In many ways, Belarus is a paradox. Its politics are off-putting to liberal Westerners and relations with many fellow European countries are icy as a result. The country’s diplomatic pose is often one of defiance. Yet a new friendliness towards FDI and a sincere effort to open up to outside investment belie the general image of the country, and while political liberalisation may not be on the horizon at this stage, economic liberalisation certainly is. In fact, Belarus is one of the fastest reformers in eastern Europe when it comes to business environment.

In the 'Ease of Doing Business' survey published by the World Bank, Belarus has shot up from 115th in 2007 to 58th place for 2013. The government has pledged to crack the top 30 by 2015. Already, its position in the rankings is higher than the regional average for eastern Europe and central Asia, and nearly twice as good as that of Russia and Ukraine. It now sits just three spots behind FDI heavyweight Poland. Globally, Belarus ranks ninth out of 185 economies when to comes to the ease of starting a business; only Georgia, two places ahead, surpasses it in the region.

Meeting demands

“We have eased the tax burden after businesses asked for this change, we have liberalised the licence system and simplified tax administration procedures. We have also made it easier to register a business. You don’t even have to leave your office,” prime minister Mikhail Myasnikovich told delegates at the Belarusian Investment Forum held in Minsk in mid-November.

This may be the case, but in order to reach the ambitious reform goal line Belarus has set for itself, it will need more forward progress and be careful to avoid backsliding. Since last year’s 'Ease of Doing Business' survey, Belarus improved in the areas of dealing with construction permits, paying taxes (moving up 29 places in this category), trading across borders and enforcing contracts. However, it slipped in the rankings for getting credit, resolving insolvency and, crucially, protecting investors. While noting reforms since 2008 that have led to Belarus’s lofty ranking for ease of starting a business, the World Bank’s report said recently Belarus has made starting a business more difficult by increasing the cost of business registration and of obtaining a company seal.

Mr Myasnikovich insists reforms will continue apace, because boosting competitiveness is viewed with high urgency by the government. “Business is like a sport. It is a race, and you have to stay ahead,” he said.

Recovery mode

The Belarusian economy is playing catch-up after a disastrous crash last year that led to the currency being devalued by more than 30%. While GDP is growing at roughly 5%, hyperinflation remains a huge threat to economic stability.

Minister of economy Nikolai Snopkov sees FDI as the key to the country's recovery. “A main pillar of recovery is for us to continue to improve the investment climate, continue structural changes and continue shaping the institutional foundations for long-term growth,” he told fDi Magazine. “Another important thing is that we still stay welcome to new investors. Despite the fact that the country faced financial crisis last year, we see a positive trend of increasing FDI inflows as well as net FDI inflows.”

At the investment forum, Belarus welcomed more than 600 participants from more than 40 countries – an indication perhaps that the business reforms have been noted by more than just the World Bank.