Kiryl Rudy, the Belarusian president’s economic advisor

Q: After almost a decade of high growth, the Belarusian economy slowed in 2008, and is yet to recover, with GDP growth at just 0.9% in 2013. What caused this slowdown?

Kiryl Rudy: It would be naive of us to only blame the global crisis for the current slowdown in our economy. A big part of our economy depends on developments in Russia. This is a conscious policy of ours; neighbouring such a big economic player, it makes sense for us to try to benefit from that. Of course, it is beneficial when everything goes well, but slowdowns in Russia also affect us.

Apart from that, there are some internal aspects [of the Belarus economy] that need improving and we are trying to do that. In 2011, we had a large devaluation of our currency, but we didn’t experience any of the social consequences that accompanied similar devaluations in Argentina and in parts of central and eastern Europe. The current economic slowdown is a result of our gradual recovery from the devaluation.

Our policy of gradual social development doesn’t include making harsh economic reforms. Because of that, it has taken us three to four years to recover [from the global financial crisis] instead of just one. As a result, interest rates are up and credit is less available. This affects businesses, economic processes and GDP growth. But these are challenges primarily for our Belarusian companies. For foreign companies coming to Belarus it is an opportunity to make money.

During the past few years, foreign companies operating in Belarus have achieved higher profits compared with subsidiaries in other countries. And it is interesting for us to see that these companies do not take their profits out of the country but decide to reinvest them here.

Q: At the beginning of August 2014, the EU and the US tightened sanctions against Russia. Will these sanctions affect Belarus?

Mr Rudy: The slowdown in Belarus started before the sanctions were imposed against Russia. That is why economic growth that we are forecasting may, in fact, coincide with the sanctions.

I wouldn't say these sanctions will necessarily have a knock-on effect on Belarus. The Russian economy has its own challenges and I am sure that the government will see to them and will tackle them. What we would be more afraid of is a slowdown in the entire region Russia collaborates with. I wouldn’t link the slowdown to the sanctions.

As far as the sanctions against Belarus are concerned, [when these were imposed in 1996] we were experiencing high growth and we weren’t really affected by them. They were more detrimental to businesses that originated from the countries that imposed those sanctions. 

Nikolai Snopkov, Belarus’s minister of the economy

Q: With GDP growth of 0.9%, 2013 was a challenging year for the Belarusian economy. The government’s forecast for economic growth this year is 3.3%. What is the government’s strategy to achieve that growth?

Nikolai Snopkov: The only strategy to strengthen our growth is to sell. Our domestic market has some limitations. It only has 10 million consumers, and that is why our aim is not to grow through domestic consumption but through exports.

Foreign trade is sometimes worth more than 140% of our country’s GDP. But, as far as Western markets are concerned, we don’t see it as strategically correct to focus exclusively on the export of [Belarusian] products and services. What I mean by that is that if particular goods are not identified as Belarusian products, but instead as international products manufactured in Belarus by a foreign company or by a joint venture, then that [allows them to be] distributed in the markets of the Eurasian Economic Union, the EU and the US. This is the best option open to us.

Q: So, in other words, you would like to invite more Western companies to come and operate in Belarus?

Mr Snopkov: My task is to generate value here in Belarus, that is why I am focused on Western companies coming here and opening their manufacturing facilities here. There are many reasons why Belarus is a good location for businesses. 

The first is human capital – we have a very disciplined, not demanding and highly qualified workforce with technical degrees. We also have social stability. Another advantage is our geographic location, with numerous oil and gas pipelines, railways, roads and waterways linking western Europe and Russia, as well as Asian countries.

Another advantage is our progressive investment legislation, which is based on the Principles of European Contract Law, and allows the use of British, Italian, Swiss or any other European system of law and arbitration. Finally, 95% of the territory of Belarus has preferential regimes for investments. This means simplified access to tax and customs allowances, and other advantages for starting and doing business in the country.

Q: Most of these factors and opportunities have been there for quite some time. Why is now the right moment to consider Belarus?

Mr Snopkov: Again, there are a few reasons. One of them is that Russia, Kazakhstan and Belarus are all competing for investors right now, and it seems to be easier to do business here than in the other two countries.

After the fall of the Soviet Union, Belarus kept a lot of state-owned production companies and their performance is quite strong compared with their Russian and Kazakh counterparts, but it is weaker compared with companies in the EU. We have two choices in this situation, either to invest our internal resources or we can attract investors who already have the technologies needed to upgrade and strengthen these companies.

In the end, both methods would achieve the same result. But I prefer the second option, as it is faster, more cost-effective, more profitable for the companies in question, as well as being beneficial for foreign investors. I believe that if the government begins to invest in the companies, in a few years, foreign investment won’t be as attractive to us as it is now, as this is the time when we need to upgrade our manufacturing facilities.

And finally, today we offer a market of not only 10 million Belarusians but 170 million consumers in the Eurasian Economic Union, because, as far as goods and services are concerned, there are no limitations. The union allows for the free movement of goods, equal access to services of natural monopolies, common technical regulations, a liberalisation of trade in services and, from 2016, a unified pharmaceutical market. 

Q: Now that the agreement to establish the Eurasian Economic Union [between Belarus, Russia and Kazakhstan] has been signed, will that help foreign companies operate in Belarus and the wider region?

Aleksandr E Guryanov: Now, thanks to the Eurasian Economic Union, many companies are coming to Belarus to start their business and mark their presence in the union. They decide to set up here, and not in Russia or Kazakhstan, because Belarus offers greater political stability, less corruption and bureaucracy, as well as a better business environment.

Belarus was instrumental in establishing this union, because we believe that integration helps development, both economically and politically. But, when we created first the Customs Union and then the Eurasian Economic Union, we didn’t want to build any walls between Belarus and the EU or the US. On the contrary, we wanted to strengthen our international relationships and increase trade, investment and joint production.

Q: Is there a chance of closer collaboration between the Eurasian Economic Union and the EU in the future, especially now that the EU and the US are working on their Transatlantic Trade and Investment Partnership?

Mr Guryanov: We understand that the development of closer relations between the US and the EU will increase competition here in our region. This is a challenge for us and, of course, our priority is not to have additional barriers in our collaborations with either the EU or Russia.

About 45% of our foreign trade is with Russia and almost 40% with the EU, which implies that these partners are of equal importance to us. That is why we suggested discussions between the European Commission and the Eurasian Economic Commission, in the hope that such talks would enable us to remove some of the technical and regulatory barriers between the two unions, thus increasing collaboration. Unfortunately, politics has prevented such talks taking place.