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BELARUS: SOCIAL AND POLITICAL STABILITY, AND ECONOMIC MODERNIZATION — KEY FACTORS FOR A SUCCESSFUL DEVELOPMENT INTERVIEW WITH IGOR PETRISHENKO, AMBASSADOR EXTRAORDINARY AND PLENIPOTENTIARY OF THE REPUBLIC OF BELARUS TO THE RUSSIAN FEDERATION
— Your Excellency, what are Belarus’s key economic and social development achievements of the recent years? — To begin with, a few words on our international standing. Doing Business 2016 report ranks Belarus 44th out of 189 countries. For a country which became independent only 25 years ago, this is reasonably good. As for the “engine of progress”, trade, we are ranked even higher — 25th place (Russia — 170th, Kazakhstan — 122th). Despite the Chernobyl nuclear accident impact (Belarus was affected the most — a third part of the country was contaminated with radionuclides, with a total loss of USD235 billion), according to the Environmental Performance Index (EPI) which ranks 180 countries’ performance taking into account protection of human health and ecosystems, Belarus rose to 35th (!) position in the world. 30 years ago after the Chernobyl nuclear accident, it was hardly imaginable. I strongly believe that Belarus will make a significant further progress in improving both business climate and international trade indicators. We rank first in the Eurasian Economic Union (EAEU) on quality of life and 54 in the world (Numbeo database). According to Numbeo, Minsk is ranked 13th among Eastern European cities, ahead of Kiev, St. Petersburg and Moscow, but the citizens of Belarusian capital wish for more. Minsk is also in the list of top10 most promising European cities for international investors, according to fDi Intelligence (a division of the Financial Times). Our capital ranks second in “Top10 cities by doing business cost effectiveness’ and tenth in “Top-10 cities with best FDI strategies”. th
85 Igor Petrishenko. Image courtesy of the Embassy of the Republic of Belarus in Russia
Speaking of our achievements, we should not forget to note that the country insured highest level of food security. Among the CIS countries and, consequently, the EAEU Belarus ranks first on production of main agricultural goods per capita, except grain. The aggregated index of domestic production of agricultural goods, commodities and food exceeds the required volume almost twofold. Furthermore, milk production is 2.1 times higher than the internal demand, meat and eggs production — 1.3 times higher. The agricultural sector provides 8–9% of annual GDP. Agricultural products and food exports amount to 16% of our total export volume. The country trade in agricultural products trade comes up in surplus in recent years. Belarus exports its agricultural goods to about 50 countries of the world. Belarus is one of the Top-20 food exporting countries in terms of all its primary agricultural export items, and in Top-10 on the five key export items. In terms of condensed milk export volume Belarus ranks 4th, and the country is 9 th in terms of powdered skim milk exports. Belarus’s milk production per captia exceeds twofold that of agriculturally developed European countries (Belgium, Germany, Italy and Sweden). Last year we were third among the world butter exporters. 225 Belarusian commodity producers possess the ISO 9001 certificates confirming compliance with the quality management system requirements. An international quality system is applied by more than 20 leading Belarusian meat and 70-milk processing plants. Among other achievements I would also like to emphasize a slightly paradoxical one: Belarus, being an agrarian country, outperforms the world leaders, India and the US, on software export per capita. But actually this is not a paradox. In the Soviet Union period Belarus was regarded as an “assembly plant”. We preserved and consolidated our advantages, particularly in high tech. One of the largest IT clusters in the world, the Hi-Tech Park, operates in Minsk. The Hi-Tech Park clients include 5 of the world’s 10 largest corporations. More than half billion persons in about 200 countries of the world use Viber mobile phone application developed by the Belarusians. Hundreds of millions persons enjoy the World of Tanks computer game. And what a splash was made by the iPhone application
86 MSQRD (the most downloaded this spring) created by the Belarussian engineers and promoted by the Academy Awards winner Leonardo DiCaprio! As Reuters wrote, according to expert assessments, in March Mark Zuckerberg, founder and CEO of Facebook, paid USD150 million for it, although the deal value was confidential. Almost 90% of the software produced by Belarusian Hi Tech Park is exported (in 2015 — more than USD700 million). Foreign direct investment to Hi Tech Park amounted to USD150 million last year. Hi Tech Park companies are employing 24 thousand people and account for around 1.5% of Belarusian GDP. This year Hi Tech Park, the California Silicon Valley counterpart, is expected to grow by 20–25%. And, of course, one of our most impressive achievements of the recent years is tourism development. We preserved our nature (Belovezhskaya Pushcha National Park in the Brest region; Normal forest of Europe in the Mogilev region; famous Braslav glacial lakes in the Vitebsk region…). Our villages and cities are clean and orderly, the roads — comfortable, and crime rate is among the lowest. Belarus is frequently vbut isited not only by the Russians but also by the Europeans who come to explore new tourist destinations — our country’s castles. The ancient architectural masterpieces included in the UNESCO World Cultural and Natural Heritage list were reconstructed in Belarus. We observe an increase in the demand for health resorts recreation, agro-ecological and medical tourism. The key advantage of Belarusian health system is its high quality and while the costs are well below the European average. Moreover, in Trivago Global Hotel Reputation Ranking Minsk is in the Top-50 cities with the best hotels between Porto in Portugal and Chicago in the US. In 2015 the largest Russian tourist on-line platform Travel.ru listed Belarus as the most
Mir Castle Complex, 16–18th centuries., Grodno region, Belarus UNESCO World Heritage Object #625. Image by Vadim Novikov
87 budget-friendly country for holidays in the CIS. According to Travel.ru assessment, in 2015 Russian tourists’ hotel spending in Belarus was around RUB4000 per day, while in Kazakhstan it amounted to more than RUB7000 per day. There has also been a significant improvement in agro-ecological tourism Belarus in recent years. There are around 2 thousand agro-farms with perfect Belarusian cuisine, and excellent conditions for fishing, hunting and enjoying pristine nature! Belarus ranked second behind Italy in “Agro tourism” nomination in internet voting by National Geographic Traveler Awards in which a few hundred thousand persons participated. In “Family recreation” Belarus shares the 10th place with Austria, in “Rest and recreation” — the country is 8th. Belarusian Belavia was 7th in the “Best international airlines’ category. All of this attracts investors. A list of public property objects for privatization is endorsed in Belarus, which mostly includes construction and food industry enterprises. Agricultural production, processing, warehousing and transportation as well as IT sector also contain a lot of opportunities for investors. The National Agency for Investment anda Privatization operates in Belarus. The Agency accumulated a data base of more than 100 investment projects in all sectors. The Agency is successfully implementing the “single window” system: investors do not need to apply to a score of government bodies. Let me also outline Belarus’s social achievements in statistical terms. Infant mortality in Belarus is one of the lowest in the CIS and it decreases faster than in the US, Belgium, Germany, Netherlands, France and Switzerland. Infant and maternal mortality rate is the 4th lowest in the world. According to the WHO assessment, in terms of maternity conditions Belarus is one point behind the UK and 8 points ahead of the US. The World Economic Forum ranked Belarus 34th in terms of gender equality at its annual 2015 meeting (our closest European neighbor Poland is 51st). Belarus has a high Human Development Index (HDI): it ranks first among the CIS and 50th in the world. According to the UN statistics, the HDI has been growing in Belarus for the last 10 years. We have one of the best educational systems and we are among the most reading nations in the world despite the fact that our internet access rate is on par with that of advances countries. On the information and communication technologies development index Belarus ranks 36th. E-library of our main university — Belarusian State University (BSU) is among 100 best e-libraries in the world, ranking second among e-libraries of Central and Eastern Europe, according to Webometrics. In the past Belarus was known as a “reading” country, now — as an “enlightened” one.
88 Corruption in the country is minimal. According to our legislation, senior managers who discredited themselves are not able to take executive positions either in public and private bodies. There are only 35 civil servants per 1000 employees. This ratio is one of the lowest not only in the CIS, but in Europe (in Russia — 75; in Latvia, Lithuania, Estonia and Poland — up to 70). In terms of economic growth the recent years cannot be characterized as successful. Certainly, we are proud that Belarus holds one third of mine trucks world market, that almost one in ten tractors sold in the world is produced in Belarus, that a brand “Made in Belarus’ maintains its reputation throughout Eurasia. But this year we don’t expect a significant GDP growth just as other EAEU members by the way. This trend is partly the result of unfavorable external economic conditions (which is typical to all open market countries). Now, after dynamic upward period, we find ourselves at some sort of plateau characterized by minimal growth rates. However taking into account the global economic outlook we could expect a new upward trend. Historically, the world economy has always developed according to a sinusoid-like pattern with up- and downswings. The question is how soon economic growth will become a sustained trend. But every cloud has a silver lining: Belarusian economy investment potential has increased due to reduced capital, market entry and promotion costs. — Your Excellency, what are the key factors of success? — To name a few: social and political stability in the country during many years; high government approval rating; not revolutionary but evolutionary approach to economic development and modernization; multilevel planning; necessary state intervention in market regulation; accurate identification of social and economic development priorities; adherence to best world practices and reliance on the country’s own resources. From my point of view, however hard as it might be, Belarus maintains a balance between economic and human resources development. We understand how they are interlinked and how this interrelation is important for the country’s future. Businesses require rules of the game at the Belarusian market to be consistent and clear and full investment protection ensured. Today we can provide such conditions. Naturally we understand that as life moves on regulatory and legal framework in Belarus as in any other state is improved further. Simplification of government processes (inter alia those related to business activities), relatively low level of corruption, investor-friendly state policies — are the features of contemporary Belarus. As early as the Soviet period high quality human resources was one of our strengths. Actually, ambitious, competent and responsible people are our main resource.
89 Undoubtedly advantageous position in the heart of Europe, at the crossroads of main trade routes, the role of a bridge between the EAEU and European Union — all of these factors also positively influence the state of play in our economy. Belarus’s participation in the Eurasian Economic Union makes it more attractive as a place for establishing platforms for entry into European and Eurasian markets. Finally, we were and continue to be responsible and reliable partners both in terms of implementing joint projects and in what regards the servicing of foreign loans. Belarus aspires to build advanced, prosperous and forward looking society with modern economy and puts this vision into practice. This is the foundation of our success. — What are the challenges the country faces? — I am unlikely to name anything new and unique in this regard. Poor external markets outlook is one of such challenges. Belarus is an open market economy. Two thirds of our output is exported. Moreover, we mainly produce comparatively low added value goods. Given the intense competition in the world market and de facto lack of large premium markets our net profit is not too high. Decrease in purchasing power at the Russian market, which is one of the most important for us, severely hits the Belarusian economy. Even the deep industrial cooperation, when our tractors, combines, lorries and buses are in fact half Russian-built, does not improve the situation. In recent years our exports in services have increased significantly and their share in the GDP is gradually rising. However, barriers hindering a free flow of services still exist, even within the EAEU. Undoubtedly, the Ukrainian crisis had a negative impact on trade relations with our third largest foreign trade partner (after Russia and the European Union). The losses are high and they could not be restored to a full degree in a short-term perspective. Our priority is economy modernization, creation of new effective high-tech production, which requires more resources. In such challenging economic conditions it is vital to comply with the government’s social commitments, stay true to socially-oriented market economy goals and protect the well-being of our people. In recent years the demographic situation in Belarus has improved, first of all due to rise in birth rate. We should take full advantage of it. But the funds for supporting maternity and childhood will not appear out of thin air… I could give a lot of examples of the negative consequences of external economic conditions.
90 But there are also other challenges, such as, for example, security problems the world faces today. We can see how easily instability pervades, how countries and regions are seized by chaos, bloodshed and devastation. We understand that terrorist attacks are reality for many European and non-European countries. At first sight it may appear that this problem is not relevant for peaceful and quiet Belarus. But as we live in an open world, we are not fenced off from our neighbors and therefore cannot afford to idly observe the developments in the world. — What role do you think the regional integrations processes, such as EAEU, play in the country’s development? — In my opinion the state of world economy is not simply unstable, it looks somewhat paradoxical. On the one hand, there is no doubt that each state desires to develop independently and to build up its economic influence in the region. On the other hand, independent development is practically impossible under the current economic conditions, formed against the backdrop of economic downturn. Only a handful of strong, advanced economies could do it. A natural response to these trends is the emergence of integration blocks. Such blocks have been established in most regions, namely the ASEAN, MERCOSUR, and European Union. It is a comm on understanding that it is easier to address external challenges and take full advantage of economic opportunities together. The Eurasian Economic Union is not an exception in this respect. This initiative is not an outcome of two — three years’ work, we’ve been working on this since the disintegration of the Soviet Union. We passed through all stages of formation. There was the Eurasian Community, the Customs Union which transformed into the Common Economic Space. The EAEU and the Eurasian Economic Commission (supranational body) were established as a result of the evolution of economic relationship between our countries. For our young state it was not easy to delegate national powers, when the decisions related to your interests are taken by a consensus of “Troika” (now five members). Common rules simplify the situation. Thanks to this mechanism we are able to consistently move forward. Together we elaborate common regulations and administration norms which help us mitigate a dependence on external conditions. In practice such mechanisms build up confidence and promote stability both for the entire Union and for each of its members. What is important the EAEU does not pursue isolationist policies. We are open for cooperation. Development of trade and economic cooperation with third
91 countries and integration alliances is vital. We already have a free trade agreement with Vietnam. The same work is carried out with our Israeli and Indian partners. We have close cooperation with China, inter alia on coordinating development of the EAEU and Silk Road Economic Belt. We carry out a full-scale work both internally and externally. The results of this work will contribute to our Union’s development and improve our states’ and peoples’ well-being. — What are Belarus’s priorities within the EAEU? — The Eurasian Economic Union was established as an economic alliance. This fact determines the response to this question. Belarus’s membership in the Union first of all benefits our country, particularly in terms of free flows of goods, services, finance and workforce. We have achieved a moderate success in this regard. However, for the abovementioned reasons, the key indicators are below our expectations. In 2012 at the early stage of formation of the Union our trade turnover reached approximately USD68 billion. Last year, due to the objective reasons, this figure decreased significantly (to USD46 billion). We continue to work to improve the situation. Today all the Union members continue to collaborate on building an integral internal market, the main objective is to remove waivers and barriers, to form common markets in various sectors of economy. In 2015 our leaders adopted the Concept for Forming a Common Electric Energy Market and Program for Liberalization of Cabotage Transportation. The heads of states approved the Major Guidelines of Industrial Cooperation within the Union. We continue to work on forming services and finance markets, align our migration policies. The EAEU supranational bodies are being established, this process is also very important. Our common strategic goal is to create a barrier-free economic space with equal opportunities and unified rules aligned to our national interests within the shortest possible timeframe. — What is your vision for Belarus cooperation with Russia and other Eurasian Economic Union members, particularly in business track? — From my point of view, there is no single formula for cooperation development with the EAEU partners. To a large extent trade and economic relations between the countries are determined by a legal framework as well as the presence and the exact number of waivers and barriers affecting mutual trade.
92 We all understand that despite the EAEU formation Belarus’s or any state relations with the EAEU partners are primarily carried out on a bilateral basis. Certainly, the rules of the game are determined by the Treaty of the EAEU, but it is national legal and regulatory framework which determines an access to internal market. The algorithm is the same for both government and business engagement. In this regard we should recognize and accept the fact that if we want to make breakthrough decisions in developing Eurasian integration process, we should address waivers and barriers. If we have access to each other’s markets, our businesses and state companies will be able to collaborate in all sectors. Now we work within the framework conditions determined by the member states delegation of the competencies to the supranational body. Regarding cooperation perspectives I would like to emphasize that the EAEU member countries and, first of all, Russia, are our important strategic partners. Belarus intends to intensify engagement with them in all cooperation tracks to maximize our economic benefits. We believe that we are on the right track and will continue on in this direction gathering momentum. — How do you envisage the future of Belarus cooperation with ASEAN member countries as well EAEU and ASEAN as integration alliances? — The strategy of export diversification is currently being implemented in Belarus. Our Head of State identified an objective of achieving a balance of exports between the three markets: EAEU, EU and other countries, in particular distant ones. By 2020 the ratio should constitute “one third-one third-one third”. This task is complex but ambitious. The current conditions confirm its relevence. In addition to the work on traditional markets we should find new contacts, expand geography of our export destinations. Obviously, one of the priority directions is the Southeast Asia. It is well known that this region is one of the most rapid-growing markets, and it attracts interest of all world’s economic powers. Belarus is not an exception. We are not a newcomer to the ASEAN countries markets. We have rapidly growing trade and economic relations with almost all members of this economic alliance. Our trade turnover with ASEAN countries approaches USD1 billion while Belarusian exports exceed imports more than twofold. Exports of potash fertilizers, steel products, tires, agricultural equipment, cars and mine trucks, agricultural products are among the most promising cooperation areas. We are ready to cooperate with our partners in services sector, in particular in such spheres as mineral exploration, healthcare, education, medical facilities and pharmaceutical supplies. We should fully unlock potential of our cooperation in tourism (for example, our country becomes more attractive for the European tourists by the year).
93 Currently, Belarus has two diplomatic representations in Hanoi and Jakarta, ambassadors to these countries are also accredited as non-residents to other ASEAN economies. Our honorary consuls actively work in the region. Ambassador of Belarus to Indonesia Vladimir Lopato-Zagorsky is concurrently a permanent representative to the ASEAN. An important line of our work in the region is the development of cooperation between EAEU and ASEAN. The Eurasian Economic Commission is actively working on liberalization of relationships with third countries. Many countries, in particular ASEAN member states, demonstrate their willingness to engage in such cooperation. The first important step in this direction was made in May 2015, with the signing of the Free Trade Agreement between the Eurasian Economic Union and the Socialist Republic of Vietnam, which covers almost all economic spheres, including industry cooperation. Trade liberalization with Vietnam provides all EAEU countries with opportunities to expand production supplies to other ASEAN member countries. Certainly, signing the Trans-Pacific Partnership (TPP) Agreement at the turn of 2015 with participation of a number of ASEAN countries, including Vietnam, increases competition but it also stimulates us to take coherent and groundbreaking steps to implement specific projects of mutually beneficial cooperation. And we are ready to do it. The Embassy of Belarus in Russia actively works to develop cooperation with the ASEAN. Last year thematic presentations of trade, economic and investment potential of Belarus were organized for the ASEAN countries and Malaysian Chamber of Commerce at Business and Cultural Center of the Embassy. According to the participants’ assessments, the events attracted significant interest and boosted further contacts between business representatives. We will continue to support our colleagues in developing mutually beneficial contacts in the region. All in all, we face the future of our relations with the ASEAN countries with confidence and believe that our bilateral and multilateral cooperation will develop dynamically in all spheres.