belarus looks

Belarus is climbing up the innovation league table thanks to an official decree to establish a favourable environment for start-ups. Initiatives such as tech parks and tax-friendly conditions are attracting foreign companies and reversing the country's brain drain, as Wendy Atkins reports.

The roll call of locations that aim to be a tech hub grows on a yearly basis, and one of the latest is Belarus. Taking advantage of a high skill base and favourable investment conditions, the country is rising up the rankings as a place for innovation and entrepreneurship, and is building its credentials as the Silicon Valley of eastern Europe and the Commonwealth of Independent States.

Innovation is in evidence throughout capital city Minsk, from ordering a taxi from the airport via the Yandex app, to sharing apps based on QR codes when hiring the bikes and e-scooters located throughout the city. 

Belarus is a global player when it comes to software production, and its export figures per capita for software and computer services are also world-leading. Indeed, according to UN trade body Unctad, in 2018 Belarus exported $168 per capita in software and computer services compared with the US’s $73, India’s $41, Russia’s $28 and Japan’s $24.

A HTP success story

The creation of Hi-Tech Park (HTP) Belarus – which provides a special legal and preferential tax regime for IT and hi-tech companies – has been an important factor in the growth of the country’s tech sector. Until 2049, residents of the HTP can take advantage of select tax benefits such as 0% VAT, profit tax, offshore duty and customs duties; 0% income tax in equity carve outs; 0% tax in the sales of shares in an HTP resident company and 0% tax on revenues of foreign companies; 9% income tax; and 7% average deductions for social security. There are also incentives for cryptocurrencies until 2023, including 0% VAT and no profit tax on mining, buying/selling and exchanging cryptocurrencies and other transactions with tokens.

The HTP also acts as an intermediary between government and IT firms. “The HTP links directly to the president of Belarus,” says Kirill Zalessky, director of global co-operation office at HTP Belarus. “This means there is a very low level of bureaucracy, which is essential because the tech world is moving very fast.”

Unlike more traditional business parks, HTP residents are not confined to a physical geographic location, but can be located anywhere in the country. Residents of the HTP include EPAM Systems, Wargaming.net and Rakuten Viber as well as other names from the worlds of artificial intelligence, games development, R&D, software and hardware.

Mr Zalessky says there has been a tremendous growth in exports of software and computer services by HTP residents in recent years. In 2013 there was $447m. By 2016, this had risen to $821m, by 2017 it was $1.03bn and by 2018 it was $1.41bn. “At the same time, there has been an explosive growth in companies and start-ups in the HTP, and by June 2019 we had 563 member companies,” adds Mr Zalessky.

Technopark's happy customers

Minsk City Technopark is another initiative catering to innovative firms. Located on the site of a former meat-processing plant, it provides favourable conditions for new companies operating in the hi-tech sector, including offering firms preferential rates on leases.

“Residents of Technopark pay a 10% tax on profits and are exempt from land and real estate tax. We also provide ongoing support for resident firms, including information support and access to resources,” says Vladimir Davidovich, director at Minsk City Technopark.

Contact engineering company KG Impex, which is based in the Technopark, is happy with the special taxation regime and the government support for innovative business that it provides, says a spokesperson. Nina Sergeeva, CEO at fire protection solutions company ODO Pranas, also resident at the Technopark, says: “We’ve had a lot of support in terms of premises and exhibition organising, as well as with contacts with leading innovators. We would never have dared to start our project without this support.”

Belarus scores highly with innovators who have developed home-grown businesses in Minsk before expanding globally, including domestic entrepreneurs who moved overseas to study and have been drawn home by the opportunities and lifestyle on offer, as well as with international companies that appreciate Belarus’s advantages as a business location.

Minsk meets Princeton

Enterprise software firm EPAM Systems grew out of an idea that two classmates came up with, and was started simultaneously in Minsk and Princeton in the US in 1993. Today, the company is fully export oriented with main markets in Europe and the US, and employs more than 30,000 people worldwide. It floated on the New York Stock Exchange in 2012.

Andrei Shubaderov, director of people operations at EPAM Belarus, says it has hundreds of Fortune 500 and Fortune 1000 companies among its clients and it has achieved 20% year-on-year growth since 2010. “Investors in our global company include many international names and that’s testament to their confidence in our biggest delivery centre in Belarus,” he adds. 

Tech start-up Kino-mo Technologies, which trades as HYPERVSN, was set up in London in 2011 and focuses on 3D holographic technology. The company employs 160 people in Minsk and 20 others around the world. “What we offer today is a combination of hardware and software products that allow the projection of 3D visuals floating in mid-air anywhere on the planet, and you don’t need glasses for it,” says Kiryl Chykeyuk, founder of HYPERVSN.

“We decided to set up our R&D in Belarus because the engineering talent you can get here is [better than] what you can get in the UK for the same money. I am from Belarus and I did my Bachelor’s degree here. I did my PhD at Oxford, and when you look at prices here in Belarus compared with in the UK, you can get a lot more here for the same amount."

Mr Chykeyuk stresses he is not the only Belarusian to be attracted back home. “A lot of tech is coming to Minsk at the moment because the talent is here, and having access to the HTP with its tax incentives is also important,” he adds.

Pivotal decree

The December 2017 presidential decree – The Decree on the Development of Digital Economy – is seen by many as pivotal in Belarus's tech sector’s continuing development. “Three points were crucial for me as a company owner,” says Slava Mazai, founder of precision farming data platform OneSoil. “First, the ability for companies that do not yet make money to join the Belarus HTP. Second, the ease of paperwork between Belarus and foreign countries that was impossible to imagine before. That has made it much easier for specialist workers to relocate. Third, better tax conditions.”

Tech firms are generally satisfied with the quality of talent in Belarus. According to the HTP, 50-plus universities, more than 300,000 students and over 15,000 science, technology, engineering and mathematics graduates a year provide the basis for the development of the hi-tech industry in Belarus. Additionally, HTP resident companies have access to visa-free entry and exemption from all kinds of special procedures when it comes to the employment of foreigners.

“I would say that we have quite a good level of education for IT engineers, thanks to the university system that we inherited from the Soviet era,” says Mr Mazai. “But a lot of IT specialists are leaving for Europe and the US. For instance, none of my university friends live in Belarus anymore. The brain drain is a real issue. I have to deal with it when looking for people for the OneSoil team. We have already had to relocate some specialists from Russia and Ukraine and I anticipate that we will have to do it even more often in the future.”

“Last year, EPAM employed 200 foreigners here in Belarus,” says Mr Shubaderov. “They were mainly from Russia, Kazakhstan and Ukraine. Conditions created by both the HTP and EPAM are favourable for employing skilled foreign workers. We also have skills development programmes for our employees. They can progress from being designers to being analysts, so they can change their profession but not leave the company. We know that the world is open and people look for better conditions, so we try to create an environment where people can develop professionally and will want to stay with us.”

Collaboration and challenges

Tech firms report that there are many opportunities in Belarus for collaboration between businesses, universities and other stakeholders. “We have our own laboratories in about 18 Belarusian universities, and our engineers teach there,” says Mr Shubaderov at EPAM. “We also run an eKids programme to train children on the basics of programming. Additionally, we’ve run hackathons, where government representatives have presented their most acute challenges and our engineers have had 24 hours to find a solution.”

Although innovators say Belarus has taken big steps towards providing firm foundations for tech firms to establish themselves and grow, they report that bureaucracy can still be an issue. “Among the disadvantages is the complexity of all the importing and exporting processes,” says Mr Mazai. “At OneSoil, we produce weather sensors, and it is quite difficult to get all the details we need from abroad. It is the same with licensing; it takes a lot of time and effort.”

Mr Chykeyuk at Kino-mo agrees: “Sometimes things take longer than you’d expect in other markets, and shipments can cost more. When we’re prototyping, engineers need hardware quickly. It can take a while to get these things, but we’ve received a lot of help from the HTP in this regard.”

Tech firms should be confident in Belarus, says Mr Shubaderov. “Investors vote with their money and our international investors have voted for a company that maintains its biggest delivery centre in Belarus. The environment for the development of digital technologies is unique here,” he says. “The situation is interesting, because some of the sectors are only at the beginning of digitalisation, so they can apply unique solutions that are made locally and these can deliver good results.” 

This article is sourced from fDi Magazine
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