Belarus has no oil or gas to

export, unlike our neighbors, it is

crucial to give some thought to what

products Belarus should bring to

the European market. These can be

foodstuffs, for instance, as they are

always in demand and will never

go down in price. Although only

three Belarusian companies have

managed to get European quality

compliance certificates to date.

Do you think that Belarusian

food products could be popular

among Czech consumers?

Not long ago a small private

store opened in Prague. It sells

linen, products for women and other

goods made by Bellegprom Concern.

However, the first question the cus-

tomers asked the owner was “Do

you have any Belarusian food prod-

ucts?” Here is the answer to your

question. Czech meat producers, as

famous as they are, do not make the

same sausages as we do in Belarus

and the Czechs are eager to try

them.

But in order to export to the

Czech Republic, Belarusian compa-

nies have to obtain necessary cer-

tificates which means they have to

modernize their production facili-

ties and upgrade equipment. We

have to be at least half a step ahead

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Czech companies are interested

in doing business in Belarus and

ready to invest significant funds in

various sectors of the Belarusian

economy as they appreciate our

reliability, the favorable investment

climate and the stability of busi-

ness operation ensured by the state.

Attesting to this fact is the growing

number of Belarusian-Czech joint

ventures. Today there are 100 com-

panies with Czech investments reg-

istered in Belarus, of them 49 are

joint ventures and 51 are foreign-

owned companies; eight compa-

nies are residents of free economic

zones. Besides, there are 20 repre-

sentative offices of Czech compa-

nies in Belarus.

Over the last ten years Belarus

has raised over $315 million in Czech

investments. Dozens of joint invest-

ment projects were implemented in

such industries as automobile engi-

neering, power industry, machine

engineering, metalworking, petro-

chemistry, agriculture, and food

industry. Czech businessmen are

of our competitors. Only this will

help us get access to the EU market

and secure a foothold there.

The Czech party has been

actively investing in the

Belarusian economy. Attesting to

this are numerous joint invest-

ment projects currently under-

way. For instance, last year about

40 projects were in progress in

Belarus, many of them were

worth more than €25 million.

What is the situation today?

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their Belarusian counterparts in

other spheres such as logistics, con-

struction, engineering and health-

care.

Are there any projects of spe-

cial importance?

It is difficult to say as all the

projects that are currently in pro-

gress are important. For instance,

Novopolotsk-based Naftan jointly

with some Czech companies have

been reconstructing a hydro skim-

ming unit; a joint company is mod-

ernizing electric diesel-locomotive

shunters in Lida, Grodno Oblast.

Tabor-based Bauer Technics s.r.o. is

involved in turn-key construction

of a new hog breeding complex with

a closed production cycle for 24,000

head in Borisov. Metrostav a.s. is

building a transport and logistics

center in Shchitomirichi village of

Minsk Oblast and will be building

another one in Kozlovichi village

of Brest Oblast. Glinka, a company

of the Beltopgas state production

association, jointly with Raselina

a.s. is involved in peat extraction

and processing in Brest Oblast.

Czech partners are partaking in the

project to supply a hot galvaniz-

ing line to BelFerrumTsink, man-

agement and security systems to

ten railway stations located on the

route from Polotsk to Vitebsk, and a

cheese making line to Postavy Dairy

Factory.

I think that joint investment

projects in the energy and petro-

chemical sector are worth special

mentioning. As for the energy sec-

tor the Belarusian and Czech par-

ties have been constantly looking

for ways to boost cooperation and

set up a Belarusian-Czech working

group in the energy sector. As a

result Mavel a.s. joint venture is

completing assembly, testing and

commissioning of imported hydro-

electric equipment for the Grodno

hydroelectric power plant on the

Neman River and is ready to provide

services for construction of other

hydroelectric power plants. Besides,

the two countries are considering

a great number of other energy

projects, including design and con-

struction of a brown coal extraction

site in Lelchitsy, fostering nuclear

power cooperation, construction of

a mini co-generation plant running

on local fuels in Belarus, as well

as a possibility of supplying Czech

windmills to Belarus.

Are any joint projects in other

sectors being considered?

In H2 2012 preparation for imple-

mentation of two new projects was

started, namely the production of

base paper at the Newsprint Plant

with the use of specialized equip-

ment made by Czech-based Papcel

a.s. and setting up a turkey meat

processing facility with Bauer

Technics equipment in Ludenevichi

agro-town. Bauer Technics will also

supply equipment for construction

of a hog breeding farm at Bobruisk

Bread-Making Plant. The construc-

tion of a Czech commercial center

in Minsk is being considered as

well as construction of a glassware

plant, modernization of Kamvol by

the Czech company Envirmine and

a number of other projects in the

agricultural sector and food pro-

cessing industry.

A total of $447 million worth

of projects either have already

been launched or are in the pipe-

line. It is important that financial

resources of the major Czech banks

are attracted for virtually all the

projects implemented in Belarus.

The Czech Export Bank, CSOB,

European-Russian Bank, PPF

Banka, Commercial Bank, Savings

Bank, representative offices of

Commerzbank and UniCredit Bank

in Prague provide export crediting

under equipment supply projects in

Belarus.

The Czech Republic is one of the

few European countries that pro-

vide insurance to projects of Czech

entrepreneurs in Belarus. Leasing

mechanisms were put in place fol-

lowing the signing of a €10 million

agreement between ASB Leading

and Ceskoslovenska obchodni

banka a.s.

Belarus is ready to be a reli-

able partner of any state and to

build cooperation based on mutual

respect. The Czech Republic is

aware of that and this is why the

two countries have established solid

ties and mutually beneficial coop-

eration in various economic sectors.

Yekaterina BABKEVICH

There are 100 companies with

Czech investments registered in Belarus,

of them 49 are joint

ventures and 51 are foreign-

owned companies

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BANKS AND FINANCE

Modern Payment Trends

The share of cashless payments in the total number of card transactions

increases year to year

The expansion of cashless payments is one of the major objectives both for Belarus and the majority of developed countries. There are a lot of reasons for it. The increase in the number of transactions using bank cards has a positive impact on the country’s economic development because it allows cutting down on expenses associated with money turnover. Besides, the widespread use of cashless payments enhances the transparency of financial transactions and currency circulation, which, in turn, discourages off-the-books economy. Director of the Plastic Cards Department at Belarusbank Mr Anatoly BOGOVIK highlights the advantages of cashless payments and analyzes the development of the Belarusian market of bank cards in an interview with the Economy of Belarus Magazine.

Mr Bogovik, according to

the National Bank, the number

of plastic cards issued by Bela-

rusian banks exceeds the number

of Belarusians. How ever, despite

the positive trends, the share of

cashless payments in Belarus is

insignificant compared to Euro-

pean countries. Why do you think

Belarusians still prefer to use

cash instead of plastic? Does it

have to do with inadequate pay-

ment infrastructure or poor

financial literacy of Belarusians?

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Belarus has a well-developed

infrastructure for cashless transac-

tions. It includes 3,700 ATMs and

3,300 self-service terminals; over

37,000 retail and service outlets

accept bank cards.

You can use plastic not only in

stores, restaurants and cafes, but

also in movie theaters, gyms, beauty

parlors, showrooms and to pay for

taxi service. Belarusian banks offer

a variety of loyalty programs aimed

at encouraging their customers

to use bank cards more often. By

the way, about 500 retail and ser-

vice outlets in Belarus offer dis-

counts to holders of Belarusbank

cards.

I would like to say a couple of

words about the remote services

provided by banks. Today a card-

holder does not need to go to a bank

to perform financial transactions.

This can be done 24/7 through a

broad network of ATMs and self-

service terminals, as well as mobile

phone and Internet.

As for the level of financial lit-

eracy, I think positive trends are

getting more pronounced. More

Belarusians come to understand

that cashless payments are safer,

more convenient and even cost-

effective, compared to cash pay-

ments. Every month the number

and the volume of cashless trans-

actions performed at banks, retail

and service outlets, as well as using

self-service terminals and remote

payment services increases.

What needs to be done, in your

opinion, to increase the share of

cashless settlements in Belarus?

We need to continue encourag-

ing people to make cashless pay-

ments, raising the financial literacy

of Belarusians and developing the

infrastructure for non-cash opera-

tions. Belarusbank attaches much

attention to all these issues.

More new services and options

become available for cardholders.

Retail outlets offer loyalty programs

for customers who use plastic cards.

We actively develop remote bank-

ing services such as SMS bank-

ing, mobile banking and Internet-

banking. By the way, around one

million of our clients have come to

appreciate the advantages of these

services and prefer cashless trans-

actions over personal visits to the

bank offices.

In order to popularize cashless

payments, the bank regularly holds

promos. Last year, for example, the

bank held two promotional games,

the winners of which won tickets to

the 2012 Olympic Games, and also

received cash prizes. Now two games

are in progress for Belarusbank

cardholders.

Particular attention is paid to

improving the financial literacy of

people. We keep in touch with mass

media, write articles and do inter-

views in the press, Internet, tele-

vision and radio. However, I would

like to emphasize that the campaign

to promote cashless settlements

should involve other independent

and credible sources that enjoy the

trust of people such as, for example,

local authorities.

Still, I would like you to cite

some statistics. How often do

Belarusians use bank cards?

What is the share of cashless

transactions in total payments?

Has it been increasing lately?

We can say that by now

Belarusians have got used to pay-

ing their bills such as utilities,

phone, Internet, and so on with

the use of cards. According to the

National Bank, cashless payments

account for 62.6% of all the trans-

actions involving cards. But if we

look at the sums, non-cash trans-

actions accounted for only 18.9%.

The remaining part is operations to

withdraw money from ATMs.

As for Belarusbank, these fig-

ures are 73.1% and 26.4%, respec-

tively. I would like to note that year

after year the share of non-cash

payments in the total amount of

operations with cards increases. In

2011 it was 19.4%, and in 2012 it

made up 22.7%.

Payments for goods and services

account for the largest part of non-

cash payments using Belarusbank

cards (69.9%).

What payment systems are

the most popular today?

To date the number of cards

in circulation in Belarus exceeds

10.4 million. Some 47% of them are

cards of the BelCard payment sys-

tem, 53% are of international card

vendors.

As of 1 March 2013, Belarusbank

emitted more than 4.9 million

cards. Of them 3.2 million (64%)

were BelCard-M, 1.1 million (23%) –

VISA, 600,000 (13%) – MasterCard.

BelCard with a magnetic stripe

(BelCard-M), Maestro and Visa

Electron cards are most popular

among Belarusians. The bank’s spe-

cial offer for its clients of the retire-

ment age is cards with higher inter-

ests on current account balance.

Today our cards are used by over

440,000 pensioners. We also offer

cards for students (53,000), rural

dwellers (3,000) and even for chil-

dren (1,800).

International cards on the bank’s

offer include economy-class cards

VISA Electron and Maestro, cards

with a wider range of services VISA

Classic and MasterCard Standard,

prestigious VISA Gold, MasterCard

Gold and premium-class VISA

Platinum and MasterCard World

Black Edition. LadyCard is the

bank’s woman-tailored payment

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product with an added perk of

special discounts in a number of

merchandizing and service estab-

lishments of Belarus. It is note-

worthy that all the international

cards utilize microprocessors and

the latest security technology (EMV

standard).

We also issue savings cards in

the national and foreign curren-

cies. For corporate clients the bank

offers a variety of customized cor-

porate card types.

What is the number of

Belarusbank’s cards in circula-

tion? How do the bank’s card pay-

ment services work?

As I have already mentioned

there were 4.9 million cards in cir-

culation as of 1 March 2013 (46.8%

of the market). Our card payment

system infrastructure includes 1,106

ATMs (30% of the market), 2,123 self-

our bank on processing their non-

cash transactions. Among them are

5shop.by, policy.by, kvitki.by, ticket-

pro.by, pokupon.tut.by and others.

The popularity of online purchases

has been steadily increasing. In

January 2013 non-cash operations

on shopping websites that partner

with the bank exceeded Br1.7 bil-

lion making more than a fourfold

increase over the previous year.

Cardholders of our bank, except

for those having BelCard-M cards,

have an opportunity to make pay-

ments in the Internet using a spe-

cial 3D-Secure technology which

guarantees enhanced security.

The bank attaches special

attention to the development of

remote banking services, namely

SMS banking, mobile banking and

Internet banking.

Mobile banking is a fast and

user-friendly solution that allows

clients to make payments (utili-

ties, Internet access, cable televi-

sion, and other ones), repay loans,

transfer money from one account

to another, top up deposit accounts,

lock/unlock cards, get payment

receipts on e-mail, etc. using a

mobile phone with special software

installed in it. In 2012 the volume of

monthly payments made via mobile

banking increased more than six

times and reached Br20.5 billion in

January 2013. The number of ser-

vice users totaled 66,000 last year

(16,600 in January 2012).

Internet banking is a fast-

growing service, too. It allows cus-

tomers to make a wide range of

payments (utilities and apartment

security, Internet access, cable

television, and other ones), repay

loans issued by Belarusbank and

a number of other banks, top up

deposit accounts, transfer money

from one account to another, etc. In

2012 it became possible for Internet

banking users to lock and unlock

plastic cards, register a 3D-Secure

password needed to make payments

online. Clients can also make pay-

ments by entering payment details

on their own. In January 2013

the amount of cashless payments

made via Internet banking went up

more than four times as against

January 2012 to exceed Br62.7 bil-

lion. The number of users of the

service stands at 222,000 (100,000 in

January 2012).

service terminals (63.5%), 2,010 cash

points (47.8%). Our terminal equip-

ment has been installed at 20,653

retail (service) outlets (53.2%).

We are constantly working to

improve services and payment

infrastructure to meet the increas-

ing needs of our cardholders.

In 2012 the bank’s acquiring net-

work expanded by more than 40%

and in the mid-January 2013 crossed

the mark of 20,000 retail and service

outlets. Among the most interesting

projects implemented by the bank in

2012 was the installation of special

self-service terminals at customs

clearance points and gas stations,

payment terminals at taxi services

and McDonald’s restaurants.

The Internet is a relatively new

but rapidly developing area of

cooperation between the bank, mer-

chants and service organizations.

Today over 200 Belarusian

online stores have agreements with

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work of ATMs and self-service ter-

minals, which are conventional

instruments of servicing cardhold-

ers.

As of today, Belarusbank oper-

ates 1,106 ATMs. In 2012 the bank

installed 71 new machines. Apart

from cash withdrawal, ATM users

can make payments, transfer money

from one account to another, top

up accounts using devices equipped

with a Cash-in function. When

developing payment infrastructure,

the bank tries to make equipment

more functional and user-friendly,

provide additional services to disa-

bled clients.

Thus, the first ATM for visually-

impaired people was put into opera-

tion in Minsk in 2011. At that time

the ATM was one of a kind not only

in Belarus, but also in the CIS. It

looks pretty much the same as a

regular machine. However, it is fit-

ted with a special audio system and

an earphone plug on the front panel.

The ATM has embossed buttons, i.e.

they can be felt by touch. In a spe-

cial regime the ATM displays large

images on a contrast screen. At pre-

sent the bank operates three ATMs

of this kind. Apart from Minsk,

such machines have been installed

in Vitebsk and Orsha.

The number of self-service ter-

minals is growing fast. At present

there are more than 2,123 of them,

with 91 installed in 2012. In 2012 the

number of operations available via

self-service terminals was consider-

ably increased. At present cardhold-

ers can subscribe to periodicals,

top up electronic game accounts

that allow buying Belarusian lot-

tery tickets over the Internet,

make payments by typing in the

necessary information, and other

things.

Self-service terminals allow

making a large number of payments

(utilities and apartment security,

Internet access, cable television,

and other ones), repay loans, top

up deposits, transfer money from

one account to another, buy tickets

to intercity and suburban buses,

learn various kinds of information

about the bank and so on. About

half of the bank’s self-service ter-

minals are available round the clock

and about 200 terminals are cash-in

enabled.

Could you tell us what new

card products and services will

be offered in the near future?

Our bank constantly works to

raise the quality of services avail-

able to cardholders and develop

the nationwide market of cashless

transfers. We labor incessantly to

expand the range of card products

and offer new and demanded ser-

vices to cardholders that will allow

them to enjoy comfort, security, and

reliability of cashless transfers.

Last year the bank issued a

variety of new and custom-tailored

cards. In 2012 we started offer-

ing Maestro gift cards that can be

acquired without a passport to be

gifted to another person. We started

offering international premium-

class cards Visa Platinum and

MasterCard World Black Edition.

Their holders are entitled to various

additional services and privileges

available from the bank and pay-

ment systems.

January 2013 saw the launch

of contactless cards Visa payWave,

which boast increased conveni-

ence and the speed of transactions.

In order to make a transaction, a

holder does not need to hand the

card over to the seller. Bringing it

closer to a special contactless termi-

nal and entering your PIN number

is sufficient. This year as part of the

efforts to build up the infrastruc-

ture to service cardholders the bank

will install contactless terminals in

retail and service outlets. At the

same time holders of contactless

cards will be able to freely make

transactions throughout the service

infrastructure.

In the run-up to the final stage

of the UEFA Champions League, we

have started issuing international

cards MasterCard Standard with

two special football themes. At pre-

sent a promotional game is going

on for holders of these cards, with

valuable prizes to be handed out.

The bank will continue work-

ing to enhance the infrastructure

to service cardholders, including

cards utilizing the latest technolo-

gies. Attention will be paid not only

to quantity but to quality as well.

Cardholders will be offered new use-

ful services. The development of

remote banking service channels

will still be a priority.

There are 3,700 ATMs and

3,300 self-service terminals in Belarus;

over 37,000 retail and service

outlets accept bank cards

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BANKS AND FINANCE

Cards, Banks, Cash

The share of non-cash transactions in retail trade in Belarus is expected to increase fourfold

to make up 50% by 2016

Game of Cards

Twenty-four banks issue plas-

tic cards in Belarus. Belarusbank

is the biggest of them. At the

beginning of 2013, it accounted

for 41.1% of all cards issued in

Belarus. Belarusbank is followed

by Belagroprombank (11.8%), BPS-

Sberbank (11.7%), Priorbank (6.2%),

and Belinvestbank (5.9%). As of

1 January 2013, the number of plas-

tic cards in circulation in Belarus

exceeded the number of potential

cardholders, i.e. 10.4 million cards

vs. 9.5 million-strong population of

Belarus. The number of cards issued

under the national payment system

BelCard amounted to 4.9 million,

the number of VISA cards stood

at 3.9 million, that of MasterCard

amounted to 1.6 million.

As a rule, banks offer debit and

credit cards to individual clients and

payroll debit cards and corporate

cards to corporate clients. There is a

variety of plastic cards depending on

the type of currency, validity period

and interest rates. There can be inter-

national cards or cards accepted only

in Belarus like BelCard-M.

Debit cards are further divided

into several types depending on

a target group. Plastic cards for

pensioners are offered by several

banks, including Belarusbank,

Belinvestbank, Priorbank, and BPS-

Sberbank. Pensioners can use these

cards to make payments and earn

an interest on the available balance.

Such cards can be used in Belarus

and abroad.

Several banks like Belinvestbank

and Belagroprombank offer special

cards for children and the youth.

These are preset spending limit

cards allowing legal guardians to

decide how much their children will

be able to spend. Moreover, legal

guardians can sign up for text mes-

sage alerts to keep track of their

children’s spending.

Belarusbank offers a special

product for women, which is called

Lady’s Card. Holders of these cards

get discounts at retail outlets, beauty

parlors, restaurants, and drugstores.

By the way, in many countries

women are offered not only debit,

credit and gift cards but also cards

with customized design or fragrance

or even diamonds.

You can make a contribution to

a charity cause by ordering a plas-

tic card issued by Belinvestbank

together with Zhdanovichi Orpha-

nage for Mentally Challenged Child-

ren within the framework of the

charity program “Make the Miracle

Happen!” Holders of this card donate

50% of the card issuance fee and

0.25% of the amount of each cash-

less transaction to the orphanage.

In solidarity with the cardholders,

Belinvestbank also transfers 0.25%

of the amount of all transactions to

the orphanage out of its own funds.

This piece of plastic can also be a

good gift. Such gift cards are a good

way to present a gift of money.

Credit cards are also very com-

mon in Belarus. They allow buy-

ing goods and services on credit at

retail outlets, cafes, restaurants,

gas stations, and withdrawing cash

at ATMs. Some banks offer instant

approval credit cards that can be

issued the same day a credit card

application is submitted. Revolving

credit cards are extremely popular.

They allow using a part of the loan

that was repaid in the previous bill-

ing cycle over and over again. These

cards can be used for a rather long

time.

In the future a usual plastic card will no longer be just a payment instrument but also an identification document and an insurance policy card. Belarus is set to develop a social card that will combine all these functions. Today the number of services provided by banks to plastic cardholders is pretty big. A bank card is the most popular e-payment instrument used for cashless payments in the retail sector. Belarusians use bank cards to receive salaries and pensions, save money and get loans, give pocket money to kids and take part in charity events. Holders of VIP-cards have even more opportunities. By the way, the VIP segment is experiencing a robust growth in the country. Belarusians have a variety of options when it comes to choosing a payment system, from domestic BelCard to international VISA and Master Card. Besides, some Belarusian banks started accepting American Express and UnionPay cards in their acquiring network. All major international payment systems will operate in Belarus by 2014.

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Holders of payroll debit cards

can apply for overdraft, a form of

short-term loan allowing cardhold-

ers to make payments even if the

available balance goes below zero.

The credit card issuer charges inter-

est only on the outstanding balance.

The principal debt and the inter-

est rate are repaid automatically

when a salary is credited to the card

account. If the amount overdrawn is

repaid in full, the overdraft option

can be used again. Moreover, hold-

ers of some payroll cards can earn

an interest on the available balance.

Banks also offer corporate cards to

pay for travel expenses, hospital-

ity costs, and other expenses of a

company.

Earn, Save and... Spend

According to the banks, the most

popular product is still payroll debit

cards. The interest in savings cards,

including those intended for pen-

sioners, has been growing lately.

The most economically active seg-

ment of the population is interested

in non-standard card products –

charity and co-branded cards, mini-

cards and so on.

Payment cards of the initial

level such as Visa Electron, Maestro,

BelCard have traditionally been the

most widespread in Belarus due to

a number of factors. Firstly, the

majority of salary projects and non-

credit programs are implemented

with the use of these types of cards,

and secondly, these cards are a

good choice in terms of price and

functions for Belarus. The higher

level cards such as Visa Classic or

MasterCard Standard have been

recently growing in popularity due

to their additional features.

Today more Belarusians are

willing to become premium service

cardholders. Last year alone, the

total issue of such cards in Belarus,

according to the Visa International

payment system, surged by more

than 50%. For those who need

more functions than Gold cards

As of 1 January 2013, there were 9.5 million cardholders

in Belarus; the total number of cards in circulation was 10.4 million

Dmitry FURS

Deputy Head,

Credit Card Department,

Belgazprombank:

As of 1 January 2013, there

were 1.1 bank cards per capita

in circulation in Belarus. Just

to compare, in Russia this figure

was about 1, in the EU and the

United States more than three

cards per capita. Two conditions

are needed to be in place to stim-

ulate the development of the

card market and raise the vol-

ume of non-cash transactions in

Belarus. Cashless transactions

should be as fast and convenient

as cash transactions. Second,

fees for issuing and servicing

cards should not be high.

Today cardholders mostly

use their cards to make pay-

ments and withdraw cash. Bank

cards are increasingly used

to transfer money to another

card account. Distant bank-

ing services are becoming

more popular, too. Therefore,

Belgazprombank launched

Internet Banking two years

ago. Since then the service has

gained over 20,000 customers.

Every month over 100,000 pay-

ments and transfers are made

via Internet Banking. Therefore,

we can say that online banking

services are gaining popular-

ity. The number of people pay-

ing their bills, topping up bank

accounts or repaying credits

online will keep rising.

I would also like to mention

another promising area for the

banking sector – contactless

payments. Belgazprombank has

installed 13 payment terminals

enabling contactless payments

so far.

By the year-end we are plan-

ning to install another 200 ter-

minals.

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3 a joint action plan for 2013-2015 to

simplify the transition from paper

money to plastic cards and work out

a system of non-cash retail opera-

tions with the use of modern elec-

tronic payment instruments and

means.

It is expected that a wide use

of non-cash operations will benefit

everyone, from retail companies,

the banking system to government

bodies to population. Apart from

obvious convenience, non-cash oper-

ations save time, reduce the risk

of robbery, and offer additional

income – with the help of savings

cards, bonus, accumulative and

other programs.

A lot of measures will be imple-

mented to develop the system of non-

cash retail operations in the country.

First of all, the action plan pro-

vides for a considerable increase in

facilities with the new-type payment

terminals. Customers’ right to use

cashless payments will be formal-

ized by the law. Besides, cardholders

will have 24/7 access to infokiosks

and ATMs. The list of services that

can be paid for using bank cards will

be expanded. The National Bank of

the Republic of Belarus suggests

cashless payment for the goods and

services which cost exceeds the

base amount 100 times and more, i.e.

over Br10 million. The proposal is

in line with international practices.

In bulk all the planned events

will contribute to increasing the

share of non-cash retail transac-

tions and boosting the Belarusian

market of plastic cards, believe rep-

resentatives of the banking system.

The number of cards in circulation

will increase, which will enhance

competition among issuing banks

and reduce tariffs on some of opera-

tions with the use of payment cards.

On the other hand, the efforts of

issuing banks to expand the market

of plastic cards should go hand in

hand with the efforts to increase

the financial literacy of cardhold-

ers, to explain card safety rules and

to maintain an uninterrupted opera-

tion of the accounting system given

the increasing amount of transac-

tions. It is also important that state

regulation and market methods

complement each other rather than

run contrary.

Anna KOT

totaled 13.2% in 2012 (9.5% in 2011).

Non-cash operations in the sector

of paid services are recorded by the

National Statistics Committee of

Belarus on the annual basis. They

made up 10.8% in 2011.

It is estimated that in some

three years Belarusians will pay for

half of their retail purchases and

services using cashless transfers.

Thus, the share of non-cash opera-

tions in Belarus’ retail trade and

services is expected to soar four

times, up to 50% of all transactions

by 2016.

Yet, it is not much compared

with the European statistics.

According to the latest data, cash

payments accounted for 10% of

the total payments on average in

the European Union. Less than

10% of cash was in circulation in

Denmark, Croatia, Estonia, Brazil,

and Turkey. According to the Bank

for International Settlements, cash

payments totaled only 3% in the

Swedish economy.

The Belarusian government

and participants of the financial

market have teamed up to develop

Non-cash Settlements Development Program

Number of bank cards in circulation:

For non-cash payments there are:

The biggest issuers of bank cards among 24 banks are:

The number of non-cash transactions in operations involving bank cards:

as of 1 January 2012

million

Belarusbank

Belagroprombank

BPS-Sberbank

Priorbank

Belinvestbank

million

ATMPayment terminals

On January 1, 2013.

On January 1, 2012.

Source: National Bank of the Republic of Belarus Design by BelTA

Info-kiosks

as of 1 January 2013

Belarusians will pay for half of retail purchases and the same amount of services with plastic cards by 2016

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nizer. The list of professional mar-

ket participants, who are authorized

to register transactions on the over-

the-counter market, will be stipu-

lated. Transaction registration rules

will be specified. It will be impos-

sible to use one’s own promissory

notes as a guarantee of obligations

in a transaction.

In 2013 work on other legal acts

that will regulate the stock market

will continue. The number includes

the law on investment funds. The

law is designed to enable the emer-

gence of collective investors in the

country, namely share and unit

investment funds. Thanks to the

securitization law the Belarusian

stock market will become more

transparent, reliable, and effective.

One has to remember that

Belarus is now part of the Single

Economic Space together with

Russia and Kazakhstan, and there-

fore the three countries are forced to

harmonize their laws.

“At present regulations on secu-

rities of the Customs Union coun-

tries rely on general regulation prin-

ciples. However, due to the establish-

ment of the Single Economic Space

of Russia, Belarus, and Kazakhstan

it has been decided to more tightly

harmonize the laws within the

next seven years,” remarked Alexei

Krasinsky. “By 2015 the possibil-

ity of establishing a supranational

body to regulate the financial mar-

ket of three countries combined

will be considered. By 2020 the sides

are expected to mutually recognize

financial industry licenses. For

instance, a professional stock mar-

ket participant with a Belarusian

license will be able to freely ren-

der its services in the partnering

states in the Single Economic Space.

The same option will be available

in Belarus for colleagues from the

neighboring states”.

Apart from that, as part of the

Single Economic Space evolution

there are plans to enable the mutual

recognition of the registration of

securities issues by the relevant

agencies of the member states in

the issuer’s country of origin in

the medium term. It means that if,

for instance, a corporation issues

bonds in Belarus, the corporation

will be able to sell the bonds in

Russia or Kazakhstan, too. This is

why the three countries will have

to work to approximate the laws

in order to enable the fulfillment

of their arrangements in prac-

tice. A supranational body of the

Single Economic Space, namely the

Eurasian Economic Commission, is

the one in charge of coordinating

this work.

Growth Advantages

Borrowing money by issuing

shares and bonds has several advan-

tages over bank loans.

“If we talk about shares, they

allow using attracted monetary

resources without deadlines and

without repaying them. Investments

are attracted and used by the issuer

and do not have to be returned.

In exchange the investor will get

shares and respectively the rights

that the shares certify. Thus, not

only the issuer runs the risk of non-

returning investments if the perfor-

mance of the borrowing company

is unprofitable (as is the case if a

bank loan is taken out). The risks

are divided between the issuer and

the investor,” said Alexei Krasinsky.

The primary advantage of bonds

is the ability to borrow money for

a long time. Not every economic

operator can take out a bank loan,

a considerable one at that, for a

long time. Bonds allow doing that

because the issuer has the right to

determine how long the bonds will

be in circulation. According to the

Finance Ministry representative,

another advantage is that national

and foreign corporations and indi-

viduals can act as investors. The

fact allows attracting foreign invest-

ments even if shares and bonds are

floated on the home market.

“National and foreign corpora-

tions and individuals can act as

investors who operate on the stock

market. The fact allows attracting

foreign investments even if shares

and bonds are floated on the home

market. The ability to use various

redemption schemes and if neces-

sary, the ability to buy out bonds,

look attractive. It allows reducing

the cost of service of borrowed

money and improving the state of

payable accounts,” remarked the

Finance Ministry representative.

Most convenient and profitable

taxation rules encourage the use

of bonds as an independent bor-

rowing instrument. Revenues from

redeeming or selling the corporate

bonds issued from 1 April 2008 and

till 1 January 2013 are exempt from

taxes. A recent amendment to the

Tax Code extended the preference

till 1 January 2015.

Experts believe that the tougher

monetary management policy of the

government should encourage more

active development of the corporate

bonds market. For instance, in early

February the National Bank of the

Republic of Belarus issued recom-

mendations to commercial banks

requesting them to analyze the effec-

tiveness of lending to projects with

state support. Specified use of the

loan should now be indicated in

loan contracts if the loan is issued

to corporations and self-employed

businessmen.

“It turns out that from now on

banks will pay more attention to

whether loans are spent on speci-

fied purposes. Loans will be avail-

able only for a specific investment

project. If money is needed, for

instance, to replenish key assets,

it will be simpler to get money via

bonds,” explained Vadim Iosub.

It is possible that in the next few

years Belarusian companies will be

more active in attracting foreign

capital, too. Specialists have been

stating for a long time that in the

next few years the banking industry

may run into certain problems since

its capacity will be insufficient to

satisfy the demand of Belarusian

companies for credit resources. The

planned economic growth rate is

high and cannot be achieved with the

help of bank loans alone. However,

in order to successfully borrow

money via foreign stock exchanges,

companies have to comply with sev-

eral requirements. To begin with,

in order to be listed at Western or

Eastern stock exchanges, companies

have to meet certain formal crite-

ria. In particular, a company has to

have a coherent ownership struc-

ture and the operational structure,

a clear-cut development program,

good profits over the course of sev-

eral years. However, the readiness

of the borrower to show its hand is

the key aspect. Not every Belarusian

company can dare do that.

Alexander BENKO

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Steady Forecast for Leasing

BusinessIn 2013 the demand for manufacturing equipment

available via leasing is expected to rise in Belarus in view of the plans

to modernize the economy

Operating in the Black

About 150 companies operate

on the Belarusian leasing market

at present. The number is quite

large for the country although the

list is changed constantly as old

competitors are replaced by new

ones. Every year the Association

of Leasing Companies of Belarus

compiles a ranking of the mar-

ket participants. The ranking

indicates that there are about 40

major professional players on

the market. The other ones have

either stopped providing leasing

operations as their core business

or the share of leasing operations

in their total business volume is

insignificant.

Mr Alexander Tsybulko,

Chairman of the Council of the

Association, remarked that in 2011

the volume of new business of leas-

ing companies amounted to about

Br6.9 trillion (€854 million calcu-

lated using the average weighted

exchange rate), 69% up from 2010

in Belarusian ruble terms. And the

figure was achieved despite the fact

that the year was a hard one due

to the well-known problems on the

currency market. To compare: in

Europe the volume of new business

totaled €256.6 billion, 7.7% up from

2010.

Here is the statistics of Belarus’

closest neighbors. Over €18 billion

worth of leasing contracts were

signed in Russia in 2011, nearly 60%

up from 2010. Considerable growth

was achieved in Ukraine, too —

258% as against 2010 or €635 million

although in money terms the figure

is way smaller than that in Belarus.

Poland exceeded the year 2010 fig-

ure by 10.6% reaching €7.3 billion.

With 69% growth Belarus looked

quite decent in comparison with

these countries.

The volume of international

leasing or the export of Belarusian

products using international con-

tracts is growing fast. In 2011 it

skyrocketed by 250% in comparison

with 2010 (46.5% up from 2009). The

impressive growth is attributed to

presidential decree No. 465 of 24

September 2009, which amended

certain leasing regulations.

Virtually no shipments like that

had been made in Belarus before

the decree.

At present international leas-

ing operations in Belarus are per-

formed by one company – OAO

Promagroleasing. In particular,

leasing schemes are used to ship

Belarusian automobiles and agri-

cultural machines as well as rock

haulers to African countries –

Mozambique, Zimbabwe, Botswana,

Angola, and South Africa. OAO

Promagroleasing also operates on

the markets of Southeast Asia and

Latin America.

In 2011 the total volume of the

leasing portfolio of Belarusian

leasing companies rose by 95% to

reach Br11 trillion. According to

preliminary results of the year 2012

a 10% increase is expected. No large

deals were registered, the leasing of

The Belarusian leasing business is rather young when compared to other countries. Experts say that foreign leasing markets have had decades to evolve and now have the relevant legislation and infrastructure.However, the trends witnessed in the last few decades indicate that in Belarus the volume of new business (the value of leasing contracts signed for one year) rises all the time. Even the foreign exchange crisis of the year 2011 could not slow down the growth. At present leasing contracts account for 2.5% of the country’s GDP while in 2007 the figure was as low as 1.9%. Experts believe that the growth rate is comparable to the European one.

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013vehicles, including trucks, cars, and

commercial vehicles considerably

invigorated the market. The mar-

ket was influenced by the delayed

demand brought about by the for-

eign exchange crisis of the year

2011. “Resources were very expen-

sive and it deterred the develop-

ment of this market,” the specialist

explained.

As an effective economic instru-

ment leasing operations can resolve

many problems, stimulate entire

branches of the economy, and

develop various spheres of busi-

ness, small and medium enter-

prises. The relevant legal base has

been created in Belarus for that

purpose. It has been recognized as

one of the best ones in Europe by

experts. “Our task is to work harder

to increase the client base, invit-

ing manufacturers to use leasing

schemes,” summarized Alexander

Tsybulko.

Watchdog Needed?

At present the portfolio of leas-

ing companies is ten times smaller

than the amounts borrowed by

corporations from banks. In other

words, corporations prefer taking

out loans for leasing-facilitated pur-

chases.

Proprietary funds of corpora-

tions account for only about 25%

of the money used to finance leas-

ing operations, the remaining 75%

comes as borrowed resources,

mainly bank loans. Moreover, the

portfolio of leasing companies

instituted by banks accounts for

over 70% of the country’s total

one. Hence leasing in Belarus is

developed exclusively thanks to the

presence of banks, as the latter

give loans to leasing companies and

directly operate on the leasing mar-

ket.

All in all, it correlates with gen-

eral European figures where the

largest lessors either belong to the

banking industry or are branches

of large industrial, financial and

investment holding companies. The

consolidation of banking and leas-

ing business objectively leads to the

establishment of a common regula-

tor for these two branches of the

financial market, said Mr Dmitry

Nabzdorov, Head of the Non-

Banking Operations Regulation

Office of the National Bank of the

Republic of Belarus.

The country’s central bank

believes it is necessary to give

leasing companies the status of

financial mediators for the sake

of increasing the potential of this

industry. “The transition to inte-

grated regulation (megaregulation)

and supervision of all the sectors

of the financial market apart from

banking is part of the joint policy to

be implemented by the government

and the National Bank in the next

five years,” said Dmitry Nabzdorov.

There are plans to put the National

Bank in charge of regulating and

developing the leasing business.

The financial potential of the

leasing industry may be increased

with the arrival of major foreign

investors. Respectable domestic

investors, which are not banks,

may evolve. Apart from that, the

business may grow livelier through

market-based redistribution of the

money generated by the financial

market, including money transfer

from the banking industry to the

leasing one. The National Bank

believes it is the most realistic way.

“To make it happen, leasing

companies should be granted the

status of financial mediators. As

a result, while considering loan

applications banks will assess the

solvency of a business taking into

account peculiarities of financial

mediators instead of following the

routine reserved for common corpo-

rations. It will be possible, provided

a specific government agency is put

in charge of supervising the finan-

cial stability of leasing companies.

With many years of banking super-

vision under the belt the National

Bank is up for the job,” explained

Dmitry Nabzdorov.

As the financial potential of

leasing companies grows stronger

and the supervision mechanisms

are improved, the National Bank

will be able to allow companies to

access the interbank market or will

even be able to act as the lender

of last resort for them similarly to

bank refinancing. It can advance

the industry to a new level, believes

the NBRB representative. Then the

emergence of new domestic and

foreign investors on the leasing

market will be more probable. It

is worth noting that the transfer

The share of leased vehicles

in the total volume

reached 62.1%

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of the regulating function to the

National Bank does not mean the

government will stop encouraging

the development of individual busi-

nesses (manufacturers, lessors, and

lessees) in the future using the state

budget.

The possible transfer of leasing

regulation functions to the National

Bank has invoked heated debates in

the business community. In particu-

lar, it has been said that the meas-

ure may lead to monopolization of

the market by subsidiary compa-

nies of the banks. It may concen-

trate leasing in major cities. Other

changes may happen to worsen the

operation of leasing companies.

However, the source believes that

the involvement of banks in leasing

is already rather large and there-

fore one should not fear market

monopolization. The National Bank

will be focused on developing the

market if it is authorized to regu-

late the market.

Aiming for Export

Some time ago the National

Bank of the Republic of Belarus

and the Alliance for Financial

Inclusion (AFI) polled small busi-

nesses about the availability of

financial services. As many as 1,815

respondents were polled. As far as

leasing is concerned, only 6.6% of

the respondents said they use the

instrument. When broken down by

regions, leasing is used by 24.4% of

the respondents in Minsk Oblast,

17.1% in the city of Minsk, 9.3%

in Brest Oblast, 9.1% in Vitebsk

Oblast, 6.3% in Mogilev Oblast,

2.7% in Grodno Oblast, and 1.4% in

Gomel Oblast.

The Association of Leasing

Companies believes that the figures

rather correctly characterize the

leasing market. The leasing market

capacity in Belarus is considerably

larger than the volume the leas-

ing industry can service. In other

According to preliminary results

of the year 2012 the Belarusian leasing market

expanded by 10%

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words, only a very small number of

economic operators use this finan-

cial instrument.

The Development Bank of the

Republic of Belarus can largely

accelerate the growth of the leasing

market. Established in line with the

relevant presidential decree in 2011

by the Council of Ministers and the

National Bank of the Republic of

Belarus, the institution is designed

to provide the Belarusian economy

with affordable credit resources.

“Effective lending to the economy,

particularly to priority projects, is

our current objective. We should suc-

cessfully and timely achieve it within

a short time via the Development

Bank,” stressed Prime Minister of

Belarus Mr Mikhail Myasnikovich

at the bank’s presentation. He also

reminded that the government had

come up with five main schemes

to support exporters, including via

leasing.

By the way, since 1 March 2013 the

Development Bank of the Republic

of Belarus has been the main owner

of OAO Promagroleasing, with

62.5% of the state-owned shares

transferred to the Bank’s author-

ized fund. The Development Bank

has clear government-set goals to

achieve: elaborate understandable

and acceptable leasing schemes for

Belarusian exporters in order to

help Belarusian machines to com-

pete on foreign markets with foreign

manufacturers, who use such mecha-

nisms.

Chairman of the Board of

the Development Bank Mr Sergei

Rumas remarked that the handover

of the controlling interest in OAO

Promagroleasing will allow setting

up a comprehensive export support

system. It will provide for complex

structuring of all deals, borrowing

of resources to finance foreign cur-

rency projects, preferential export

lending and shipment of machines

using leasing terms. In 2013 the

Development Bank intends to issue

at least Br5.5 trillion in loans to

implement investment projects.

Forecasts for 2013

In 2013 Belarus expects a massive

increase in the leasing of manufac-

turing equipment as well as a solid

demand for the leasing of cars and

real estate. The demand for manufac-

turing equipment is necessitated by

the large-scale modernization pro-

gram set to run in 2012-2015. The ris-

ing demand for the leasing of equip-

ment became pronounced in H2 2012.

In January 2013 Minsk hosted

the first conference to discuss leas-

ing trends and prospects in Belarus.

Participants of the conference

were polled. The absolute majority

believed that the leasing market will

keep expanding in 2013, although

they held different views on how

much it will grow. As many as 70%

believed that the growth will be

small – up to 10% while 17% were

more optimistic about the figure and

expected a considerable rise in leas-

ing operations.

Those polled said they believed

that the main challenges the market

will face will be expensive resources

(31% of the conference participants)

and restricted foreign currency leas-

ing (23%). As many as 15% pointed

out a possible decrease in the pur-

chasing power of Belarusian compa-

nies. As many as 10% of the polled

feared possible negative changes in

the legislation and dumping on the

part of competitors. It appeared that

an increase in overdue debts was not

important for lessors, with only 3%

of the polled concerned about the

possibility.

As far as the forecast of the cost

of leasing services is concerned, the

participants of the conference were

divided, with 36% expecting a slight

reduction, 32% expecting a slight

increase, 27% hoping the rates will

stay the same, and only 5% fear-

ing a considerable increase in rates

through the year 2013.

Participants of the conference

believed that the largest growth can

be expected in automobile passen-

ger transport and railway transport,

as well as real estate. The majority

of the polled prioritized automobile

passenger transport. The respond-

ents were careful while speaking

about a considerable expansion of

leasing services in the sector of

information technologies and con-

struction machines.

Participants of the conference

were also asked to assess the exist-

ing legislation on leasing operations.

Only a third of the polled criticized

it while the majority (64%) believed

that the Belarusian legislation meets

the demand of the industry.

Mr Maxim LISITSKY,

Director of SOOO Raiffeisen

Leasing:

The year 2012 was generally suc-

cessful for the industry. It set a record

for the imported automobiles and

hence a record for leased international

automobile transport. The year 2013

will be weaker for international auto-

mobile carriers, therefore one can

hardly expect a significant increase in

deals in this sphere.

However, there are good forecasts

regarding the leasing of real estate.

Belarusian companies are once again

interested in the leasing of office prem-

ises, shops, warehouse facilities, which

encourages the construction of new

premises and creates good prospects

for this segment of the leasing market.

I think that the demand for cars

may stay the same or even grow larger

because it is now rather difficult to

import new cars or nearly new ones in

private capacity. Both corporations and

individuals are likely to go to show-

rooms and the trend is likely to be a

long-term one. We expect an increase

in leasing services.

Mr Viktor KOBYAK,

Director of OOO Activeleasing:

Last year was very good for the leas-

ing business. If we manage to maintain

momentum in 2013, it will be just per-

fect. I believe that this year the largest

growth can be expected in the leas-

ing of manufacturing equipment and

small-capacity commercial passenger

transportation.

If we compare development trends

of the European and Belarusian leas-

ing markets, the major difference is

that in Europe passenger transport is

the key driver. In 2011 the share of

leased cars over there stood at 42%

while in Belarus it was only 4%. In

the medium term our market should

expect a many-time increase in the seg-

ment and a considerable increase in the

share of passenger transport leasing in

the total volume of new business.

Among the deteriorating factors of

the industry I would mention the lack

of highly qualified and correctly moti-

vated personnel. The Belarusian leg-

islation on leasing is well-developed.

It is understood unambiguously, the

practice of its application suits les-

sors, and on the whole it contributes to

the development of our branch of the

economy.

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BANKS AND FINANCE

The BelCard payment system

can become an independent legal

entity in 2013. Deputy Chairman

of the Board of the National

Bank of the Republic of Belarus

Sergei Dubkov informed that

BelCard might soon join such

international payment systems

as Visa, MasterCard, and Diners

Club.

As of 1 January 2013, there

were 4.9 million cards of the

national payment system BelCard

in circulation (or 47% of the total

number of cards in circulation in

Belarus), 3.9 million Visa cards

(37%) and 1.6 million cards of

the MasterCard payment system

(16%).

Bank BelVEB, SME Bank and the Kunyavsky

Business Union of Entrepreneurs and Employers have

signed a cooperation agreement to promote small and

medium-sized business.

The agreement will enable the Belarusian partners

to adopt Russia’s best practices in supporting SMEs,

including in micro-lending, and to develop new products

for Belarusian small and medium-sized businesses.

The banking products to be offered on the Belarusian

market are already available in Russia. Bank BelVEB

has plans to offer these new products in the near future.

The expertise of the Russian bank will be used to

harmonize the legislations of the two countries and

address issues related to business operations.

The agreement is expected to promote Belarus’

exports to Russia and Russia’s exports to Belarus

and to expand ties between Belarusian and Russian

companies.

BelCard to go ‘independent’

Supporting entrepreneurs

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The Energy Efficiency Department of the State

Committee for Standardization is working on the loan

agreement with the World Bank to finance the upgrade

of two Belarusian CHPPs. The $90 million loan will be

channeled into the upgrade of CHPP-1 in Mogilev and

CHPP-1 in Gomel. Some of these funds will be used for

other projects, informed Sergei Semashko, Director of

the Energy Efficiency Department.

In January 2013, the

National Bank of Belarus

and the international pay-

ment system Visa signed a

memorandum of cooperation

to enhance financial literacy in

Belarus.

The National Bank is also

working on a similar agreement

with MasterCard. Repre sen-

tatives of this payment sys-

tem have already visited the

National Bank.

The National Bank is open

to all forms of cooperation

with the international payment

systems. In particular, the

National Bank invited the

PayPal international payment

system to discuss cooperation

prospects.

The idea to establish the association was

put forward by the Belarusian offices of such

international companies as Forex Club, Teletrade,

Alpari and Admiral Umis.

The National Bank welcomes the idea to set

up the Financial Market Association, according to

Dmitry Nabzdorov, the head of regulation of non-

banking operations at the National Bank of Belarus.

It is planned that the association will, in close

cooperation with the National Bank, facilitate

the development of the efficient and sustainable

regulatory environment, expedite the emergence and

development of new financial products and services

for all market participants, and promote high

standards of corporate governance and protection of

the rights and interests of investors. The association

will draw on the experience the financial companies

have accumulated in Belarus and cooperate closely

with organizations from other CIS countries, Russia

in particular.

World Bank to provide $90m for upgrade of two Belarusian CHPPs

Financial literacy campaign

Belarus to set up Financial Market Association

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Belarusian Railways:

151 Years and Counting

Every year about 150 million tonnes of cargo and 100 million passengers are transported by rail

What comes to your mind when you think about railways? Some people imagine shiny and blazing strips of metal, others remember the calming and soothing sound of wheels turning on the railroad track… the feeling of tranquility and safety. Most people going on long-distance trips choose railway transport for its reliability and safety. It is not just about the low accident rate but also excellent service. Belarusian Railways, the national rail operator, is investing tremendous effort to ensure a high level of customer satisfaction. Head of Belarusian Railways Mr Vladimir MOROZOV tells the Economy of Belarus Magazine about the company’s ambitions and new products and services.

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Mr Morozov, the year 2012

was an important milestone for

the company as the national rail

operator marked its 150th anni-

versary. This is quite a date for

any company. The company must

be proud of what it has achieved.

What are the major challenges

Belarusian Railways is going to

take up this year?

Indeed, this year is a new ref-

erence point for the company. It

is noteworthy that in 2013 we also

mark the 50th anniversary of elec-

trification of the Belarusian rail-

way tracks. We are looking forward

to enhancing cooperation with rail

services of foreign states, taking

advantage of new opportunities

opened up by the establishment

of the Customs Union of Belarus,

Russia and Kazakhstan and the

Single Economic Space.

Now our number one task is

to strengthen our positions on the

domestic and international markets

of transportation services. To this

end, we have launched large-scale

investment projects as part of 15

government programs, including

the state program for rail transport

development for 2011-2015. The most

important of them include electri-

fication of railway sections Gomel-

Zhlobin-Osipovichi, Molodechno-

Gudogay-state border, renovation of

the rolling stock, expansion of the

Minsk railway hub, development of

the operation control center, and

upgrade of the railway infrastruc-

ture.

The modernization theme is

getting increasingly relevant

now. Therefore, could you please

tell us about the company’s

efforts to upgrade its capacities,

expand the rolling stock and ren-

ovate infrastructure?

Our modernization efforts are

meant to improve the quality of

passenger and cargo transporta-

tion, cut down on equipment main-

tenance costs, facilitate innovative

development of our subsidiaries

and enhance their competitiveness

on the global market. In January

2013 Belarusian Railways passed a

plan to boost its operational effi-

ciency (the Modernization Plan).

The document envisages a set of

measures to enhance the economic

and technical performance of the

company. The latter implies refresh-

ment of the rolling stock and rail-

way infrastructure, assimilation

of new or improved transportation

technologies, optimization of tran-

sit cargo transportation using high-

speed container trains, and over-

haul of cargo terminals.

I would like to highlight some

of our projects. One of the most

important investment projects we

are running now is the electrifi-

cation of railway tracks as part

of the Pan-European Transport

Corridor IX. In April 2013 we are

set to complete the electrification

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of the Osipovichi-Bobruisk section

and offer short-distance railway ser-

vice using electric trains. In July

we will finish electrification of the

Bobruisk-Zhlobin section. This year

we have plans to start mounting

electric power supply installations

at the Zhlobin-Gomel section. At

the end of 2012 Belarusian Railways

and China National Electric Import

& Export Corporation (CUEC)

signed a $94.9 million contract to

electrify this section. This year we

will start electrifying the section

Molodechno-Gudogay-state border.

Belarusian Railways actively

upgrades the passenger transpor-

tation infrastructure, including

through the project to develop the

urban rail line in Minsk. The appro-

priate infrastructure has already

been installed for the urban line

connecting the Minsk-Passazhirsky

railway station with Minsk’s suburb

Zhdanovichi.

Currently Belarusian Railways

is working on the infrastructure for

the urban rail link between Minsk

and Rudensk, which is scheduled

to come on stream in 2013. The

new facilities will include under-

ground pedestrian crossings, pas-

senger platforms with canopies,

ticket offices. By the end of 2015 the

Belarusian rail operator plans to

upgrade the infrastructure on the

Minsk-Smolevichi route.

In order to improve the qual-

ity of passenger service and relax

border crossing, several railway sta-

tions in border regions of Belarus

are being renovated. Reconstruction

of the railway stations in Grodno

and Brest is on track to be complete

in 2013.

With regard to Minsk, under the

Minsk-Passazhirsky railway station

development project, this year we

intend to commence the redeploy-

ment of the train maintenance facil-

ity outside the city limits. In its

place we will arrange two additional

passenger platforms with canopies.

Now Belarusian Railways is imple-

menting the second phase of the

project to build a coach yard at the

Minsk railway junction.

I would like to mention that we

are doing the upgrade of the cargo

terminals with a view to turning

them into advanced transport and

logistics centers, which is important

not only for the rail operator but

also for entire Belarus as a transit

country. Currently, the reconstruc-

tion of the Kolyadichi commercial

station is in progress. In 2013 we

plan to open a new indoor storage

facility of 5,000 square meters for

the unloading and processing of

unitized cargo transported in cov-

ered railcars. We will also begin

the construction of a new admin-

istrative building which will meet

the most up-to-date standards of

customer service. Following the

upgrade of the station, Belarusian

Railways will be able to offer high-

est-quality service to cargo ship-

pers. The project consists of five

phases, on the completion of which

the Kolyadichi station will become

one of the most advanced terminals

of Belarusian Railways, providing a

full range of services related to pro-

cessing of large containers, heavy

goods vehicles.

The comfort of passengers, the

confidence of customers in the

timely delivery of goods – this all

depends on the technical capaci-

ties of the carrier. Maintenance

of the existing rolling stock is

of crucial importance. But per-

haps, the purchase of new cars

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with the upgrade of the rolling

stock?

The upgrade of the rolling stock

is one of the most important tasks

of Belarusian Railways. This is

done within the framework of the

state program for rail transport

development for 2011-2015. During

this period the rail operator plans

to purchase 30 freight and 24 pas-

senger electric locomotives, eight

passenger diesel locomotives, six

shunting locomotives, 20 diesel and

29 electric trains. I would like to

note that last year the rolling stock

was upgraded by more than 15%.

Over the past two years, as part

of the effort to develop a new for-

mat of passenger transportation,

we purchased six electric trains for

the urban lines and four for the

regional lines from the Swiss com-

pany Stadler Bussnang AG. In 2012

we commissioned three one-car-

riage diesel trains for the regional

lines made by Belkommunmash

jointly with the Polish company

PESA Bydgoszsz SA with the par-

ticipation of Minsk Railway Car

Repair Plant. This year, Belarusian

Railways plans to purchase four

electric- and four diesel-trains. This

is a brand new rolling stock, which

corresponds to up-to-date standards

of reliability, safety, comfort and

environmental friendliness.

We are upgrading the fleet of

passenger cars to make passenger

ride in Belarusian trains as com-

fortable as possible. In the past six

years, the Belarusian rail operator

purchased 168 cars, including two

cars corresponding to the EU RIC-

200 standards. New passenger cars

are equipped with air condition-

ing, eco-friendly bathroom facilities

and electricity supply system allow-

ing recharging laptops and mobile

phones. In accordance with the state

program for rail transport develop-

ment in Belarus, in 2013-2015 we

plan to purchase at least 140 passen-

ger cars. As regards freight cars, we

aim for 2,000 units this year.

Last year Belarusian Railways

acquired six BCG1 electric loco-

motives built by Datong Electric

Locomotive (China). The company

plans to purchase the same num-

ber of rail vehicles this year. The

project launched in 2011 to produce

diesel shunting locomotives MTE-1

and MTE-2 in the Lida locomotive

depot using the technology of Czech

CZ LOKO is of great importance

for the country’s railway system.

Belarusian Railways also launched

a project to build four-wheeled die-

sel electric switchers MTEZ. The

first locomotive of the kind was

made in late 2012. This year there

are plans to produce eight diesel

shunting locomotives.

In general, the issue of renewing

rolling stock requires a comprehen-

sive approach that should include

the purchase of new-generation

locomotives and modernization of

the existing rolling stock. Diesel

freight locomotives 210TE and 2M62

are currently having their diesel

engines replaced – a total of 100

locomotives have been upgraded

so far. The upgrade allows saving

annually up to 74.4 tonnes of diesel

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vehicle.

New locomotives, new rail-

road cars… Trains get better in

terms of quality and design. Can

we expect an increase in speed

on national and international

routes in the near future?

I would like to say that the

increase in speed requires imple-

mentation of a whole range of

measures, starting from infrastruc-

ture development to the repair of

rail lines and optimization of traffic

schedules.

There are plans to amend the

2013/14 national rail timetable

introduced on the last Sunday of

May. The schedule is annually

approved by the Council for Rail

Transport of CIS States. In par-

ticular, we are looking to reduce

journey time for passenger trains

No.656 Grodno-Minsk and No.655

Minsk-Grodno. Increasing speed

limits at the section Lida-Mosty up

to 120-140km/h will reduce travel

time approximately by an hour. We

are also adjusting the traffic sched-

ule for interregional economy-class

trains. The move will make a 7-15

minute cut to the journey time for

some routes.

Amendments will be intro-

duced to international routes as

well: Belarusian Railways and

Lithuanian Railways are planning

to cut travel time between Minsk

and Vilnius by 30 minutes to make it

a 2.5-hour journey. Under the agree-

ments with Russian Railways the

new schedule introduced in May

reduces the travel time between

Moscow and Kaliningrad via

Belarus and the neighboring coun-

tries. In more detail, train No.29

Moscow-Kaliningrad will see a

reduction in journey time by 67

minutes, train No.30 Kaliningrad-

Moscow by 74 minutes, train No.79

Saint Petersburg-Kaliningrad by

two hours, train No.147 Moscow-

Kaliningrad by 32 minutes. Apart

from that, passengers will spend

less time traveling from Saint

Petersburg to Minsk and back on

trains No.51 and No.52.

Belarus continues joint work

with Russian Railways on the

high-speed route Moscow-Minsk-

Berlin with the use of Talgo rolling

stock. The project envisages instal-

lation of a railroad switch device

at the Brest-Tsentralny station.

Belarusian Railways and Russian

Railways signed the relevant agree-

ment in November 2012.

Belarusian Railways is work-

ing hard on improving customer

service and introducing new ser-

vices. What do you think of the

electronic travel card introduced

recently?

Last year’s results are encour-

aging, as we were able to secure a

considerable growth in passenger

numbers. A total of 100.5 million

people were transported in 2012, up

13% on 2011. The share of passenger

traffic by rail increased by 1.8% to

35.6% in the total passenger turno-

ver in the country.

Last autumn the rail operator

launched the electronic registra-

tion service for passengers travel-

ling inside Belarus. Passengers paid

for tickets via the Internet using

plastic cards. The service is grow-

ing in popularity. Since September

Belarusian Railways has sold more

than 34,000 e-tickets. In March

Belarusian Railways is planning to

launch electronic registration for a

number of passenger trains bound

to Russia.

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On the official website of

Belarusian Railways the sale of

e-tickets will be linked to the Internet

acquiring system of Belarusbank.

Passengers will buy tickets using

Visa International, MasterCard

WorldWide cards of any bank in the

world. The company is planning to

finish all preparations this year.

Please tell us about the

international cooperation of

Belarusian Railways? What pro-

jects implemented jointly with

foreign partners are considered

the most important?

I would like to emphasize that

cooperation with leading foreign

companies and international trans-

port organizations is among our

priorities. Of course, Belarusian

Railways will continue coopera-

tion with foreign manufacturers of

rolling stock, machinery and equip-

ment. We are planning to enhance

mutually beneficial relations and

bilateral cooperation with the rail-

way services of Europe and Asia.

For instance, Belarusian

Railways will promote freight

transportation, including container

transportation, and raise the speed

of international passenger trains in

cooperation with Russian Railways,

our major strategic partner.

Belarusian Railways will team

up with the rail operators of

Russia and Kazakhstan to imple-

ment railway transport agreements

signed within the framework of

the Customs Union and the Single

Economic Space.

Cooperation with our north-west-

ern neighbors has been increasingly

vibrant too. Belarusian Railways

cooperates with the rail operators

of the Baltic countries. The compa-

nies have launched high-speed pas-

senger service Minsk-Vilnius, run

the Viking container train project

connecting Klaipeda, Minsk and

Odessa, electrify the Molodechno –

state border – Naujoji Vilnia rail-

way, build the infrastructure of

the Vitebsk-Polotsk-Daugavpils

section.

Belarusian Railways maintains

cooperation with Germany’s DB

Bahn. The two partners will imple-

ment the high-speed container train

project to ship Volkswagen car parts

to Kaluga via Brest using the exist-

ing route and a new railway route to

Belarusian Railways is an important component of not only the

transport sector, but also the entire economy of the country. The com-

pany has a modern and well-developed transport network with over

5,500km of track. Belarusian Railways is a leader of the national trans-

portation system. It accounts for over 70% of Belarus’ freight trans-

portation and about 40% of passenger traffic. Every year Belarusian

Railways carries about 150 million tonnes of cargo and 100 million

passengers. Belarusian Railways operates 31 subsidiaries. The com-

pany has about 86,000 employees representing more than 500 profes-

sions. Over 400 families have been with Belarusian Railways for many

generations. These are 2,015 people, of them 730 work with Belarusian

Railways today.

EDITORS’ NOTE

Nizhny Novgorod, a project to trans-

port BMW products from Leipzig

to China’s Shenyang and Hewlett-

Packard goods from Chongqing to

Duisburg.

Belarusian Railways is a member

of the Council for Rail Transport of

the CIS States, the Organization for

Cooperation between Railways, the

International Railways Union, coor-

dination conference on passenger

transportation of the Forum Train

Europe, the Coordinating Council

on Transsiberian Transportation.

Closer cooperation with these

organizations will promote fur-

ther integration of Belarusian

Railways into the global transport

network.

Tatyana IVANYUK

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The Transport and Communi-

ca tions Ministry is busy putting

together a strategy for the

innovation-driven development of

the transport system of Belarus till

2030.

According to the press service of

the Ministry, a council has been set

up for the purpose, with scientific

personnel as part of the council.

“The state can earn economic

benefits from modernizing the

transport system, provided all

kinds of transport are developed

simultaneously. It will be taken into

account during the elaboration of

the innovation-driven development

strategy,” said the source.

Strategy for innovation-driven development of Belarusian transport system till 2030

About 769,000 passengers used

the Minsk metro every day in 2012,

said the central statistics office of

Minsk.

The importance of metro

grows year after year. Metro is

used for half of the passenger

transportation trips in the city.

Minsk’s passenger transport

network comprises automobile

(buses), urban electric, aerial, and

inland water transport.

In 2012 as many as 899.7 million

people were transported in Minsk

by all kinds of passenger transport,

1.8% up from 2011. Passenger traffic

totaled 7,226.2 million passenger

kilometers, up by 8.1%.

Nearly 770,000 people use Minsk metro every day

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A mixture of style and pragmatism

Unified vehicle passports for Customs Union

The uniform set shall include 40 items made

from various materials, such as a jacket, a

vest, a blouse/shirt, a skirt/trousers, a cap, an

apron, a scarf. The uniform set will also include

a coat and a hat for winter and a raincoat

for summer. Besides, during summer months

female cabin crew members will have an option

to wear summer dresses. Finally, all cabin crew

members will get special suitcases which can

be used as personal luggage during the flights.

The apparel has been designed by Ms Elvira

Zhvikova, senior art director of OAO Fashion

Center. In her words, the design takes into

account wishes expressed by flight attendants

and modern fashion trends. The result is a

mixture of style and pragmatism.

There are plans to introduce unified passports

of vehicles, chassis of vehicles, and self-propelled

machines in the Customs Union as from 1 July

2013. The plans are stipulated by the relevant draft

intergovernmental agreement approved by the Council

of the Eurasian Economic Commission and put on its

website.

In line with the document the unified passports will

be in effect until a digital passport system goes online.

The draft agreement stipulates that as from 1 January

2015 authorized agencies of the Customs Union member

states and specifically listed manufacturers will issue

digital passports of vehicles, chassis of vehicles, and

self-propelled machines.

Meanwhile, a special procedure will be in place

for issuing the passports till 1 July 2013: Belarus and

Kazakhstan will have to apply for and use Russian

forms.

The agreement is subject to ratification and will

be temporarily in use as of the signing date. The

Eurasian Economic Commission has forwarded the

draft document to the member states for the sake of

accomplishing the intrastate procedures required to

sign the document.

In January the Belarusian

air carrier Belavia presented

new uniforms for flight

attendants.

The Belarusian air

carrier has ordered sets

made for men and women

for warm and cold weather

since both can be sometimes

experienced on the same day

during long-distance flights.

New summer and winter

uniform sets have been

designed for female and

male cabin crew members

of the national carrier. The

familiar color spectrum of

white – blue-turquoise will

be changed. The new winter

uniform set is designed in

dark blue and red, while the

summer set will be produced

in white-grey-rose colors.

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Successful StartToday products made in Lida District are sold

in 70 countries worldwide

The modernization policy adopted by the Belarusian government for this five-year term has been the mainstream policy in Lida District for several years already. It is by no means surprising as Lida District is home to dozens of modern industrial companies representing a variety of industries. For them upgrade is a matter of survival and competitive growth. Chairman of the Lida District Executive Committee Mr Alexander OSTROVSKY tells the Economy of Belarus Magazine about plans and aspirations of this unique ancient region.

Mr Ostrovsky, are you happy

with the industrial development

of Lida District in 2012? Did the

region succeed in increasing the

output of industrial goods and

making them more competitive?

That was a difficult year.

Nevertheless, the local industry

manufactured Br5,818.1 billion

worth of goods in factory prices

(including the cost of raw materials

supplied by customers). In 2012 the

industrial output expanded by 10.7%

(the target was 10%). If calculated in

factory prices (including the cost of

raw materials supplied by custom-

ers), the output growth was 86.2%.

The region manufactured

Br824.3 billion in innovative prod-

ucts, 15.2% of the total output. We

also expanded the manufacture of

some non-food products, including

agricultural machines and equip-

ment, furniture, construction mate-

rials, lamps, optical devices, paints,

lacquers, enamels, footwear, etc. We

sold more foodstuffs, including meat

products, flax oil and butter, flour,

cereals, starch, beer and non-alco-

holic beverages.

The government urges pro-

ducers to make more import sub-

stitution goods. How is progress

on this side of things?

Within the framework of

national, sectoral and regional inno-

vation programs, our companies

turned out a variety of industrial

and consumer goods. For example,

Lidselmash rolled out heating radia-

tors. On the one hand, these are

import substitution products, on

the other hand, these products are

meant for export. About 30% of

heating radiators are sold domes-

tically. Taking into consideration

great competitive advantages of

these products, the factory is set

to boost their sales in Ukraine, the

Baltic states and Poland. After a

new welding line is commissioned,

the output will be increased.

Lidagroprommash started pro-

ducing potato harvesters as part of

the government program to develop

and supply promising machines and

equipment to domestic agricultural

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companies in 2011-2015. Besides,

we are going to provide domestic

producers with Lida-GE 220 self-

propelled flax pullers and Lida-U30

self-propelled flax harvesters.

Lida Foundry and Mechanical

Plant also makes import substitu-

tion products – castings for Minsk

Motor Plant. Lida Plant of Electrical

Products makes import substitution

LED-based lighting equipment. The

company is running an investment

project of the Industry Ministry

“Development of production of

energy-saving lighting equipment”.

In order to make their products

more competitive in domestic and

foreign markets, a number of local

enterprises seek to establish mutu-

ally beneficial contacts with world-

renowned manufacturers, set up

licensed production and expand the

range of import substitution prod-

ucts. For example, Minoity Repair

Plant started producing spare parts

for CLAAS (Lexion, Mega), Bizon,

John Deere grain harvesters. Under

the import substitution program,

the plant also manufactures mul-

tifunctional units for soil process-

ing “Diskopak-6”, semi-mounted

ploughs, and crop collectors.

The company OAO Lakokraska

has established good relations with

Euro pean partners. The company

made pilot batches of two-compo-

nent polyurethane materials under

the license from BASF Coatings

GmbH (Germany): BALISTA High

Gloss for painting equipment and

BALISTA Filler for the protection

of metal surfaces and fiberglass

against corrosion. As part of

the import substitution effort

Lakokraska produces new mate-

rials: enamel EP-152 and primer-

enamel EP-158 for protection of

steel, copper or aluminum prod-

ucts against corrosion, LidAlkyd

lacquers for the manufacture of

pentaphthalic enamels, Primecoat

enamel for protection against cor-

rosion. All new products enjoy high

demand on the market.

How popular are Lida-made

goods on foreign markets? How

are things export-wise? What

is the correlation between the

exports of goods and services?

Foreign sales of local enterprises

amounted to $608.3 million in 2012.

The total export was $400 million,

up 16.8% from 2011. The district had

a foreign merchandise trade surplus

of $204.9 million

In 2005 we exported products

to 53 countries around the world,

while in 2012 we were present on the

markets of 70 countries. The main

foreign market is, of course, Russia.

The share of exports to the Russian

Federation made up 73% of the total

exports of Lida District.

Many local enterprises have

boosted exports. These were Lako-

kraska, Lida Milk Plant, Lida Meat-

Packing Plant, Glass works Neman,

Lidselmash, Yukon Advanced Optics,

Optic Plant, Bel-Plast International,

Lida khleb produkt bakery, Lida

Furniture Factory, Lida Footwear

Plant, Lidastroikonstruktsia, Lida

Plant of Electrical Products, Lida

Food Concentrates Factory, ZAO

Kaskad and other companies.

The food industry accounted for

44% of the total exports of Lida

District, chemical industry for

21.4% and manufacturing industry

for 9%.

Export of the companies exclud-

ing the organizations subordi-

nated to the national government

amounted to $240 million, up 11.5%

as against 2011.

Lida Milk Plant and Lida Meat-

Packing Plant account for 70.4% of

the export of this group of compa-

nies. The latter managed to boost

export to the neighboring market by

20.8% in 2012. The export deliveries

of Lida Milk Plant went up by 26.9%

in 2012.

With regard to the export of

services, its volume is inferior to

merchandise export, yet it has been

increasing more rapidly. Thus, in

2012 local producers provided $19.2

million worth of services to for-

eign clients, which was up 57.2%

from 2011 and well above the growth

target of 24%. The district had a

surplus in trade in services in the

amount of $10.5 million.

In order to secure a foot-

hold on the traditional markets

and expand into new ones, it is

vital to steadily enhance com-

petitive ability. How are things

with investment in technologi-

cal development of the industrial

sector?

We are doing our best to create

maximum favorable conditions for

investors. We have recently opened

a number of new factories. Not long

ago, in cooperation with a German

company, we set up a new company,

XABEP BY Woven Wire Factory,

to produce woven-wire mesh. The

National Academy of Sciences

implemented an investment pro-

ject to build HD Galvanizing

Plant Konus which uses hot-dip

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sized metal structures from corro-

sion. MEDAX-M Company commis-

sioned a manufacturing facility of

the total area of 800 square meters

to produce import substitution dis-

posable medical supplies.

An estimated Br1.5 trillion

worth of investment was put into

the economy of Lida District in

2012. Unfortunately, a downward

trend was registered in capital

investment, which was caused by a

number of objective reasons. Last

year Lida District raised a total of

$19.7 million of net FDI.

A number of companies consid-

erably enhanced their technologi-

cal potential using both proprietary

funds and attracted resources. Thus,

Lakokraska continued technical re-

equipment of the phthalic anhy-

dride production facility increas-

ing its capacity to 48,000 tonnes per

year. Lidskoye PIVO brewery has

built a number of new facilities as

part of its large-scale reconstruc-

tion effort. Lidselmash has built a

new painting section. Lida Meat-

Packing Plant has upgraded its pre-

fabricated unit of the sausage pro-

ducing shop, by building two meat

cooling rooms with the capacity of

30 and 60 tonnes. Lida Milk Plant

has opened a new milk powder pro-

duction unit and installed gas power

generating equipment at the whole

milk substitutes shop. ZAO Kaskad

has completed a makeover of its

production base with the opening of

powder painting and abrasive sand

recuperation units. An upgrade

project is underway at Glassworks

Neman.

What are investment plans for

2013? What projects will local

economic operators implement

this year?

Development of the invest-

ment and innovative potential is

in the spotlight of the Lida District

Executive Committee.

Lakokraska will continue its

technical retooling program. Lida

Furniture Factory is planning to

launch the construction of a fin-

ishing and assembly workshop.

Optic Plant will continue revamp-

ing a vacuum coating workshop.

Lidselmash will develop production

of automated silage-type grain stor-

age facilities. All organizations and

companies have upgrade plans.

Food manufacturers have

large-scale investment plans, too.

For example, Lidakhlebprodukt is

planning to implement five invest-

ment projects. Among them is the

project to set up a pasta factory

with the capacity of 20,000 tonnes

per year. Lida Meat-Packing Plant

will rebuild the prefabricated meat

facility of the sausage workshop by

replacing packaging, smoking and

cooking lineups. Lidskoye PIVO will

launch the production of Sandels

beer in glass bottles.

This year we are going to give

a boost to small and medium-sized

business. The district has favora-

ble conditions to promote business

initiatives and create competitive

environment. In 2013 small business

will account for 28.5% of returns on

sales of goods, works and services.

Practice shows that small busi-

nesses play a crucial role in raising

investments into setting up modern

production facilities and providing

services. It is also important for the

promotion of export.

Do you expect to raise more

foreign investments? What indus-

tries will consume these invest-

ments?

Of course, we will step up efforts

to raise foreign investments. We

expect to get $30 million in foreign

direct investment on net basis. In

particular, there are plans to mod-

ernize and ramp up the capacity

of the company to recycle animal

wastes. We have already signed an

investment agreement to the tune

of at least €5 million to implement

the project with the Lithuanian

company Marijampoles ARVI. The

enterprise is also eager to take part

in the project to build a turkey pro-

duction facility.

In fact, Lida District needs to

raise investments in the industrial

sector to resolve the main task for

the year 2013, which is to introduce

new high-efficiency technologies

and equipment. As a result, local

companies will ramp up the pro-

duction of goods complying with

international standards, raise labor

productivity and reduce expenses.

Tamara MARKINA

In 2012 the export

of Lida District enterprises

went up 16.8% to $406.6 million

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BUSINESS ENVIRONMENT

Protos Means “First” in Greek

Protos Group is investing about €20 million in the expansion of metal structures production

Protos Group is a great success story of a private business in Belarus. Over the last 20 years a small metal structure workshop grew into a respectable company with products and services high in demand both in Belarus and abroad. Today this modern and rapidly growing enterprise channels the major part of its revenues into innovations to create new jobs, produce import-substitution goods and win new foreign customers. The company has been constantly searching for new ideas and exploring new areas of operation, increasing the number of staff and expanding physical infrastructure.

Even Small Things Matter

This motto was adopted by Mr

Nikolai Sysa, Protos founder, when

he started up his own business.

Today the motto remains one of

the core principles of labor man-

agement and secures a responsi-

ble attitude toward anything Protos

embarks on.

“We try to carefully verify every

step we make both in the market

and in doing business in order to

get a maximum return on labor

and money invested. This allowed

us to choose the right course, cal-

culate our capacities, grow, mature

and go forward overcoming dif-

ficulties. We have grown from a

small workshop producing metal

structures into a multifunctional

holding company uniting four

large enterprises, namely Protos,

a fittings factory, Protos Avto

and Protos Tekhno,” said Nikolai

Sysa.

“The backbone of our policy

is meeting the requirements and

expectations of our customers by

improving the physical infrastruc-

ture, ensuring high quality and

customer-oriented sales, fostering

a balan ced development of all the

companies, and encouraging pro-

fessional development and team-

building. Our motto is ‘Even small

things matter’ and we try to keep up

with the times,” the Protos Group

Director emphasized.

Reliable Partner and Supplier

Protos has earned a solid repu-

tation by delivering on its prom-

ises. The company is involved in

the wholesale of pipes, rolled metal

products and technical equipment

as well as in cargo and liquefied gas

transportation. In 2010, Protos was

licensed to provide forwarding ser-

vices. It is noteworthy that virtually

all the main production and man-

agement assets are concentrated at

Protos. This company also supplies

materials for metal structures to the

fittings factory.

Thanks to a new Finnish weld-

ing line installed in 2011, Protos

launched the production of plate

girders that nobody else in Belarus

makes.

“As a result, we have a competi-

tive product that sells well both at

home and abroad. For instance, we

supplied plate girders together with

metal structures to Belarusian Steel

Works,” Nikolai Sysa said.

Big Transporter of Hazardous Cargo

As part of Protos Group, Protos

Avto specializes in international

transportation, including delivery

of metal structures to the customer.

It boasts a modern fleet of vehicles,

including special-purpose ones, that

is constantly growing. The profes-

sional qualifications of the drivers

employed by Protos Avto are equally

impressive with some of them

being winners of line-haul train

drivers’ competitions. All this helps

meet most discerning requests.

Protos Avto employees have been

conferred honorary diplomas by

the International Road Transport

Union (IRU). The company itself is

one of the largest transporters of

liquefied gas and light oil products

in Belarus. Having started in 2004 as

a supplier of liquefied hydrocarbon

gas in Belarus, the company has

gradually extended its wholesale

deliveries to the Czech Republic,

Estonia, Lithuania, Latvia, Poland,

Russia and Ukraine.

European Level of Service

Protos Tekhno is a large service

center responsible for diagnostics

and repairs of heavy duty vehicles.

Having grown from an extension to

the vehicle fleet, Protos Tekhno can

perform any type of repairs.

The service center incorporates

a 985 m2 maintenance shop with the

capacity to service eight vehicles at

once and an 800 m2 shop for mainte-

nance of semitrailers. It can service

a wide range of heavy duty vehi-

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cles (DAF, Iveco, MAN, Mercedes,

Scania, Volvo, Renault, МАZ-MAN,

МАZ, KamAZ, MZKT); semitrailers

of all types and models; combilifts

and excavators; reefer trucks and

WABCO air compressors.

Among the services provided are

computer diagnostics, ADR safety

shutoff system installation, assem-

bly and disassembly of the power

take-off equipment, discharge noz-

zle repair and checkup, brake sys-

tem control, installation and diag-

nostics of automated tachograph

systems, tire fitting, wheel vulcan-

ization and balancing, aluminum

welding, and others.

“Owing to the upscale techni-

cal facilities, quality spare parts

from the world’s leading produc-

ers, qualified personnel trained and

certified at European maintenance

centers, Protos Tekhno provides

services at the highest level meeting

European standards,” Nikolai Sysa

explained.

Innovations and Modern Technologies

The history of the fittings fac-

tory dates back to 1994 when it

was a small shop producing metal

structures. Over time the shop grew

bigger, introduced innovative solu-

tions and launched production of

new competitive goods. Today it is

a powerful manufacturing facility

producing up to 500 tonnes of metal

structures a month used in a wide

range of buildings of various pur-

poses and complexity.

“We have invested a lot in the

development of this production

facility. We bought equipment and

technologies of the world’s leading

producers from Finland, Germany,

Ireland, Italy, Portugal, Spain and

the United States. Surely, there was

a certain risk as we were invest-

ing in the future technologies. But

it was a justified risk and today

the majority of construction com-

panies in Belarus and abroad use

rapidly erected metal structures

of high reliability and durability,”

Nikolai Sysa said.

Employees of the fittings factory

have been trained at representa-

tive offices of the leading European

firms and received corresponding

certificates. All the materials for

production of metal structures are

bought from renowned manufactur-

ers of sheet and profile iron, which

ensures high quality and reduces

prime cost of the end product.

Nondestructive Control

Methods, an independent labora-

tory of the Belarusian-Russian

University, performs a check assem-

bly of newly made metal structures

and issues a final opinion on their

welding quality. Delivery of the

ready-made structures is available

on request.

“Within a couple of years the

company managed to build a repu-

tation of a reliable partner. For

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This year Protos Group intends

to implement another large-scale

investment project to build a cut-

ting-edge metal structure produc-

tion facility that will be second to

none in Belarus. About four hec-

tares of land has been allotted near

the acting plant; preparation of the

site and design documentation is

underway.

“We plan to buy equipment of

the leading European producers

with the production capacity of

over 1,000 tonnes of metal struc-

tures a month. The most advanced

technologies will be used and all

the production processes will be

automated to the maximum. This

will allow us to maximize the output

while minimizing the costs, extend

the range of products and raise

their quality,” Nikolai Sysa noted.

The new equipment will make

it possible to produce metal struc-

tures for the construction of mod-

ern road bridges and crossovers in

addition to buildings.

“Taking into consideration the

projected market demand, we plan

to invest about €20 million in the

construction of the new metal struc-

ture production facility,” Nikolai

Sysa said.

The increase in the metal struc-

ture production has been necessi-

tated by the growing demand for

these products in the construction

sector both at home and abroad.

Today metal structures are used to

build virtually all major buildings

such as nuclear plants, bridges,

amphitheaters, hypermarkets,

sports complexes, etc. The use of

metal structures speeds up con-

struction, guarantees high quality

and reliability of buildings.

The new production capacities

coupled with the 20 years of experi-

ence will allow the holding company

to boost production and sales, con-

tinue market diversification efforts

and increase the export potential.

“We also plan to raise the wages,

improve working conditions at the

production facilities, and imple-

ment various social projects. We are

very optimistic about the future,”

Nikolai Sysa stressed.

TIN 700010872

The multifunctional

holding company unites four large

enterprises, namely Protos,

a fittings factory, Protos Avto

and Protos Tekhno

instance, our metal structures were

used to build the main facilities

of the Dazhynki Harvest Festival

2012, namely the ice arena with

a gym, Pogodino railway station,

Gorki youth center with an amphi-

theater. Our products are used in

construction of the Belarusian

nuclear power plant and a num-

ber of big commercial and indus-

trial facilities both in Belarus and

the neighboring countries. The

European Union also had a chance

to get familiar with our products

during the construction of an

oil-loading terminal in Antwerp,

Belgium,” the Protos Director

said.

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Stadler settles in Belarus

The Belarusian-Swiss electric transport factory in the town of Fanipol will start manufacturing

merchandise in late 2013

On Common Rails

It is worth mentioning that

Stadler Rail Group is one of

Europe’s top three manufacturers

of electric railway transport and

one of the world’s top ten manufac-

turers in this market. The group

designs, manufactures, and supplies

railway transport solutions and

operates factories in Switzerland,

Germany, Poland, Hungary, Czechia,

Italy, Austria, Algeria, and the USA.

The industrial group boasts the

annual turnover of CHF2.3 billion

and nearly 5,000 personnel.

In Belarus the Swiss company is

expanding its business in association

with Belkommunmash. The share of

the Swiss company in the author-

ized fund of the joint venture is

60%. Investments in the project will

exceed €35 million initially. Taking

out a loan from the European Bank

for Reconstruction and Development

is under consideration.

The Fanipol-based factory will

make FLIRT-type electric trains for

the 1,520mm track and double-deck

KISS-type trains as well as trams

and trolleybuses. Apart from that,

the company has plans to make

hybrid-drive buses and 18-meter-

long trolleybuses with a diesel gen-

erator. The Fanipol factory will per-

form assembly, welding, painting,

and commissioning of Swiss-design

commuter trains. The company is

expected to employ over 1,000 people

as early as 2014. There are plans for

increasing the workforce, organiz-

ing re-training trips for workers and

specialists to Stadler enterprises in

Europe. This way Stadler Minsk will

become a major employer in Minsk

Oblast.

“Apart from assembling com-

muter trains we are interested in

making individual components here

that will be shipped to our western

enterprises,” said Mr Peter Spuhler,

Director and the owner of Stadler

Rail AG Company. “The invest-

ments have been prompted by good

opinions voiced about the first ship-

ments to Belarusian Railways. We

are impressed by the Belarusian

partner, its technical capabilities

and performance. We see a large

potential for selling our products in

Belarus, Russia, and Kazakhstan,”

he noted.

Peter Spuhler pointed out the

high technological standards and

the education level in Belarus.

Apart from that, he believes that the

Belarusians and the Swiss fit each

other well in terms of mentality.

At the ceremony to place a

time capsule into the foundation

of the Belarusian-Swiss factory

Prime Minister of Belarus Mikhail

Myasnikovich underlined that the

project opened a new page in the

development of the Belarusian

economy and the production sec-

tor in particular, with the intellec-

tual force and the output capacities

of the Belarusian and Swiss sides

merged. The enterprise will allow

Belarus to secure the development

of its railway transport and rather

effectively operate on the Customs

Union market while export-

ing the make to non-CIS states,

too.

First Orders

Although the factory has to be

built yet, the demand for the mer-

chandise is being determined and

several customers have been found

already.

First, efforts will be continued in

Belarus to electrify and introduce

a new format of passenger trans-

portation. Urban railway commut-

ing will be offered in Rudensk in

2013 and Smolevichi in 2015. Rolling

stock will have to be purchased for

A while ago a new kind of railway transportation – urban commuter trains – was offered in Belarus. Belarusian Railways has bought ten trains in Europe. The move marked the beginning of the cooperation with Stadler Company and the cooperation is now approaching a new level. The Swiss side is investing money to build a factory to make electric transport in the industrial zone Fanipol, Minsk Oblast. The construction project was launched in October 2012 with assistance of Prime Minister of Belarus Mr Mikhail Myasnikovich. The factory is scheduled for commissioning by the end of the year. Once it is up and running, Belarus will have a modern European-level enterprise, while the investor will be able to promote its products to the Customs Union and the Commonwealth of Independent States.

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INVESTMENTS www.belarus-economy.by

it. Now the regular urban commuter

train service is available between

the Minsk Passazhirsky station and

the Zaslavl station.

The Russian transport com-

pany Aeroexpress operates com-

muter trains that connect Moscow,

Sochi, and Vladivostok with the

airports that service these cities.

In February 2013 Stadler won the

tender in Moscow and will supply

the customer with 16 four-car trains

and eight six-car trains by 2016.

The delivery of 13 more trains or

60 railcars is possible. Part of the

order will be fulfilled by the Fanipol

factory. The contract is estimated at

nearly €350 million. The commuter

trains will be used on lines of all the

three Moscow airports. The tender

was announced in May 2012. In the

final stage Stadler competed with

such major mechanical engineering

companies as Alstom (France) and

Skoda (Czechia).

The trains for Aeroexpress will

be based on the existing Swiss KISS

trains, but will have several techni-

cal differences, which is required for

operation in Russia. For instance,

the train track gauge in Russia,

the width of the rolling stock and

its height differ from those used in

Western Europe. Apart from that,

there are tougher climate require-

ments: the trains should be opera-

tional at temperatures varying from

50°C below zero and 40°C above zero.

Stadler had faced a similar situa-

tion when it had to supply FLIRT

trains to Finland, Norway, Estonia,

and Belarus. The new trains will

be able to travel at speeds of up to

160kmph. The light interior will be

offered to passengers in business

and economy class. The railcars will

be made of light aluminum and

therefore their weight will be con-

siderably less in comparison with

conventional steel railcars, result-

ing in lower operation costs.

Stadler believes the contract is

an important milestone in coop-

eration with Russia. Such double-

deck trains are already available in

Switzerland, Germany, Austria, and

Luxembourg. A total of 133 KISS-

type trains have been commissioned

but it is the first time they will be

offered in the CIS.

In turn, Mr Vladimir Korol,

Chairman of the Board of Directors

of OAO Belkommunmash Holding

Management Company, Director

General of OAO Electric Transport,

underlined that the capability of the

future factory to make trains for the

1,520mm track, which is used in the

post-Soviet space, raises the inter-

est in the Belarusian-Swiss com-

pany. Cooperation with Azerbaijan,

Ukraine, and the Baltic states is

under consideration. Certainly, the

market of Russia where large-scale

renovation of the rolling fleet is

underway looks promising. In par-

ticular, the modernization of the

tram system is one of the coop-

eration avenues. Trams are now

widely used in Europe for subur-

ban and intercity communication.

Designed by Belarusians, a rapid

tram has been presented in Kazan

and Saint Petersburg. In associa-

tion with Stadler a prototype tram

for Moscow is being prepared. The

Russian city is eager to replace up

to 900 trams within a short time.

Once the Stadler Minsk project is

implemented, Belarus will have one

more export-oriented manufacturer.

The project indicates that Belarus

has a high investment potential and

is open to mutually beneficial coop-

eration.

Nadezhda RADIVON

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Latvia: A View on

the Baltic SeaThe National Expo of the Republic of Belarus held in Riga

in December 2012 marked an important milestone in the Belarusian-Latvian relations

A Small Big Partner

Latvia is almost three times

smaller than Belarus in terms of

territory and almost five times

smaller in terms of population.

Nonetheless, it is the 5th biggest

economic partner of Belarus. Thus,

in 2012 the bilateral trade reached a

record high of $3,425.1 million.

It is noteworthy that the

Belarusian-Latvian cooperation is

not limited to the commodity trade

only. This small Baltic state is among

the ten largest investment partners

of Belarus. The total number of

companies with Belarusian and

Latvian capital reached 1,500 in 2012,

of them over 1,100 were set up in

Latvia. These companies mean new

jobs, increased revenues and better

living standards for those involved

in the bilateral cooperation.

The two countries have estab-

lished good partnership relations

in the international transporta-

tion market. The total share of the

Belarusian cargo in the overall

transit flow of Latvia was 24.2%

in 2012. The close access to the sea

and cost-effective logistics make the

shipment of Belarus-made goods

through Latvia’s ports cheaper.

Products at Their Best

The National Expo of the

Republic of Belarus BelEXPO 2012

was one of the largest tradeshows

in Latvia. It showcased Belarus’

best products made by 252 compa-

nies and organizations. The total

area of the expo was 2,500 square

meters. The number of visitors

exceeded 38,000.

As always the biggest col-

lective booths were set up by the

Ministries of Industry, Agriculture

and Food, Education, Transport and

Communications, State Committee

for Science and Technology,

National Academy of Sciences of

Belarus, and the Belneftekhim,

Bellegprom and Bellesbumprom

concerns. Economic and invest-

ment opportunities of Belarus

were in focus at the stands of the

National Agency of Investment and

Privatization and the Bela rusian

Universal Commodity Exchange.

Visitors examined with inter-

est products of MTZ, MAZ,

Belkommunmash and other pro-

ducers of automobile, tractor and

agricultural equipment. Many peo-

ple visited booths showcasing pet-

rochemical products, commodities,

food products and furniture, build-

ing materials and household appli-

ances, jewelry.

Presentations of innovative

products, telecommunications

and information technologies and

investment projects were held as

part of the expo. Transport and

transit projects were in the spot-

light. New projects in science, edu-

cation, healthcare and tourism

were presented as well.

The Chambers of Commerce

and Industry of Belarus and Latvia

held a business matchmaking ses-

sion that was attended by about 90

businessmen of the two countries.

The chambers reached an impor-

tant agreement to provide ser-

vices on precontractual checks of

First of all, the large-scale event showcased the opportunities of today’s Belarus, its trade, economic, sci-tech, investment, cultural, educational and tourism potential. The 6th Belarusian-Latvian Investment Forum Baltic Region 2012 in Kipsala became a significant event as well, bringing together businessmen, manufacturers and financiers from the CIS member states, Baltic and Scandinavian countries. A Belarusian delegation visited Riga to take part in the national expo and investment forum. Headed by Economy Minister Nikolai Snopkov, the delegation comprised heads of ministries, state-run committees and concerns, representatives of regional authorities, free economic zones and business circles.

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EXHIBITIONS www.belarus-economy.by

business reputation and solvency

of partners.

During BelEXPO 2012 over 1,200

negotiations were held, 36 mem-

oranda of understanding were

signed, agreements to set up 13 joint

ventures were reached. Over €3.6

million worth of contracts were

concluded.

The meetings resulted in bilat-

eral documents, including a proto-

col on cooperation to reduce inter-

national roaming rates between

Belarus and Latvia as well as a

memorandum of cooperation in the

area of intellectual property protec-

tion.

Investment Realities…

The 6th Belarusian-Latvian

Investment Forum Baltic Region

2012 was quite fruitful as well. It

gathered more than 270 representa-

tives of Belarus, Latvia, Lithuania,

the Czech Republic, Sweden and

Estonia.

During the forum, three satellite

sessions were held on the following

themes: credit and financing; fos-

tering investments and IT develop-

ment; transport and logistics; grow-

ing interregional ties; trade and eco-

nomic cooperation.

Top on the agenda were the

investment climate and advantages

of doing business in Belarus and

Latvia, trends and prospects of busi-

ness development, scientific frame-

work of projects, regional coopera-

tion as well as traditional areas

of the bilateral relations - banking

activities, transport and logistics.

A number of joint Belarusian-

Latvian transport and logistics pro-

jects were discussed, including the

development of the Zubr container

train project and boosting liquid

cargo capacities of the Ventspils

port.

Businessmen took part in the

workshop to discuss regulations of

foreign economic activities under

the Customs Union (CU) and Single

Economic Space. The main topics

of the workshop were customs tar-

iff and non-tariff regulations, the

CU Single Customs Tariff taking

into consideration Russia’s commit-

ments to the WTO, customs con-

trol on the external border of the

Customs Union, food safety control

and other issues.

Discussions of these important

topics were continued during the

workshop on information and com-

munication technologies aimed to

raise the efficiency of the transport

and logistics systems of the Baltic

states and Belarus. The participants

of the workshop discussed matters

on electronic customs declaration,

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Economy Minister of Belarus with

President of the Latvian Employers

Confederation Vitaly Gavrilov. Other

Belarusian representatives at the

meeting included Nikolai Pantelei,

Minister of Communications and

Information Technology; Alexander

Guryanov, Deputy Foreign Minister,

and Alexander Gerasimenko,

Ambassador Extraordinary and

Plenipotentiary of Belarus to

Latvia.

During the meeting the par-

ties considered cooperation in the

manufacturing industry; transit of

Belarusian cargo via Latvian ports;

fostering investments; application

of Belarusian R&D projects in

Latvia; cooperation between mobile

network operators in the area of

international roaming; knowl-

edge exchange in the area of busi-

ness personnel training; boosting

regional and border cooperation.

Implementation of agreements

and new partnerships will pro-

mote further growth of the bilat-

eral trade, Belarusian exports and

investments and intensify coopera-

tion in all economic areas of the two

countries for the benefit of Belarus

and Latvia.

countries agreed that the poten-

tial of the bilateral cooperation

has not been fully realized, and the

two states have great prospects to

expand partnership and implement

more mutually beneficial projects.

This opinion was voiced at the

talks between Economy Ministers of

Belarus and Latvia Nikolai Snopkov

and Daniels Pavluts respectively, as

well as during the meeting of the

use of electronic technologies to

facilitate border crossing proce-

dures, development of e-services

for vehicle and cargo monitoring,

ensuring their security and safety.

… and Prospects

Reflecting on the results of

BelEXPO 2012 and the investment

forum, participants from both the

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Platform for Pundits

The 20th Healthcare in Belarus 2013 expo took place in Minsk on 26-29 March

… Avicenna once said: “A doctor has three assistants: a word, a plant and a knife”. In modern language this statement should be translated as follows: professional excellence, advanced pharmacopoeia and modern technologies. The annual Healthcare in Belarus expo makes a considerable input in the development of these components.

Today Belarusian doctors per-

form unique transplant surgeries,

successfully “repair” hearts and ves-

sels, help patients once considered

untreatable live their lives to the

fullest. There are excellent doctors

in Minsk-based national research

centers and regional hospitals.

Belarus has a well-developed health-

care service. This is why more and

more patients from abroad arrive

in Belarus to get high-tech medical

services such as coronary artery

bypass graft, endoprothesis, heart

surgeries, organ transplantations.

Of course, these surgeries would

be impossible without cutting-edge

technologies, modern equipment

and materials, pharmaceuticals,

of which many are showcased at

the Healthcare in Belarus expo and

then used in hospitals. Every year

major Belarusian and international

medical and pharmaceutical com-

panies, developers and producers of

unique equipment, diagnostics and

treatment methods gather in Minsk

to display their know-how.

The expo has its regular par-

ticipants. These are the manufactur-

ers of medical X-ray systems Adani

and Drive, the producer of joint

implants Altimed, the manufacturer

of operation tables Medindustriya

Service, the company offering anes-

thesia workstations and ventilators

Respekt Plus, the producer of heart

valves Electronmash and other

companies. They produce modern

equipment for preventive medicine,

surgery, orthopedics, cardiac sur-

gery.

The Belarusian pharmaceuti-

cal industry is traditionally rep-

resented by Belmedpreparaty,

Borimed, Pharmland, Minsk-

intercaps, Bel Aseptika, MALKUT

and DIALEK. By the way, the old-

est pharmaceutical company

Belmedpreparaty manufactures

about 200 medications today. The

company has its own innovative

development department which

Valery SHEVCHUK,

Deputy Healthcare Minister

of the Republic of Belarus:

Our industry needs new knowledge and latest tech-

nologies to keep moving forward. Lack of experience

exchange might result in deterioration of the quality

of medical services, hence poorer health of people.

The availability of a professional networking platform

for best producers and medical professionals, scien-

tists, suppliers of medical equipment and pharmaceu-

tical products is vital for healthcare. Such a platform

is provided by the forum Healthcare in Belarus, which

has been organized by the Healthcare Ministry of

Belarus for many years already.

The event contributes to the modernization and

reformation of the Belarusian healthcare system. It

showcases the best results of fundamental and applied

research that will translate into considerable medical,

social and economic benefits in the future.

The forum also represents a communication plat-

form to discuss the most urgent issues of the national

healthcare system. This is the place where one can

get information about projects to reform the industry,

new managerial and financial solutions.

Belarusian manufacturers of equipment, drugs

and medical products have the opportunity to show-

case their achievements while medical practitioners

have a great chance to learn about the world’s cutting-

edge healthcare technologies.

The main goal of the forum is to demonstrate the

achievements of international and domestic produc-

ers of medical goods, cosmetics, optics, medical sup-

plies, laboratory and diagnostic equipment, dental

equipment, consumables as well as information on

the status and development trends in the healthcare

industry in Belarus and abroad.

Both the expo and the forum give medical com-

panies and healthcare personnel a great opportu-

nity to enhance professional ties. It is the place

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designs new substances and tech-

nologies. The company has filed

more than 200 applications for

inventions, got 90 patents of the

Republic of Belarus, the Russian

Federation and Ukraine. The prep-

aration Photolon used for photo-

dynamic therapy of malignant

tumors has been awarded a cer-

tificate of the World Intellectual

Property Organization.

The list of regular participants

also includes Belmedtechnika, a

supplier of Belarus-made medical

equipment and devices, Beloptomed

and Belmedsnab, the companies

offering comprehensive equipment

solutions for healthcare facilities.

The 20th Healthcare in Bela rus

expo was co-located with Pharm-

Expo and Dentistry expos. The

event also included science to prac-

tice seminars, presentations, con-

ferences to discuss new methods

of diagnostics and treatment, recu-

peration technologies, and achieve-

ments of the esthetic surgery.

where Belarusian clinicians and their foreign coun-

terparts become equal partners and share good profes-

sional practices, get familiar with the recent achieve-

ments of medical science, progressive methods of

treatment.

The academic and research program of the forum

consists of conferences, seminars, presentations and

discussions on the current issues of modern medi-

cine. It provides an unparalleled opportunity to share

experience, establish new contacts and discuss prom-

ising plans. Healthcare professionals from around the

globe can learn and compare medical equipment for

hospitals, pharmaceutical novelties, state-of-the-art

laboratory equipment, and the world’s most recent

healthcare achievements.

A number of events were held as part of the

Healthcare in Belarus 2013 expo. Among them was

the 12th international science to practice conference

on dentistry; the symposium “Innovative Technology

in Healthcare: Harmonization of Requirements and

Implementation” and the national science to prac-

tice conference “Pharmaceutical Products of the

Republic of Belarus”; the international conference

“Some Issues Regarding Surgery, Anesthesiology,

and Critical Care Medicine in Infants”; the national

clinical pharmacologist school “Generic Drugs and

Biosimilars. Target Therapy”.

The international forum is a platform for sharing

experience between scientists and healthcare profes-

sionals, medical students and heads of healthcare

companies; it allows medical professionals to broaden

their horizons and enhance their knowledge.

The annual Healthcare in Belarus expo makes a

huge contribution to the assimilation of new medi-

cal technologies, state-of-the-art equipment, and

consumables, modernization of the industry and

improvement of the country’s healthcare system

in general. In the long run, such events will help

enhance Belarus’ image in the world’s healthcare

community.

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Know How to Change the World

Belarus ranks sixth in the pace of advance of information and communication technologies

Minsk will host the 20th forum TIBO on 23-26 April. Specialists, heads of government agencies, companies and organizations of various branches of the economy, managers of leading domestic and foreign companies, and a large number of consumers will gather for the display of the latest products in communications, software and consumer electronics. All the residents of Belarus, preschoolers and pensioners alike, consume IT products even if they are not aware of it.

Dynamic Belarus

When the company ZAO

Technics and Communications, the

organizer of many international

expos, decided to display the lat-

est products of the IT industry in

Belarus in 1994, it realized it was

quite a challenge. Well-known man-

ufacturers viewed Belarus as a terra

incognita with unclear prospects.

Twenty years later the situation

changed considerably. At present

Belarus ranks 52nd in the develop-

ment of information and communi-

cation technologies. The index meas-

ures 11 indicators, which among

other things evaluate the access to

information and communication

technologies, utilization and usage

skills. Among the CIS states only

Russia is ahead of Belarus in the

ranking this year, while Argentina,

Brazil, and China are behind.

As far as the development of

the telecommunication infrastruc-

ture is concerned, the Republic of

Belarus ranks 48th, occupies the 61st

position in the Digital Government

rating and is in the Top 10 Most

Dynamic Countries.

Here are some illuminating fig-

ures. At the end of 2012 Belarus

had 4,538 million Internet users.

About 2.5 million accessed the Web

via mobile devices. By the way, the

number of cellular communica-

tion subscribers is way ahead of

the number of Belarus residents.

According to the International

Telecommunication Union and

UNESCO, last year Belarus ranked

21st in the availability of Internet

access.

The establishment of the Hi-Tech

Park in 2006 made Belarus the CIS

top exporter of software products

per capita. Software export rises

year after year, convincingly dem-

onstrating that the IT sector is one

of the most stable, sought-after, and

attractive for investors. In 2012 the

export of software and services by

resident companies of the Hi-Tech

Park rose by 54%, with the net for-

eign direct investments ahead of

forecasts at $62.5 million.

Information technologies are

actively introduced in the produc-

tion sector, business, banking,

public administration, education,

healthcare, and the sector of ser-

vices. In addition to effectively help-

ing resolve complicated manufac-

turing, economic, and managerial

tasks, IT technologies make the life

of every Belarusian more exciting

and comfortable.

Belarusians would hardly believe

20 years ago that they would actively

use a mobile phone, a smartphone,

a banking card, and Internet access

at home. Who could have thought

that they would be able to pay for

utilities, book tickets and hotels,

send electronic declarations with-

out leaving their homes? And all the

information is at your fingertips…

Seeing, Discussing, Assimilating

The TIBO expo is often hailed as

a mirror of the IT industry achieve-

ments. The comparison is only par-

tially true. It would be fairer to call

it a window into the day of tomor-

row. As a rule, many exhibits such

as technologies, services, software

and hardware products make the

transition from being on display to

being used relatively fast.

TIBO was the venue to present

the system of banking transactions

using plastic cards for the first

time, to open the first cyber cafe, to

demonstrate abilities of the mobile

communication standards GSM 900,

3G, WiMAX, the technologies Metro

Ethernet and Wi-Fi. Showing off the

know-hows of domestic producers

and providers of information prod-

ucts and services, the expo acceler-

ates the development of the domes-

tic IT industry market and raises

the awareness of many users of the

new opportunities that information

and communication technologies

offer.

Events held as part of

the Belarusian Congress for

Information Society Technologies

attract crowds, too. Participants of

research to practice and technol-

ogy seminars, roundtable sessions,

discussions, presentations analyze

the implementation of government

programs as well as other topical

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matters relevant for the development of

the industry. In particular, in 2012 the

Congress reviewed the progress in fulfill-

ing the government program for introduc-

ing digital television and radio broadcast-

ing in Belarus till 2015, problems of ena-

bling transboundary digital interaction

within the Single Economic Space frame-

work, prospects of entrepreneurship and

public-private partnership in digital busi-

ness, the development of gaming technolo-

gies.

What will TIBO 2013 focus on? In 2013

the jubilee forum is supposed to follow the

motto Virtual Technologies for the Real

Economy.

As part of the expo the Belarusian

Congress for Information Society

Technologies will be held to sum up the

development of the information society in

the Republic of Belarus over the 20 years,

analyze global trends for the effective use

Mr Sergei NESTEROVICH,

Deputy Information Technologies and Communications

Minister of the Republic of Belarus:

The World Summit on the Information Society (WSIS) will take

place in Geneva on 13-17 May 2013. The jubilee TIBO expo will be

held prior to the Summit and will focus on the information society

development in the Republic of Belarus, its problems and ways

to address them, improvement of the cooperation mechanism

between the state and business in the area of information and

communication technologies for the sake of accelerated social and

economic development of the Republic of Belarus.

I would like to underline that in addition to displaying the lat-

est technical solutions TIBO has unwaveringly drawn attention to

the development of the information society where knowledge and

information will dominate while information and communication

will influence all the aspects of human life.

TIBO was the first venue in Belarus to formulate and discuss

topical problems facing the national information industry, to

demonstrate technological novelties and new types of telecom-

munication services that later found their way to Belarusian cus-

tomers. Over the 20 years effective usage of national information

resources has been discussed here in addition to the concept of the

national information policy, security of information systems, digi-

tal workflows and digital signatures, digital commerce, introduc-

tion and effective usage of automated design and manufacturing

solutions for the mechanical engineering industry, distant learn-

ing, introduction and use of the state register of economic entities,

transition to the information society.

Since 2010 television and multimedia technologies have been

part of the expo. The section is arranged in association with

the Belarusian Information Ministry. It is meant to further

advance the technological basis of Belarusian television and

radio broadcasting, movie production, expand the national high-

quality content, develop the market of media services and, in

the end, raise the quality of information services available to

Belarusians.

It is also worth noting that following the global trends TIBO

gradually shifted its focus from the available hardware and soft-

ware to complex solutions and various services based on infor-

mation technologies and resources. It was at TIBO that Internet

access services were first offered as well as mobile services,

engineering and consulting services, mobile and online banking,

outsourcing, digital government services, and other ones.

In 2012 the expo featured products by 250 companies from 15

countries. The number included Belarus’ largest companies and

foreign companies interested in promoting their products onto the

Belarusian market.

The seminar Availability of Digital Government Services

focused on the interaction of government agencies in using infor-

mation resources. Digital government products made available via

the national program for the accelerated development of services

in the area of information and communication technologies in

2011-2015 were displayed on a dedicated stand.

In particular, the nationwide automated information system

was showcased in action as well as a system for interagency digital

document workflow – a common protected environment for data

sharing between central and regional government agencies, the

computerized information system for local councils of deputies,

and the national computerized system for electronic declarations.

The latter is designed to provide digital customs services to inter-

national trade participants.

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nologies for the sake of social and eco-

nomic development, determine priorities

and prospects in shaping the information

society in the Republic of Belarus.

The Congress will feature science to

practice conferences that will be held

to analyze the effectiveness of the state,

industry-wide and regional informatiza-

tion programs, the use of information and

communication technologies to upgrade

the national economy and enhance its

innovation potential, geo-information,

navigation, and aerospace technologies,

the state and prospects of the national

telecommunication infrastructure, and

the digital culture. The 2nd Belarusian-

Azerbaijani business forum in the area

of information and communication tech-

nologies will be held as well.

More than 20 themed sections of the

expo will feature the latest products in tel-

ecommunication equipment and commu-

nication systems, television and multime-

dia technologies, power-supply and power-

saving systems, smart home solutions,

education and entertainment software.

Products by companies residing in the

Hi-Tech Park will be displayed separately.

During the expo roundtable sessions

will be held to discuss IT education and

the development of the IT industry in

Belarus. The contest of websites TIBO

Internet Award will be held along with the

contest of IT projects Belarus Startup 2013

and a cyber gaming tournament.

By the way, the IT forum will be once

again co-located with the 17th interna-

tional expo Mass Media in Belarus. The

organizers went ahead with the co-loca-

tion idea last year for the first time and it

turned out a success.

A national program for the acceler-

ated development of information and

communication services is in progress

in Belarus. Creating the infrastructure

for higher speed data transfer is the key

purpose of the program. The technologies

Metro Ethernet and xPON will be further

developed. Close attention will be paid to

the improvement of Wi-Fi access, particu-

larly in public places, like cafes, hotels,

shops, and entertainment centers.

The decision to build a fourth-gen-

eration cellular communication network

in Belarus has been made for the sake

of wide assimilation of cloud computing

technologies. The creation of the infor-

mation society in Belarus along with

the knowledge-driven economy that will

replace the industry-driven paradigm

depends on the rapid advance of informa-

tion and communication technologies.

This year’s TIBO offers an opportunity to analyze the effective-

ness of national and industry-wide IT development programs and

effectiveness of public administration via information and com-

munication technologies. Each area will be discussed at seminars

with representatives of government agencies, research and educa-

tion institutions.

The expo will feature components (segments) of telecommu-

nication networks that allow providing a wide range of telecom

services. The introduction of digital television broadcasting in

Belarus will be highlighted separately.

Following the established tradition, the national telecom opera-

tor Beltelecom and the national postal service operator Belpochta

will take part in this year’s expo. The former’s presentation will

use the concept of new quality of familiar services. It will strive

to present Beltelecom as the leader of telecom services, which

provides freedom of communication and information acquisi-

tion through cutting-edge technologies and services. Beltelecom

will demonstrate new abilities of traditional Internet access,

television, and telephony services, namely the video portal ser-

vice, antivirus protection, mobile Internet access (3G) available

for byfly users, and new TV channels, themed packages, and the

opportunities offered by xPON and IMS technologies available for

ZALA subscribers.

The national postal service operator Belpochta will demon-

strate a wide range of new postal, digital, and payment services.

Visitors will be able to see a computerized mobile operator work-

station, which allows providing the full range of services available

from a fixed urban postal office. The ability to get postal communi-

cation services via self-service kiosks and the Internet will be dem-

onstrated as well as the ability to remotely subscribe to printed

mass media. A project dealing with the automated processing of

posted items will be presented.

As the prime idea TIBO is meant to provide a hands-on experi-

ence of the fact that information and communication technologies

are commonly and effectively used in all the spheres of modern

life. Respected international research organizations state that

investments in IT industry are considerably more effective than

investments in materials and equipment.

At the current stage of the society development, information

and communication technologies are the main motive power

propelling economy growth and better living standards. Their

influence on the economy is versatile: better labor productiv-

ity, higher employment, more effective markets, higher quality

of products and services, encouragement of innovations and

the emergence of new products and services. The advance of

information technologies fundamentally change living standards,

the quality of healthcare, education, providing consumers with

convenient ways to interact with businesses and government

agencies.

In Belarus the development of the information sphere is a

national priority. A council for the development of the information

society has been set up under the aegis of the Belarus President.

A national strategy has been adopted to guide the development of

the information society till 2015 as well as several other national

and industry-wide programs. Unlike many countries, in addition

to consuming information technologies the Republic of Belarus

has its own well-developed IT industry.

One can rest assured that prerequisites have been created in

Belarus to form the foundation of the information society and

enable the effective usage of information and communication

technologies in all spheres of life of the Belarusian society.

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Demand Creates Supply

Belarusians see benefits in bringing big supermarket chains to the regions

Improving Shopping Experience

It comes as no surprise that the

purpose of the survey was to learn

people’s opinion on grocery stores

in rural areas as well as to find

out where supermarket chains are

needed most. Today 21.3% of house-

holds in small towns and villages

spend 70% to 90 % of their budget on

food, 38.4% of households spend 50%

to 70% of their budget and only 5%

spend less than 30% of their budget

on food according to the global

standards of household food spend-

ing. At the same time, only 17.5%

of rural residents are satisfied with

their local food stores and many peo-

ple believe that only supermarket

chains can improve the situation.

The survey was conducted

in two towns of every oblast:

Ivatsevichi and Pruzhany (Brest

Oblast), Lepel and Postavy (Vitebsk

Oblast), Korma and Dobrush (Gomel

Oblast), Ostrovets and Shchuchin

(Grodno Oblast), Smolevichi and

Maryina Gorka (Minsk Oblast),

Belynichi and Kostyukovichi

(Mogilev Oblast). Since they all are

typical Belarusian small towns,

the results of the survey can be

applied to all similar towns, said

Mr Igor Kotlyarov, Director of the

Sociology Institute of the National

Academy of Sciences of Belarus.

By the way, the results of the survey

are very indicative. Thus, the fol-

lowing main shortcomings of the

local trade system were cited (in

addition to high prices): impossibil-

ity to buy all products in one store

(47.7% of respondents); low quality

of products (45% of respondents);

poor offering range (39.3%); poor

customer service (28.5%), inconven-

ient work hours (20.7%).

At the same time, according to

sociologists, 96.4% of the Belarusian

population knows what Euroopt

is. Moreover, 75.5% of residents of

towns where Euroopt stores are not

available went to other regions to

shop there. In particular, 65.4% of

the respondents noted that Euroopt

is a one-stop shop for them, which is

particularly important for those who

are pressed for time. Convenience of

shopping (logical arrangement of

goods in the store, good customer

service, etc) and long work hours is

important for one third of respond-

ents. Besides, virtually every sec-

ond respondent (45.5%) believes that

Euroopt will create new jobs in their

town. It is particularly important

for the residents of Lepel (88%),

Korma (64%), Pruzhany (59%) and

Maryina Gorka (54%).

The survey shows that the lower

satisfaction with local stores is,

the higher is the demand for chain

stores in small towns of Belarus.

The more people know about chain

stores, the more they want to have

them near.

According to the survey, resi-

dents of small towns pin their hopes

on Euroopt stores to improve their

shopping experience.

Chain Store Price Indicator

It goes without saying that for

a Belarusian family, like for any

other family in the world, prices

for food and basic necessities mat-

ter. This is why many people name

high prices as one of the most frus-

trating things about their grocery

stores. Researchers have conducted

a comparative analysis of consumer

goods sold in Belarusian groceries

and found retail operators with the

most affordable prices.

The price monitoring was con-

ducted in 18 different grocery stores.

Researchers compared two grocer-

ies from each oblast center and the

capital and one grocery from each

regional center. They compared

prices for more than 300 items, both

food and non-food products, as well

as alcoholic beverages. If there were

no identical products of the same

brand, prices for similar products

were compared.

The survey showed that Euroopt

has the lowest prices. In other gro-

cery stores the prices were 28.2%

higher on average. The biggest diver-

One of the fundamental freedoms people have always wanted to enjoy is, of course, the freedom of choice. This applies to any life situation and to any type of activity. Speaking about the retail sphere which we deal with on a daily basis, the freedom of choice means, first of all, the right to choose where to do our shopping. A survey recently conducted by the Sociology Institute of the National Academy of Sciences together with Nielsen, an international analytical firm, showed that rural residents want to have modern supermarkets offering a wide range of goods at affordable prices.

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gence between prices was detected

in the following product groups:

muesli, nuts and dry fruit (54.4%),

spices, coffee and tea (51%), but-

ter, vinegar, ketchup, sauces (44.2%),

mushrooms, vegetables and fruits

(41.4%), canned food (39.5%), water,

juice, beverages (27.5%), sweets

(25.3%), sausages and smoked meat

(24.2%), frozen ready-to-eat food

(22.3%), seafood (22.2%), cereals,

pasta and flour (17.2%). At the same

time the researchers stated that the

price differences for staple foods,

which usually have the highest sell-

ing prices, are insignificant. The

average difference in prices for alco-

holic beverages was 28%.

As for non-food products (house-

hold and personal hygiene articles,

etc), their prices varied by 59.6%.

Particularly high differences were

recorded in several product groups,

such as laundry conditioners

and rinsers (110.5%), shower gels

(97.1%), detergents (71.7%) and some

other goods. The lowest price differ-

ences were recorded in the following

goods: pet food and accessories (8.8%

and 11.7% respectively), windshield

washers (18.4%), diapers (18.7%).

The reliability of the survey

findings is confirmed by Nielsen

experts who were involved in the

preparation for the price monitor-

ing, including the development of

the questionnaires and selecting

the articles that correctly reflect

the current price difference. They

also checked the reliability of the

information collected. “Our survey

showed that the information col-

lected by the Sociology Institute is

reliable, the data is accurate and

the findings are trustworthy. We

conducted a parallel survey which

gave similar results,” said Mr

Valentin Sokolovsky, head of the

retail department of the Nielsen

representative office in Belarus.

Today before going shopping

the majority of people try to find

out where it is cheaper to shop.

Especially, if they are shopping for

food or convenience goods, as these

are the basic necessities of our

everyday life, unlike computers or

microwaves. Therefore it comes as

no surprise that the survey findings

indicate that the majority of people

see grocery chains as a way to save

money.

Development Priorities

About two million people live

in small towns and surrounding

villages. A total of 30% of the

Belarusian population live in rural

areas. Yet, their demand for proper

retail outlets has not been fully met

as the survey shows. The retailer

takes it into consideration and

develops its chain growth strategy

correspondently.

One of the priorities is boost-

ing presence in the regions. By

the way, as of early 2013, there

were 123 Euroopt stores in Belarus

employing over 14,000 people.

Euroopt supermarkets opened first

in Krichev, Gorki, Myadel, Slutsk,

Smorgon, Nesvizh, Zhitkovichi and

Braslav. This year according to Mr

Andrei Zubkov, Euroopt Director

General, at least 100 more super-

markets will be opened and 10,000

new jobs will be created.

Another priority of Euroopt

is diversification, i.e. opening not

only hypermarkets and supermar-

kets, but also small groceries for

more convenient shopping.

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And finally, the company plans

to launch mobile stores in all vil-

lages even in those with just one

resident. “All the settlements that

lack our groceries will be serviced

by stores-on-wheels. They will come

to big villages two or three times

a week and at least once a week to

small villages,” Andrei Zubkov said.

According to him, Euroopt is ready

to immediately start the mobile ser-

vice in small towns which have no

Euroopt supermarkets given the

consent of the local authorities. To

implement this project the company

plans to purchase about 1,000 sales

vans this year. They will sell not

only food products but also techni-

cal appliances.

On the whole, achieving all

these goals will improve shopping

opportunities for all the residents

of Belarus regardless of where they

live.

By the way, the company has all

the necessary financial resources.

Thus, last year investments totaled

$200 million. In 2012, Euroopt

was the first private company in

Belarus to attract major invest-

ments from foreign sources. Alfa

Bank issued a $100 million loan.

A bit later the retail chain signed

a €10 million agreement with the

European Bank for Reconstruction

and Development. These key invest-

ments will foster a speedy growth of

the chain.

To Play by Global Rules

In sum, all conditions are in

place: a popular demand, economic

interests of the regions, and the

company’s desire to grow and

develop. However this year can

bring a big game changer in the

retail sector. Currently, MPs are

debating a bill related to the regu-

lation of the Belarusian consumer

market. In particular, it envisages

setting a cap on the market share

of large grocery chains. In this con-

nection I would like to note that in

Europe ten major grocery chains

account for 70% to 90% of food-

stuffs sales, while in Belarus ten

major suppliers hold only 26% of

the food market. The state has to

ensure that the share of one par-

ticular company will not exceed

25% to 35% of the market. By the

way, today the share of the major

Belarusian retailer is under 10%,

while in Russia the share of the

Magnit supermarket chain, leader

of the Russian food market, exceeds

20% in some regions. It is also note-

worthy that Russia adopted a law in

February 2010 that sets a 25% cap on

the market share of large supermar-

ket chains. Moreover, the Russian

Ministry of Economic Development

announced last year that the ratio

would be revised upward to 35%.

At the same time, the unions of

entrepreneurs of Belarus insist on

a 10% cap for supermarket chains.

They give the following rationale to

this demand. First of all, big retail-

ers will destroy small business,

particularly in the regions. Second,

they will become a monopoly in the

food market and will end fair com-

petition. Finally, all these factors

together will eventually contribute

to price rises. These are some strong

arguments.

Their opponents provide coun-

terarguments that are quite strong

as well. In particular, they give an

example of the Maxima supermar-

ket chain in Lithuania. With the

38% share of the retail market,

Maxima remains one of the most

affordable chains providing great

customer service. Maxima does not

affect the development of small

commercial businesses and is not

interested in raising prices as it will

lose its competitive advantage.

“Our neighbors believe that the

artificial restriction of the retailer

presence in the market reduces

stimuli for a healthy competition.

This leads to an increase in prices.

Chains need to develop in order to

get better prices from producers

and offer products at lower prices to

the public”, Andrei Zubkov believes.

According to him, the proposal of

the Trade Ministry of Belarus to

introduce a 30% cap per chain is

economically justified and is in line

with the international practice.

This practice shows that large

private supermarket chains can

breathe a new life into regions.

Together with low prices and wide

assortment range, they bring a new

level of customer care, hence rais-

ing people’s living standards.

Vladimir VISHNEV

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PLACE ON THE MAP

Capital of the Land of Castles

…It is nearly impossible for tourists coming to Novogrudok to believe that this town once was a metropolis in the great sovereignty. Now it looks nothing more than a little town of 30,000, a dozen factories, a handful of hotels and cafes with a neat downtown... And only after the bus reaches the ancient castle hill, the words of a tour guide describing the greatness of the second Belarusian capital stop sounding like exaggeration.

All doubts vanish the minute

you walk up the rampart and all

the words materialize distinctly and

clearly into the town nestled in the

valley with domes of ancient tem-

ples and a sophisticated ornament

of streets and pathways disappear-

ing into infinity… The panoramic

view from the Novogrudok hill

which is 343 meters above the sea

level is nothing short of striking

and breathtaking.

The locale of the town was chosen

primarily for the defense reasons.

The town was founded in 1044 when

Yaroslav the Wise “marched into

Lithuania and founded Novogrudok

in the spring”. By the end of the 12th

century, Novogrudok had achieved

the status of a prosperous trade

center, which was ready to welcome

visitors and defend itself in the time

of trouble.

It would seem that no other

town could be better suited to be the

capital of a country bordering on

the hostile neighbors: the Mongol

Horda fiercely breathing in the

East, and the Crusaders in the West.

The start of the 13th century was not

a quiet one. According to histori-

ans, it was these external threats

that promulgated the unification of

the Belarusian territories around

the new center which in 1253 was

chosen to be Novogrudok, the newly

declared capital of the Grand Duchy

of Lithuania.

The local Lithuanian Duke

Mindaugas was elected to be the

first ruler of the Grand Duchy of

Lithuania. The history is full of

contradicting facts and unproven

legends about Mindaugas, a coura-

geous commander and politician.

According to one of the legends, the

king was assassinated by his rivals

and secretly buried with his throne

in Novogrudok, at the bottom of the

hill, which up to these days is called

“Mindaugas Mountain”…

The newly formed state and its

capital did not have much time

for validation. The desirable tar-

get for many as the capital of the

Lithuanian territories, Novogrudok

was frequently invaded by the

Galician-Volynian Dukes, by the

Crusaders and the Tatars until the

time when the legendary Vytautas

ordered to build a stone fortress on

the castle hill with all necessary

defense features such as solid walls,

towers and the arsenals. Being one

of the greatest rulers of the Grand

Duchy of Lithuania, Vytautas man-

aged to expand the Duchy, rein-

forced its cities and prepared it

for the most crucial battle with

the Order of Crusaders which took

place in 1410 near Grunwald.

Novogrudok Castle would be

rebuilt and expanded during sev-

eral centuries to become one of

the greatest unconquerable cita-

dels of the Grand Duchy, one of

hundreds of the castles which still

remain in the territory of the mod-

ern Belarus. It was only when

heavy artillery was introduced

into warfare, that the citadel fell...

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OAO Ivatsevichidrevis one of Belarus’largest woodworkingenterprises. The advancedphysical infrastructure enables the company to make a widechoice of high-quality productsand export themto 20 countriesacross the globe

It fell defeated by the artillery and

another powerful enemy called

time. Unfortunately nowadays the

greatness of the citadel can only

be assumed and gathered from the

remains of two (among what used

to be seven) towers – Shchitovka

and Kostelnaya.

The town itself does not have

many traces of the glorious past

either. Nevertheless, every archi-

tectural artifact which survived in

the town can be directly linked

to the pivotal events and power-

ful historical figures. For example,

modern researchers and historians

point out that Sts. Boris and Gleb

Church built on the money given

by Hetman Konstanty Ostrogski

in 1519 was erected on the place

of the old Russian temple where

supposedly Mindaugas and his son

received baptism.

The Church of the Trans-

figuration was first built in wood

during the ruling of Vytautas.

It was in this church where the

74-year-old Polish King Jogaila wed-

ded the 17-year-old Duchess Sophia

of Halshany. As the King did not

have heirs from the three previous

marriages, this marriage was the

beginning of the Jagiellon dynasty

whose representatives ruled in a

number of European states during

200 years. They say that the Polish

King chose Novogrudok and not

Krakow or Wilno for his wedding as

the sign of respect to Vytautas with

whom the Polish King had been

rivaling for power all his life.

The church rebuilt in stone

hosted the baptism of the son of

the Novogrudok jurist Nikolai

Mickiewicz. The house where Adam

Mickiewicz, the future Romantic

poet and the national pride of

Poland, grew up did not survive and

was rebuilt after World War II, and

later reconstructed in the late 1980s.

Unlike the Mickiewicz house, the

church of Saint Archangel Michael

which used to be the Dominican

temple survived. This church

was the place where young Adam

Mickiewicz attended school – the

fact that is remembered through

the monument to the great poet and

the eternity hill.

Adam Mickiewicz lived in his

motherland for 25 years and that

was where he wrote his first poems

and met his first love. Novogrudok,

Neman, Svityaz, Valevka are the

places where the great poet lived

and derived his inspiration and

which he later described in the

poems written far away from his

motherland.

Late in life, Adam Mickiewicz

said about his native Novogrudok

“If I could be reborn one thousand

times, it is the place where I would

choose to be born. If I could die

one thousand times, it is the place I

would choose to die...”

The poet’s words need neither

comment nor explanation...