There are thousands of investment promotion agencies in the world – government agencies or departments focused on attracting foreign investment. Most countries in the world have them. But new ones, nonetheless, keep appearing, sometimes in places unexpected. On the FDI conference circuit in 2011 there was a fresh new face: Dr Dmitry Klevzhits, director of the National Agency of Investment and Privatization of Belarus. 

Young and fluent in English, with a background in business and experience of living in the UK, the US and Russia, in many ways Mr Klevzhits confounds expectations of a Belarusian bureaucrat. He is new to the investment-promotion game, but then, so is Belarus; and the country for which he is tasked with bringing in foreign capital also confounds many expectations. Most would be surprised to hear that Belarus is proactively seeking FDI in the first place, let alone that Western names such as Microsoft, SAP and Henkel are already investing in the country that bears the sobriquet of ‘Europe’s last dictatorship’.

Europe's final frontier

At least in European terms, Belarus remains something of a frontier market. But it is not exactly a wild and woolly place – less chaotic, for example, than Ukraine, less erratic than Russia and less enigmatic than many other Commonwealth of Independent States countries – and while it has its share of red tape and some layers of communist-era bureaucracy have yet to be shaved off, doing business in Belarus is less complicated than is often believed. The market is not yet liberalised compared with western European countries – the vast majority of Belarusian companies are still state-owned – but the doors have been opened. A privatisation programme is in place, and investment is being sought in a range of sectors.

"Belarus as a ‘brand’ carries with it a lot of historical baggage, which colours the first impressions of many. But European companies who take the step to visit the country, and carry out their own research about the opportunities Belarus offers, come back with quite a different and informed picture," says James Wilson, director of the Belarus EU Business Council.

The political picture is, to put it mildly, not to Anglo-Saxon tastes: president Alexander Lukashenko has a firm grip on all levers and political freedom is limited. Tales of hard-fisted crackdowns on dissent chill many Western spines and do few favours for Belarus’ international image. The ‘brand’, as it were, is a hard one to sell. (Although Belarusians can argue they are held to a different standard by virtue of being European, and repression in China, for example, has hardly scared off private capital nor stopped the West from wooing it.)  

Some companies will continue to be put off by the politics; others feel that engagement is more conducive to encouraging change; others still just see the potential return on investment of an as-yet unexploited market – albeit a small one – and the first-mover advantages of getting in while competitors shy away.

Time to act

Mr Wilson is among those who believe the time to start taking a closer look at Belarus is now. "The current economic turmoil in the eurozone is prompting a total re-evaluation of risk in central and eastern Europe. Belarus has a clear strategic vision to be a transit hub between the Customs Union [between Belarus, Kazakhstan and Russia] and the EU. I believe that the time has come to take a fresh look at what Belarus can offer to focused entrepreneurs in the rapidly changing investment climate," he says.

The investment climate in itself is a bit surprising, in a positive way. The World Bank’s ‘Doing Business 2012’ report ranked Belarus 69th among 183 countries for ease of doing business, higher than Russia and Ukraine, although it gets substantially less FDI than either of its neighbours. Government officials pin the blame on the country’s image problems.

“The way the Republic of Belarus is perceived in the international political arena certainly affects the success in attracting foreign investments,” acknowledges minister of economy Nikolai Snopkov. “An unfair negative image of Belarus that was formed alongside the lack of truthful information about the ongoing reforms aimed at improving the business climate in the country had a negative impact in the past. But now much has been done, and we consider the international assessments of ‘Doing Business 2012’ as a definite recognition of the efforts of the government of Belarus and the confirmation of the right course chosen to liberalise economic relations within the country and create a favourable investment climate.”

But there is more to be done, he says, adding that the reform process “is far from completion”. There is a stated goal of becoming a top 30 country for business and investment climate.

A modern approach

The economic policy of Belarus's government is summarised by Mr Snopkov as such: “The main focus is on modernising the national economy with an emphasis on large-scale development of highly innovative industries…In this regard, a special significance is given to the task of securing FDI inflow through increased international co-operation and attraction of strategic investors to participate in privatisation.”

The purpose of this fDispecial report is to assess the realities of the business environment and outline what opportunities might exist for those strategic investors and foreign companies considering involvement in this little-known market.